Podiatrist Ass'n v. La Cruz Azul De Puerto Rico

• Decision Date: 12 June 2003
• Docket Number: No. 01-2718.,01-2718.
• Parties: The PODIATRIST ASSOCIATION, INC., et al., Plaintiffs, Appellants, v. LA CRUZ AZUL DE PUERTO RICO, INC. and Triple-S, Inc., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

332 F.3d 6

The PODIATRIST ASSOCIATION, INC., et al., Plaintiffs, Appellants, v. LA CRUZ AZUL DE PUERTO RICO, INC. and Triple-S, Inc., Defendants, Appellees.

No. 01-2718.

United States Court of Appeals, First Circuit.

Heard March 5, 2003.

Decided June 12, 2003.

COPYRIGHT MATERIAL OMITTED

Kevin G. Little, with whom Law Offices of David Efron was on brief, for appellants.

Gilberto J. Marxuach-Torrós, with whom Arturo J. García-Solá and McConnell Valdés were on brief, for appellee La Cruz Azul de Puerto Rico.

Luis A. Oliver-Fraticelli, with whom Fiddler, Gonzalez & Rodriguez, LLP, was on brief, for appellee Triple-S, Inc.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and LIPEZ, Circuit Judge.

SELYA, Circuit Judge.

This antitrust case requires us to examine the structure and operation of health-care delivery in an era marked by a bewildering array of insurer and provider arrangements. The plaintiffs, appellants here, represent the interests of podiatrists in Puerto Rico. They Sued La Cruz Azul de Puerto Rico (Blue Cross) and Triple-S, Inc. (Triple-S) in the federal district court complaining, inter alia, that the defendants had conspired with medical doctors to exclude podiatric care from their standard benefits packages during the period from 1995 to 1999. The district court concluded that the plaintiffs had offered insufficient evidence that physicians controlled the plans' policymaking functions with respect to either insurance benefits or reimbursement rates (and, therefore, had offered insufficient evidence of concerted action). Accordingly, the court granted summary judgment in the defendants' favor. Relatedly, the court dismissed a Lanham Act claim against Blue Cross. The plaintiffs appeal from these determinations. We affirm.

I. BACKGROUND

Except for the Lanham Act count (as to which the allegations of the amended complaint control), we glean the relevant facts from the summary judgment record. We draw all reasonable inferences in the plaintiffs' favor. Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir.1990). Our recital begins with a roster of the protagonists, proceeds to detail the plaintiffs' claims and the facts upon which they rely, and then summarizes the district court's main holdings.

A. The Protagonists.

The plaintiffs include the Podiatrist Association (a non-profit trade association), a number of practicing podiatrists, their spouses, and their conjugal partnerships. Inasmuch as the podiatrists are the real parties in interest, we shall discuss the matters sub judice as if they were the sole plaintiffs.

Podiatrists are licensed health-care providers in Puerto Rico (as elsewhere). They afford medical care to the foot and lower extremities. Podiatrists attend four-year schools of podiatric medicine. Those who successfully complete the curriculum are awarded D.P.M. degrees and become doctors of podiatric medicine. Once admitted to practice, podiatrists provide services that are similar to those offered by some medical doctors, so that the two groups compete against each other for certain patients. One court has suggested that podiatrists can furnish comparable services at lower costs. See Hahn v. Or. Physicians' Serv., 868 F.2d 1022, 1032 (9th Cir.1988). Along this line, the plaintiffs' amended complaint alleges, albeit without supporting evidence, that podiatrists offer services that are not only "of equal or better quality" than those provided by medical doctors but also "generally less expensive."

The defendants are Puerto Rico's two major providers of health-care insurance.¹ They do not contest the plaintiffs' allegation that Triple-S enjoys roughly 36% of Puerto Rico's health insurance market and Blue Cross enjoys roughly 25% of that market.

Triple-S is a for-profit corporation. From 1995 forward, its board of directors has been composed of nineteen members, eight of whom are medical doctors. The other members include a dentist, hospital officials, and community representatives. The board has complete control over corporate policymaking, and all changes in the benefits packages and reimbursement rates established by Triple-S are subject to board approval. The executive committee, which exercises responsibility over corporate policies between board meetings, consists of seven board members. Since 1995, three of those members — the president, vice-president, and secretary — have been medical doctors. The medical director, who reports to the board, is required by the corporation's bylaws to have an M.D. degree.

Blue Cross has a more complicated corporate history. Before 1998, it functioned as a non-profit corporation. Its twenty-eight board members included seven medical doctors, seven hospital executives, and fourteen subscriber representatives. Blue Cross became a for-profit corporation in 1998. Upon its conversion to for-profit status, Blue Cross established a fourteen member board of directors. All the members represented subscribers; none of them were medical doctors. In November of that year, Independence Holdings, a wholly-owned subsidiary of Independence Blue Cross, acquired a majority of its shares. At that time, the board was pared to seven members (none of whom are medical doctors).

When it functioned as a non-profit, Blue Cross had a fees and contracts committee that was responsible for proposing and evaluating benefits packages and reimbursement policies. The committee consisted of eight members: two medical doctors, two hospital executives, and four subscriber representatives. Blue Cross also maintained a medical advisory committee composed of three medical doctors (all of whom doubled in brass as board members). Despite the existence of these committees, all major decisions concerning benefits and reimbursement rates remained subject to the board's approval.

B. The Plaintiffs' Allegations.

The plaintiffs' amended complaint mounts two kinds of claims. The first set, involving alleged antitrust violations, are rooted in Section 1 of the Sherman Act, 15 U.S.C. § 1, and a parallel local-law provision, 10 P.R. Laws Ann. § 258 (1997). In a related vein, the plaintiffs charged both defendants with having engaged in unfair business practices in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and Article 1802 of the Civil Code, 31 P.R. Laws Ann. § 5141 (1990).

The plaintiffs' antitrust claims start with the premise that the defendants have favored medical doctors by excluding podiatrists, podiatric care, and ancillary services essential to podiatric care from their basic health insurance coverages; that even when podiatric care is covered, the defendants reimburse podiatrists at lower rates than those paid to medical doctors for comparable services; and that many patients who are in need of foot care turn to medical doctors rather than podiatrists. The plaintiffs further aver that this favoritism is no accident: in their view, the defendants and the internal decisionmaking processes used to formulate their benefits packages have been dominated by medical doctors, so that the discrimination that permeates the plans' activities is the outgrowth of a conspiracy that has placed anticompetitive restraints on trade. These restraints operate, the plaintiffs say, to increase prices (diverting patients to more expensive treatment, i.e., treatment by medical doctors), decrease output (driving some patients to forgo podiatric care altogether), and curtail podiatrists' earnings.

In support of these antitrust claims, the plaintiffs point to the following evidence. First, they remark that physicians have served on the defendants' boards of directors and have occupied key decisionmaking positions within the defendants' organizational structures. In contrast, no podiatrist has ever participated in either defendant's governance apparatus. Second, the plaintiffs identify specific meetings in which the defendants' exclusionary benefits policies were discussed and approved. They assert that those meetings were dominated by physicians.

The second type of claim mounted by the plaintiffs accuses the defendants of making false representations regarding the quality of podiatric care. In this regard, the plaintiffs allege that the defendants spread misinformation to subscribers regarding the competency of podiatrists, the relative professionalism of podiatrists vis-à-vis medical doctors, and the limited availability of reimbursement for podiatric care. The plaintiffs claim that these disparaging comments caused them both economic loss and reputational damage.

The current dispute is emblematic of the nationwide conflict between physicians and other participants in the health-care market. See, e.g., Flegel v. Christian Hosp., 4 F.3d 682 (8th Cir.1993); Bhan v. NME Hosps., Inc., 929 F.2d 1404 (9th Cir.1991); Va. Acad. of Clinical Psychologists v. Blue Shield, 624 F.2d 476 (4th Cir.1980). Podiatrists have long been part of this conflict. In the past, they have accused physicians of employing anticompetitive means to place hospital staff privileges beyond their reach, e.g., Cooper v. Forsyth County Hosp. Auth., Inc., 789 F.2d 278, 279 (4th Cir.1986), battled with physician-dominated boards to determine what podiatric services qualify for Medicare reimbursement, e.g., Conn. State Med. Soc'y v. Conn. Bd. of Exam'rs in Podiatry, 203 Conn. 295, 524 A.2d 636, 637-38 (Conn.1987), and fought against perceived conspiracies to exclude podiatric care from insurance coverage, e.g., Hahn, 868 F.2d at 1024-25. Consequently, we are able to view the current hostilities through the prism of a significant body of case law.

C. Travel of the Case.

The plaintiffs sued on December 9, 1999, and filed an amended complaint on March 28, 2000. Shortly thereafter, Blue Cross moved for summary judgment with respect to the antitrust claims and for dismissal of the remaining claims. The district court permitted the plaintiffs to undertake discovery on the issues raised in the summary...