Saint Francis Hosp. & Med. Ctr. v. Hartford Healthcare Corp.
| Decision Date | 13 February 2023 |
| Docket Number | 3:22-CV-50 (SVN) |
| Court | U.S. District Court — District of Connecticut |
| Parties | SAINT FRANCIS HOSPITAL & MEDICAL CENTER, INC., Plaintiff, v. HARTFORD HEALTHCARE CORPORATION, HARTFORD HOSPITAL, HARTFORD HEALTHCARE MEDICAL GROUP, INC., and INTEGRATED CARE PATERNERS, LLC, Defendants.. |
RULING AND ORDER ON DEFENDANTS' MOTION TO DISMISS
In this private antitrust action, Plaintiff, Saint Francis Hospital & Medical Center, Inc. (“Saint Francis”) claims that Defendants, Hartford Healthcare Corporation (“HHC”) and various affiliates, have unreasonably restrained trade and created a monopoly of adult specialist healthcare services in Hartford County. Saint Francis' operative complaint raises eight federal and state antitrust claims and one state common law claim. Defendants have filed the present motion to dismiss, primarily contending that Saint Francis fails to state plausible antitrust claims because it lacks the particular statutory standing necessary to pursue its antitrust claims and fails to identify actionable anticompetitive conduct. For the following reasons, the Court concludes that Saint Francis has stated plausible federal and state antitrust claims, with the exception of one narrow theory of liability, and a plausible state common law claim. Accordingly, Defendants' motion to dismiss is GRANTED IN PART and DENIED IN PART.
The operative complaint contains the following allegations, which are accepted as true for the purpose of this motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Saint Francis is a nonprofit hospital system organized in Connecticut and principally located in Hartford, Connecticut. First Am. Compl. (“FAC”), ECF No. 33, ¶ 9. Defendant HHC is also a nonprofit hospital system organized in Connecticut and principally located in Hartford, Connecticut. Id. ¶ 10. The other Defendants-Hartford Hospital, Hartford HealthCare Medical Group, Inc., and Integrated Care Partners, LLC (“ICP”)-are subsidiaries of HHC. Id. ¶¶ 10-13. HHC is “one of the largest health care systems in Connecticut.” Id. ¶ 20. It owns seven hospitals, ten surgery centers, seven independent imaging services, multiple ambulance companies, and multiple urgent care centers, and it employs more than 750 physicians throughout the state. Id.
The hospitals in the City of Hartford, located only a few miles apart from each other, are Hartford Hospital, HHC's “premier” hospital, and Saint Francis. Id. ¶¶ 21, 23. More than 1,200 physicians and dentists are on Hartford Hospital's active medical staff, and it has 707 staffed beds. Id. ¶ 21. Meanwhile, Saint Francis has 578 staffed beds. Id. ¶ 22. Both hospitals “offer a full range of hospital services, including both basic and sophisticated services.” Id. ¶ 23. Saint Francis, however, is “substantially less expensive than Hartford Hospital.” Id. ¶ 24. One study concluded that Saint Francis is “15% less expensive for inpatient care generally, 20% less expensive for outpatient care generally, and 10% less expensive for cardiac care.” Id. In addition, Saint Francis alleges that it “provides higher quality care than does Hartford Hospital.” Id. ¶ 25.
HHC owns two hospitals in Hartford County, Hartford Hospital and the Hospital of Central Connecticut, which together operate more than 900 staffed beds and, at one time, had more than 17,000 patient discharges covered by commercial insurance.[1] Id. ¶ 21. Saint Francis, by contrast, had more than 8,000 patient discharges covered by commercial insurance in 2019. Id. ¶ 22. HHC's two hospitals in Hartford County “have a greater than 55% share of commercially insured and Medicare Advantage general acute care discharges in Hartford County and a greater than 60% share in the Harford Area.” Id. ¶ 159. Besides Saint Francis and HHC's two hospitals, there are three other acute care hospitals in Hartford County, all of which are significantly smaller than Saint Francis and HHC's two hospitals. Id. ¶ 27. Manchester Memorial has only 157 staffed beds, and its “limited services” do not compete with HHC or Saint Francis. Id. ¶ 28. UConn Health has fewer than 200 staffed beds, and it faces a “financial crisis” arising from its status as a state-subsidized hospital. Id. ¶¶ 32-34. Bristol Hospital has 112 staffed beds and cannot meaningfully compete with HHC's hospitals or Saint Francis because its location makes it inaccessible for patients from the Hartford metropolitan area. Id. ¶ 37. None of these hospitals have “a significant share,” meaning 10% or more, “of commercially insured or Medicare Advantage discharges in this area.” Id. ¶ 159. Saint Francis alleges that this landscape informs how HHC has been able to amass a significant degree of market power in Hartford County.
Saint Francis alleges certain facts regarding the operation of healthcare industry, which it dubs a “two stage model of competition,” that are generally relevant to the present motion. Id. ¶¶ 41-52. A common practice among employers who purchase commercial health insurance for their employees from an insurer is for the employer to select a managed care plan on behalf of the employees; the insured employees then pay premiums, co-pays, and deductibles in exchange for insurance and access to the managed care plan's provider network. Id. ¶¶ 41-42. Managed care plans and commercial insurers select hospital systems and physicians to create the provider network available to insureds. Id. ¶ 43.
The first level of competition among hospital systems occurs when they “compete to be selected as in-network providers by managed care plans.” Id. ¶ 44. Providers benefit from innetwork status by gaining access to the managed care plan's insureds, who have an incentive to seek treatment from the in-network providers because out-of-network providers require the insured to pay more money out-of-pocket. Id. ¶ 45. Managed care plans, however, typically “offer multiple in-network providers with similar out of pocket costs.” Id. ¶ 46. Thus, the second level of competition among hospital systems occurs when they compete with other in-network providers to attract insureds as patients. Id. Because the costs to the insureds are relatively similar, innetwork providers “compete primarily on non-price dimensions in this second stage to attract patients by offering better services, amenities, convenience, quality of care, and patient satisfaction than their competitors offer.” Id.
Saint Francis alleges that, out of the various provider networks competing in Hartford County, two are relevant here. The first is ICP, a Defendant in this action and subsidiary of HHC. The second is Southern New England Health Care Organization (“SoNE”), a “clinically integrated provider network” affiliated with Saint Francis. Id. ¶ 39. Trinity Health of New England, Saint Francis' owner, owns 50% of SoNE. Id. ¶¶ 9, 39. Both ICP and SoNE contract with commercial insurers to provide health care services to insureds through member medical providers and physicians. See id. ¶ 39.
Saint Francis alleges that, beginning in 2016, HHC began suppressing competition to maintain dominance in the Hartford County market. Id. ¶ 53. Specifically, Saint Francis raises four categories of conduct by HHC that are allegedly anticompetitive: acquiring physician practices; controlling physicians' referrals; refusing to participate in tiered networking programs; and negotiating an exclusive arrangement for certain medical technology. Saint Francis asserts that, as a result of this conduct, HHC “has been able for many years to charge prices far above competitive levels.” Id. ¶ 161.
Saint Francis alleges that, since 2016, HHC has hired, and acquired the practices of, approximately twenty-six physicians formerly affiliated with Saint Francis. Id. ¶ 54. While it appears that some of these physicians were employed by Saint Francis, most were independent and practiced at Saint Francis. Id. ¶ 57. Saint Francis further alleges that an additional eight physician practices have ended their affiliation with the SoNE provider network and have become “exclusively affiliated” with ICP. Id. ¶ 55. In addition to the combined thirty-four physician practices whose affiliation with Saint Francis and SoNE ended as a result of their acquisition by HHC, a number of other physician practices whose physicians were formerly affiliated with Manchester Memorial and Bristol Hospital have been acquired by HHC, similarly limiting those hospitals' ability to compete with HHC. Id. ¶¶ 59-60. HHC has also acquired at least two group practices: Middlesex Cardiology, which previously referred cardiac surgery cases to Saint Francis; and Cottage Grove Cardiology, which previously “concentrated its practice at Saint Francis.” Id. ¶¶ 63-64. Following the groups' acquisition by HHC, they began referring their cases to HHC, which severely impacts Saint Francis because “cardiac and cardiac surgery cases are among the most profitable cases for hospitals.” Id. ¶¶ 66-67. All told, Saint Francis alleges that HHC has grown substantially in two years, adding approximately 150 physicians. Id. ¶ 68.
Saint Francis alleges that various anticompetitive consequences flowed from HHC acquiring these physician practices. To begin, the physicians who were acquired by HHC generally took “a substantial portion of their patient base” with them to the HHC system. Id. ¶ 56. Those physicians then began referring their patients to HHC rather than Saint Francis. Id. ¶ 57. The loss of commercially insured patients “is especially harmful to Saint Francis” because...
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