Wichita Clinic v. Columbia/Hca Healthcare Corp.

• Decision Date: 31 March 1999
• Docket Number: No. 96-1336-JTM.,96-1336-JTM.
• Citation: 45 F.Supp.2d 1164
• Parties: WICHITA CLINIC, P.A., and Integrated Healthcare Systems, Inc., Plaintiffs, v. COLUMBIA/HCA HEALTHCARE CORP., and HCA Health Services of Kansas, Inc., Defendants.
• Court: U.S. District Court — District of Kansas

45 F.Supp.2d 1164

WICHITA CLINIC, P.A., and Integrated Healthcare Systems, Inc., Plaintiffs, v. COLUMBIA/HCA HEALTHCARE CORP., and HCA Health Services of Kansas, Inc., Defendants.

No. 96-1336-JTM.

United States District Court, D. Kansas.

March 31, 1999.

Order Denying Reconsideration May 11, 1999.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Sara E. Welch, Stinson, Mag & Fizzell, P.C., Kansas City, MO, Patrick J. Stueve, Kirk A. Peterson, Anthony J. Durone, Berkowitz, Feldmiller, Stanton, Brandt, Williams & Stueve, LLP, Kansas City, MO, Roger D. Stanton, Berkowitz, Feldmiller, Stanton Brandt, Williams & Stueve, LLP, Prairie Village, KS, for Plaintiffs.

James R. Eiszner, Shook, Hardy & Bacon L.L.P., Kansas City, MO, J. Eugene Balloun, William R. Sampson, David A. Rameden, Shook, Hardy & Bacon L.L.P., Overland Park, KS, for Defendants.

Terry L. Unruh, Grace, Unruh & Pratt, L.C., Wichita, KS, for Movant.

MEMORANDUM ORDER

MARTEN, District Judge.

The present action involves claims by the plaintiffs, Wichita Clinic and Integrated Healthcare Systems, Inc., against the defendants, Columbia/HCA and Wesley Hospital, for federal antitrust violations, along with state tort claims. The substance of the action was previously addressed by the court in its resolution of the defendants' motion to dismiss. Wichita Clinic v. Columbia/HCA Corp., No. 96-1336-JTM, 1997 WL 225966 (D.Kan. April 8, 1997). The matter is currently before the court on the competing motions for partial summary judgment submitted by the parties.

Summary judgment is proper where the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In considering a motion for summary judgment, the court must examine all evidence in a light most favorable to the opposing party. McKenzie v. Mercy Hospital, 854 F.2d 365, 367 (10th Cir.1988). The party moving for summary judgment must demonstrate its entitlement to summary judgment beyond a reasonable doubt. Ellis v. El Paso Natural Gas Co., 754 F.2d 884, 885 (10th Cir.1985). The moving party need not disprove plaintiff's claim; it need only establish that the factual allegations have no legal significance. Dayton Hudson Corp. v. Macerich Real Estate Co., 812 F.2d 1319, 1323 (10th Cir. 1987).

In resisting a motion for summary judgment, the opposing party may not rely upon mere allegations or denials contained in its pleadings or briefs. Rather, the nonmoving party must come forward with specific facts showing the presence of a genuine issue of material fact for trial and significant probative evidence supporting the allegation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Once the moving party has carried its burden under Rule 56(c), the party opposing summary judgment must do more than simply show there is some metaphysical doubt as to the material facts. "In the language of the Rule, the nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting Fed. R.Civ.P. 56(e)) (emphasis in Matsushita). One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses, and the rule should be interpreted in a way that allows it to accomplish this purpose. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).¹

Findings of Fact

In 1994, two Wichita hospitals, St. Francis and St. Joseph, announced their intention to merge into a single hospital system that would later become known as "Via Christi." The merger was announced with the intention to create a stronger, more efficient health care system which minimized costs. The proposed merger was "cleared" after an inquiry by the United States Department of Justice. The resulting Via Christi is the largest health care system in Kansas.

In addition to the merger, the Via Christi hospitals began employing physicians in order to integrate their health care delivery system. The plaintiffs contend that Via Christi "has been employing primary care physicians to secure referrals to that hospital." (Resp. Facts at 3). The evidence cited in support, however, establishes only that this was a concern of Wesley CEO Jim Kelly, who testified that Via Christi's hiring of its own physicians "certainly increased the likelihood" of more referrals to Via Christi. (Exh. 66 at 349). The plaintiffs have not produced evidence from any witness with personal knowledge of increased referrals.

Via Christi's advent significantly affected the market for health care in the area. Via Christi owns its own Health Maintenance Organization (HMO) product, Preferred Health Systems, Inc. The centerpiece of HMO managed care is the primary care physician "gatekeeper" who controls utilization of services by members. Family practice physicians are particularly well suited to provide gatekeeper services for managed care health plans. Vertical integration of hospitals allows Via Christi to offer "one stop shopping" for insurance companies and other third-party payors. The efficiencies derived from physician integration can be obtained by physician-hospital affiliation, or through effectively managed physician groups. Physician groups and clinics unaffiliated with hospitals are an important source of competition to hospital-based outpatient services and hospital-based family practice physician services. The advent of managed care has forced many single practitioner physicians to join physician groups.

Columbia/HCA, which owns and operates over 350 hospitals, is the largest company of its type in the United States. The plaintiffs allege that, in 1996, Columbia/HCA was worth $4.4 billion, and earned $2.7 billion before taxes. The plaintiffs do not cite to any evidence for this assertion however, other than a reference to the report of their expert witness. The expert's report does not contain any reference to the source for these figures. The court notes that this sort of bootstrapping of factual, nonopinion evidence clearly fails to satisfy the rules of evidence.

Columbia/HCA acquired Wesley in 1994 when Columbia merged with HCA. Wesley has been very profitable. (Plf.Exh. 66, J. Kelly dep. at 22). At some point it was the most profitable hospital in the Columbia/HCA system. (Plf.Exh. 58, Dougan dep. at 96; Exh. 66, J. Kelly dep. at 22). On the other hand, there is evidence that, in terms of total profit margin, Wesley in 1996 was not even in the top ten hospitals in the Columbia/HCA system. (Plf.Exh.144). Wesley's profits grew from $56 million in 1994 to $89 million in 1996. Wesley has higher profit margins than its competitor Via Christi.²

Wichita Clinic, with approximately 150 physicians, is the largest multi-specialty physician group in Kansas. The shareholder owners of the Clinic also own Integrated Healthcare Systems, Inc. (IHS), a management service organization which provides the Clinic with administrative and support services. Wichita Clinic has spent over 20 years and millions of dollars to develop its primary care physician base.

The Clinic's 1994 Strategic Plan called for expanding Wichita Clinic's primary care physician base to 220 physicians by acquiring 75 primary physicians to create a physician-directed integrated delivery system. The plaintiffs claim that, at the time they were approached by defendants, "they were searching for other capital partners" among four entities (PhyCor, Humana, St. Joseph, and St. Francis). The evidence indicates, however, that Wichita Clinic had independently rejected PhyCor and Humana, while the Via Christi hospitals showed little real interest in such a partnership. Contrary to the argument of the plaintiffs, the Court finds the February 2, 1995 Letter of Intent³ between the parties did not prohibit them from negotiating with other capital partners.

The relationship between plaintiffs Wichita Clinic and IHS has been memorialized in a Management Operating Agreement.⁴ This agreement states that the relationship between Wichita Clinic and IHS "is that of independent contractors." (Def.Exh.4). IHS has the same officers and directors as Wichita Clinic. IHS's contract with Wichita Clinic is nonexclusive, but IHS has not attempted to contract with any physician group other than Wichita Clinic. There is some evidence that its revenues were disrupted during the time period discussed herein, because one of its sources of revenue management fees was provided by Wichita Clinic.

In April 1994, St. Francis paid its primary care physicians more than Wichita Clinic. There was concern that these salaries would change the competitive level in the community. Later, Via Christi was establishing the market for primary care physician salaries.

The joint venture negotiations between Wesley and Wichita Clinic appear to have been motivated both by the desire to compete effectively with Via Christi and to maintain existing relationships with important insurance providers. It was in this context that Tom Kelly, Wichita Clinic's consultant, recommended that Wichita Clinic partner with a hospital to form an integrated health care system.

In April or May of 1994, John Knack, President and CEO for Blue Cross told Wesley CEO Jim Kelly that Blue Cross wanted to replace its existing exclusive hospital relationship with Wesley, which he characterized as "an older, aging product" with "more of a capitated arrangement." (Exh. 38, J. Kelly dep. at 95). Knack told Kelly that Blue Cross had unsuccessfully attempted to develop a relationship with Wichita Clinic, and had begun to talk to St. Francis about investing in their health maintenance organization. Knack told Kelly that he would give him the...