E-Mail Bulletin #2
October 2007
Interesting anti-trust case to go forward
E-Mail Bulletin
Hello, everyone.
Here's a report on a very interesting anti-trust suit that is going forward in Kansas City. It pits a physician-owned specialty facility against various third-party payors and hospital-owned facilities who are alleged to have conspired to lock-out the physician-owned competition.
The article is from the October 18th edition of kansascity.com
Gil Weber, MBA
Health-care providers lose bid to toss antitrust lawsuit
By DAN MARGOLIES
The Kansas City Star
Setting the stage for a showdown, a judge has found enough evidence for an antitrust case against some of the area's biggest health-care providers to move forward.
In a 126-page order unsealed this week, U.S. District Judge Monti Belot denied requests by the defendants to throw out the suit, which was filed in April 2005 by Heartland Spine & Specialty Hospital in Overland Park.
The closely watched case, which accuses the defendants of conspiring to shut out Heartland from managed-care contracts and drive it out of business, is scheduled to go to trial in April in Wichita.
At issue is the role of physician-owned specialty facilities in the evolving landscape of American medical care and the extent to which hospitals can negotiate with insurers to exclude them from in-network managed-care contracts.
"We're disappointed in the court's ruling, and we do believe our practices are in the best interests of our patients," said Rob Dyer, a spokesman for HCA Midwest, one of the defendants. "We intend to vigorously defend ourselves against the lawsuit."
Another defendant, St. Luke's Health System, on Tuesday asked Belot to reconsider his ruling. While acknowledging that St. Luke's discouraged managed-care companies from doing business with Heartland, it said that was not illegal under antitrust law.
Even if it had threatened to stop contracting with managed-care companies that did business with Heartland — an act St. Luke's described as "irrational on its face" — "that would not create a horizontal conspiracy with other hospitals," St. Luke's wrote.
Belot found insufficient evidence that a third defendant, Carondelet Health System, had conspired with the other hospital defendants to boycott Heartland.
Heartland originally sued five area hospitals and hospital groups — HCA Midwest, St. Luke's, Carondelet, Shawnee Mission Medical Center and North Kansas City Hospital — and six managed-care companies — Blue Cross and Blue Shield of Kansas City, Aetna Inc., Coventry Health Care of Kansas, Cigna Health Care, Humana Health Plan and United Healthcare.
North Kansas City Hospital, Blue Cross, Cigna, Humana and United reached confidential settlements with Heartland earlier this year.
The remaining hospital defendants account for 74 percent of net patient revenues in the Kansas City area. The managed-care defendants account for 90 percent of managed-care enrollment in the area.
The suit alleges that the defendants negotiated agreements meant to exclude physician-owned specialty hospitals like Heartland, while ensuring that their own hospital-owned facilities, though competitors with one another, would not be excluded.
Heartland says the managed-care defendants agreed to boycott Heartland, concerned that if one contracted with Heartland, the others would follow suit. In exchange for their cooperation, Heartland alleges, the hospitals agreed to accept reduced reimbursement rates from the managed-care companies.
The hospitals insist that it was in their independent interests to limit the number of competitors able to contract with a managed-care company and that there was no conspiracy.
But in his order, Belot found that the hospitals' rationale "does not explain why the Hospital Defendants were willing to work with their competitors to allow those competitors' majority-owned facilities into the MCO (managed-care organization) networks, while keeping physician-owned facilities out of network."
"If it is in a hospital's best interest to keep new facilities out of a network," he continued, "then it would appear to be in that hospital's best interest to keep out both majority-owned and physician-owned facilities."
Not disputed in the case is that the hospitals saw Heartland as a dangerous competitor that would "cherry-pick" patients and leave the hospitals with the costly obligations traditionally shouldered by them, namely emergency and uninsured care. For example, in a November 2003 meeting cited by Belot, HCA officials complained of their inpatient facilities coming "under attack" from physician-owned specialty hospitals.
Concerned about the impact of physician-owned specialty hospitals, Congress in 2003 ordered a moratorium on certain Medicare payments to them. The moratorium expired last year.
Heartland opened for business in September 2003, promising higher-quality care at lower cost, higher-than-average nurse-to-patient ratios and state-of-the-art medical equipment.
Owned by about two dozen physicians, the facility focuses on spine and upper-extremity treatment and is licensed for 48 inpatient beds.
But Heartland says it has struggled because the defendant hospitals conspired with the defendant managed-care companies to choke off its business.
Although Belot found that there was sufficient evidence for a jury to find that the defendants conspired to boycott Heartland, he cautioned that Heartland shouldn't presume it had a strong case.
On the contrary, he wrote, the evidence was far from conclusive.
Nonetheless, Heartland's lead attorneys, Norman Siegel and Patrick Stueve, said they were pleased with his order, which comes after nearly 100 depositions and more than 3 million documents in the case were produced and reviewed.
What's next
- The order is important because antitrust cases often don't get past this stage, but the judge said this one could go to trial in April.
- The case has drawn interest in the medical business because it pits a doctor-owned facility against a big hospital group.
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