On April 16, Judge James M. Moody Jr. (E.D. Ark.) issued a
ruling in Tri State Advanced Surgery Center v. Health
Choice, dismissing an antitrust claim that Cigna Healthcare
and Health Choice, a physician hospital organization, had entered
into an unlawful agreement to destroy the business of the
plaintiff, an ambulatory surgery center serving the greater Memphis
metropolitan area. Specifically, the plaintiff maintained that
Cigna and Health Choice, which includes Methodist LeBonheur
Healthcare (the largest hospital system in the Memphis metropolitan
area), had conspired to harm Tri State by agreeing that Cigna would
threaten physicians with expulsion from Cigna's PPO network if
they continued to refer patients to Tri State.
In support of its claim, Tri State maintained that the alleged
agreement was an anticompetitive boycott of its services, entitled
to per se condemnation. However, the Court rejected
plaintiff's argument, holding that the per se rule is
limited to horizontal agreements to harm competitors, and
that while plaintiff had alleged that "Health Choice had made
the agreement on behalf of its joint venture partner Methodist, in
an attempt to eliminate competition against Methodist,"
because Methodist was not a defendant in the case, and neither
Cigna nor Health Choice was a competitor or Tri State, this
allegation was insufficient. Accordingly, plaintiff's claim was
required to be assessed under the rule of reason.
Examining plaintiff's allegations under the rule of reason, the
Court then held that Tri State's allegations were insufficient
as a matter of law. Required to show either "market power or
proof of actual detrimental effects," Tri State's
complaint did not measure up. First, the Court held that Tri
State's allegations of detrimental effects were inadequate,
because Tri State did not allege that patients could not obtain
ambulatory surgery services elsewhere in the region, and that Tri
State "is still in business and all its services [remain]
available to patients."
Turning next to whether Tri State had sufficiently alleged market
power (which would permit a presumption of harm), the Court held
that Tri State's allegations in this regard were also
inadequate. The relevant product market for Tri State's claim
was not patients covered by Cigna insurance, but the
market for all patients requiring surgical services that do not
require hospitalization. Because plaintiff's complaint did not
contain any market share information related to this
market, and because Cigna holds only a 42% share of the commercial
insurance market in the area, plaintiff's allegations failed as
a matter of law.
In addition, finding that "the deficiencies [in Tri
State's] complaint are inherent in the nature of the claims and
not likely to be cured by further pleading," Judge Moody
dismissed Tri State's antitrust claim with prejudice.
Judge Moody then declined to exercise supplemental jurisdiction
over the plaintiff's state law claims, dismissing them without
prejudice. Whether Tri State will appeal the ruling is unclear at
this time.
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