United States: Camels And Dogs, Oh My! Defendant Documents Doom Health Provider Trade Association And Insurers' Motion To Dismiss Antitrust Suit

Last Updated: June 23 2015
Article by Bruce D. Sokler and Farrah Short

Over two and one-half years after it was initially filed, an antitrust suit brought by plaintiff ambulatory surgery centers ("ASCs") against health insurers and a trade association of competing health systems is finally moving forward. The District Court found that plaintiffs plausibly alleged in their second amended complaint ("SAC") that defendants conspired to put plaintiffs out of business and unreasonably restrained trade in the market for ambulatory surgery services in Denver and Colorado Springs, Colorado in violation of the Sherman Act Section 1 and state antitrust law. Kissing Camels Surgery Center LLC et al. v. Centura Health Corp. et al., 1:12-cv-03012 (D.Col. June 16, 2015).

An earlier complaint in the case had been dismissed for failure to plead sufficient facts establishing the predicate agreement for the alleged conspiracy. Plaintiffs were more successful this time around, and the case now moves forward on the merits.

The Parties

The four ASC plaintiffs perform outpatient surgical procedures and treatments in non-hospital environments in Denver and Colorado Springs, Colorado, frequently at a lower price than hospital surgical services. They are Kissing Camels Surgery Center, LLC, Cherry Creek Surgery Center, LLC, Arapahoe Surgery Center, LLC, and Hampden Surgery Center, LLC (collectively, the "Kissing Camels").

The defendants originally included four health insurers, a trade association purporting to represent the interests of ASCs, the two dominant private health systems in the market which operate hospitals and surgery centers, and an ASC joint venture between one of the health systems and local physicians (collectively, the "Defendants"). The health insurers are Rocky Mountain Hospital and Medical Service, Inc., d/b/a Anthem Blue Cross and Blue Shield of Colorado ("Anthem"), UnitedHealthCare of Colorado, Inc. ("United"), Aetna, Inc. ("Aetna"), and Kaiser Foundation Health Plan of Colorado ("Kaiser"). The trade association is Colorado Ambulatory Surgery Center Association, Inc. ("CASCA"). The health systems are Centura Health Corporation ("Centura") and HCA, Inc. ("HCA"). And the joint venture ASC is Audubon Ambulatory Surgery Center, LLC ("Audubon" and together with Centura and HCA, "Defendant Health Systems"). Defendant Health Systems compete with Kissing Camels.

Procedural History

Kissing Camels filed their initial complaint in November 2012 against HCA, Centura, CASCA, and Kaiser. They then amended, filing the first amended complaint in April 2013, adding defendants Anthem, United, Aetna, and Audubon. (Kissing Camels subsequently stipulated to the dismissal of claims against HCA, Audubon, and Kaiser.)

In February 2014, the District Court granted Defendants' motions to dismiss the earlier complaint for failure to plead sufficient facts to establish the predicate agreement for the conspiracy claims. Granted leave to amend, Kissing Camels then filed the SAC. In September 2014, Defendant Centura filed a motion for summary judgment, which remains pending.1 Then, in December 2014 the other remaining Defendants, Anthem, United, Aetna (collectively the "Defendant Insurers") and CASCA, filed motions to dismiss which were denied here.

Allegations

Kissing Camels alleged that from the time they first entered the market in 2010, Defendant Health Systems conspired to reduce competition for ambulatory surgery services by not doing business with the plaintiff ASCs, and using their market power to pressure physicians and insurers to also not do business with them. For example, Kissing Camels alleged that Centura and Audubon pressured Defendant Insurers into penalizing physicians for referring business to the plaintiff ASCs. Kissing Camels also alleged that Centura and HCA used their market power to convince Defendant Insurers not to contract with competing independent surgery centers, including the plaintiff ASCs. Kissing Camels further alleged that Centura and HCA controlled CASCA, and that CASCA aided in the conspiracy against Plaintiffs, including by sending false allegations about the plaintiff ASCs to the state regulatory agency.

District Court's Analysis of Motions to Dismiss Second Amended Complaint

Resolving the District Court's concern with the earlier complaint, the allegations in Plaintiffs' SAC make reference to specific pieces of evidence, including e-mails and meeting notes.

First addressing CASCA's motion to dismiss the SAC, the District Court found that Kissing Camels "now included direct allegations that CASCA was a co-conspirator, not a mere tool of the conspiracy." In earlier dismissing the original claims against CASCA without prejudice, the District Court found that "Plaintiffs' allegations suggest[ed] that CASCA provided passive facilitation of the conspiracy, not that it agreed to participate, tacitly or expressly." But now the District Court pointed to Kissing Camels' specific evidence, including an email from HCA's CEO that said "TIME TO CALL IN THE DOGS!!!!!" in response to confirmation that Kissing Camels had recently opened a new facility. The court also cited a follow up email on the same topic, which was copied to an HCA representative on the CASCA Board, stating "Can we add more pressure to the payers to stop the proliferation of the out-of-network [Plaintiff] ASCs?" The District Court found that this and other evidence cited in the SAC sufficiently alleged facts that supported Kissing Camels' claim that CASCA coordinated meetings on behalf of Defendant Health Systems in furtherance of the alleged conspiracy.

Turning to the claims against Defendant Insurers, the District Court noted that Kissing Camels had failed originally to "directly allege that the Insurers made such an agreement [to conspire]... [and] only indirectly support[ed] an inference of such an agreement, pleading parallel acts by each Insurer..." Finding that the SAC now contained explicit allegations of an agreement to conspire, the District Court cited evidence of notes from a meeting that suggested the establishment of a strategy among Defendant Insurers to prevent Kissing Camels from obtaining patients. Further supporting the allegation was the temporal proximity to that meeting and subsequent actions taken by Defendant Insurers against physicians for referrals to Plaintiffs, which "tend[ed] to exclude the possibility that... [they] were acting independently." 

It is important to underscore that all that has been decided to date is that Kissing Camels made sufficient allegations in its latest complaint so that the case can proceed. In the health care provider marketplace, payment changes, referral patterns, controversy over ASCs "cream skimming" profitable cases are prevalent. Much attention is rightfully paid to government enforcement efforts. And many private antitrust cases have been dismissed for lack of plausible antitrust theory and sufficient antitrust-related facts. The Kissing Camels opinion is a reminder that some private cases can be constructed that survive the motion to dismiss—which at a minimum means that lengthy, expensive, and distracting antitrust merits litigation will follow. Moreover, Kissing Camels demonstrates yet again that documents, emails, and provocative statements by executives are the yeast from which antitrust claims will arise.

Footnote

1. The claims against Centura were the only ones not dismissed by the District Court from the first amended complaint.

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Bruce D. Sokler
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