United States: Big Summary Judgment Win For Hospital Defending $300M Exclusive Dealing Antitrust Suit

After fending off a motion for judgment on the pleadings in March 2015, a small hospital in Peoria, Illinois lost on summary judgment in its $300 million antitrust suit alleging illegal exclusive dealing and attempted monopolization against its largest competitor. On Friday, a federal district court ruled that the exclusive arrangements between defendant hospital and health insurers did not prevent plaintiff hospital from competing in the market. Methodist Health Svcs. Corp. v. OFS Healthcare System, d/b/a Saint Francis Med. Ctr., No. 1:13-cv-01054 (C.D. Ill. Sept. 30, 2016). This decision has the potential to become a significant precedent regarding the use of exclusive contracts, particularly when employed by parties with alleged market power.

In 2013, Methodist Health Services Corporation ("Methodist") filed suit, accusing its largest rival, Saint Francis Medical Center ("Saint Francis"), of entering into contracts with payers that required those payers to exclude Methodist from their networks. Methodist alleged that those contracts unreasonably restrained trade by substantially foreclosing Methodist's ability to compete for commercially insured patients. Saint Francis and Methodist "dominate" the Peoria, Illinois market for inpatient medical services. Saint Francis offers many high-end, tertiary services that other hospitals in Peoria, including Methodist, do not offer. Of the six hospitals in the relevant geographic market, Saint Francis is the largest and Methodist—at half the size of Saint Francis—is the second largest. The district court granted summary judgement for Saint Francis on all claims.


The district court set the stage for its decision by providing an overview of the health care delivery and payment system. At issue in this case were the network exclusivity terms for commercial insurers. The largest commercial payer in the relevant market is Blue Cross Blue Shield ("BCBS"). The BCBS PPO, with 32% of all admissions and 34% of all payments, is exclusive to Saint Francis. The BCBS HMO, which is exclusive to Methodist, only has 1.6% of all admissions and 2.1% of all payments. Methodist offers a matching program to BCBS PPO patients that eliminates the cost-incentive for patients to stay in-network at Saint Francis rather than going out-of-network to Methodist. Humana, the second largest commercial payer in the area, does not include Methodist in its network. Health Alliance Medical Plans ("HAMP") is also exclusive to Saint Francis. The second largest source of commercially insured patients in the area is Caterpillar, the region's largest employer. Caterpillar's self-insured PPO used to be exclusive to Saint Francis, and its self-insured HMO was exclusive to Methodist. In 2010 and 2011, Caterpillar decoupled the tertiary services offered only by Saint Francis from the other services offered by both Saint Francis and Methodist, and opened its self-insured PPO and HMO networks to include both hospitals.

Methodist's Claims

Methodist's expert submitted a report purporting to demonstrate that Saint Francis' exclusive contracts substantially foreclosed Methodist from competing in the market for commercially insured patients in the Peoria area. The report contended that in 2009, Methodist was foreclosed from 54% of the market by the three plans that excluded Methodist (the BCBS PPO-29%, the Caterpillar PPO-12%, and the Humana plan-13%). Similarly, the report asserted that in 2012, Methodist was foreclosed from 52% of the market (based on the exclusivity in the BCBS PPO-34%, the Humana plan-10%, the HAMP plan-6%, and a very small Aetna plan).

Methodist alleged that Saint Francis has market power due to its provision of tertiary services (making it a "must have" hospital), and that it used that market power to coerce commercial payers into excluding Methodist from their provider networks.

District Court's Analysis

Exclusive dealings under Section 1 of the Sherman Act are analyzed under the rule of reason, and are condemned only if the agreement results in substantial foreclosure of competition. The district court adopted the Third Circuit's standard, whether its "probable effect is to substantially lessen competition in the relevant market" (citing ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 268 (3d Cir. 2012). Exclusive dealing claims under Section 2 of the Sherman Act are analyzed in a similar manner, however the threshold quantitative showing (roughly 40-50% foreclosure for a Section 1 claim) may be less for a Section 2 claim.

Relevant Market

A threshold issue in any antitrust case is the determination of the relevant market in which trade is allegedly restrained. Saint Francis argued that the relevant product market should include both commercial and government payers. Consistent with other cases and the antitrust agencies' mode of analysis, the district court agreed with Methodist that the two are not interchangeable, and thus the relevant product market should be limited to commercial payers.

Substantial Foreclosure

The parties disagreed over the meaning of foreclosure from competition. Methodist argued that if a contract excludes Methodist, then it has been foreclosed from competing for all patients covered by that plan. The district court rejected Methodist's all-or-nothing approach.

The district court held that foreclosure must be analyzed at each level in the distribution chain—competition between hospitals for payer contracts, competition between payers for customers (usually employers), and competition between hospitals for individual patients. Ultimately, the district court found that a jury would not be permitted to conclude that Saint Francis' exclusive contracts substantially foreclosed competition in the Peoria inpatient health care market.

Essentially making a Daubert motion, Saint Francis challenged Methodist's expert's foreclosure calculations. Methodist argued that any dispute as to its expert's calculations is factual in nature, and thus must be decided by a jury. The district court disagreed, holding that if the expert's figures included patients who, as a matter of law, are not foreclosed from Methodist based on undisputed facts, then the jury may not consider them.

The district court chipped away at Methodist's foreclosure claims by concluding that certain categories of patients, as a matter of law, were not foreclosed from Methodist and should not have been included in the foreclosure calculations: i) patients actually treated at Methodist (even if Methodist was out-of-network for those patients); ii) patients covered by BCBS PPO self-insured plans (even if those plans ultimately excluded Methodist, because there was nothing in the contract between Saint Francis and BCBS requiring exclusivity for the PPO self-insured plans); iii) OSF employees covered by Humana because OSF has no legal duty to compete with itself (OSF is the parent of Saint Francis, and previously sold its commercial plan to Humana with the condition that Humana keep Saint Francis as its exclusive in-network provider); and iv) Caterpillar employees, because Caterpillar's contracting history (designed to offer its employees a choice between the hospitals) demonstrated that the health insurance market is competitive. After excluding those categories of patients, the district court found that, at most, Methodist was foreclosed from the BCBS PPO patients that were members of non-self-insured plans—only 20% and 22% of the market for 2009 and 2012, respectively.

The district court also weighed additional factors impacting foreclosure. First, it noted that the contracts at issue were short in duration; most lasting just one or two years. Second, there were several alternative means for Methodist to reach commercial patients, including its match program.

The district court dismissed Methodist's reliance on the Third Circuit's decision in United States v. Dentsply Intern., Inc., 399 F.3d 181 (3d Cir. 2005). Dentsply was a manufacturer of artificial teeth with a national 75-80% market share. Dentsply's written corporate policy prevented the distributors of Dentsply's teeth to sell competing manufacturer's teeth. The Third Circuit found Dentsply's practice illegal, holding that the alternative distribution channels that did not involve the distributors were not adequate for Dentsply's competitors. The district court here noted that Dentsply had significantly more market power in its relevant market than Saint Francis, and that Dentsply's exclusive dealings completely foreclosed competitors, whereas Methodist was not significantly foreclosed. Significantly, Dentsply's exclusionary practice had no legitimate business purpose and was designed to harm rivals. The district court distinguished that from Saint Francis' exclusive contracts which did have a legitimate business purpose—they provide a more predictable patient volume for Saint Francis and the payers agree to the exclusivity in exchange for avoiding an open-network premium. Finally, the district court noted that the small and concentrated Peoria market allowed Methodist to know which major employers it could target to increase its self-insured business. In contrast, the large geographic market in Dentsply made it difficult for small manufacturers to operate without access to the distributor's network.

The district court held that a jury could not conclude that Methodist was substantially foreclosed from the inpatient market as a matter of law and that the Sherman Act claims must fail.

The district court quickly assessed, and again ruled for Saint Francis, the outpatient surgical services market claims. First, the district court found that Methodist did not provide any separate evidence or analysis of foreclosure in the outpatient market, instead arguing that it is the same as the inpatient market—a position that was too speculative. And second, assuming it is the same as the inpatient market, as discussed above, the district court already found the levels of foreclosure on which Methodist relied to be insufficient as a matter of law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Bruce D. Sokler
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.