On February 13, 2023, U.S. District Judge Sarala V. Nagala declined to throw out Saint Francis Hospital's lawsuit accusing competitor Hartford HealthCare of monopolizing healthcare services in Hartford County. Saint Francis Hosp. & Med. Ctr., Inc. v. Hartford Healthcare Corp., No. 3:22-CV-50 (SVN), 2023 WL 1967133 (D. Conn. Feb. 13, 2023). Judge Nagala did eliminate one theory of liability from the complaint, holding that Saint Francis failed to adequately allege that Hartford HealthCare's refusal to participate in certain cost-lowering insurance programs harmed competition.
The complaint alleged that Hartford HealthCare and its affiliates suppressed competition through two buckets of monopolistic conduct. First, Hartford HealthCare acquired the practices of physicians affiliated with competing hospitals through a "campaign of intimidation," threatening to "crush" physicians that resisted and offering compensation well above fair market value. Hartford HealthCare also maintained control over physician referrals through threats and rewards, thereby keeping patients away from competitors. And Hartford HealthCare negotiated an exclusive agreement to buy innovative orthopedic surgical technology—precluding competitors from using the technology—which gave Hartford HealthCare an advantage in recruiting orthopedic surgeons. Second, Hartford HealthCare refused to participate in tiered networking programs that would increase competition and reduce prices.
Together, these anticompetitive practices have purportedly entrenched Hartford HealthCare's monopoly power by enabling it to amass a significant share of Hartford County's specialist physicians, none of whom can refer patients to Saint Francis. The lawsuit alleges that Hartford HealthCare holds significant leverage over managed care plans, making it difficult for them to refuse the high rates that Hartford HealthCare demands despite its lower quality services.
In a lengthy opinion, the court held that Saint Francis had sufficiently pled its first theory of liability based on Hartford HealthCare's recruitment of physicians and control over referrals. In its motion to dismiss, Hartford HealthCare argued that hiring a competitor's employees does not constitute an antitrust violation. But Judge Nagala said the complaint plausibly alleged that Hartford HealthCare engaged in vertical acquisitions of physician practices "for the purpose of concentrating [its] market power," though she acknowledged that this was "a close question." The court distinguished the allegations from the mere "hiring of rival talent," which would be insufficient to state an antitrust claim. In fact, no-poach agreements violate the antitrust laws, so the court was likely keen to draw this distinction, particularly given the government enforcement agencies' heightened scrutiny of antitrust conduct in labor markets over the past few years.
Judge Nagala also held that Saint Francis adequately alleged antitrust standing for its first liability theory. Hartford HealthCare argued that "Saint Francis would have suffered from the same injury if any hospital system had acquired the physicians at issue." The court disagreed, noting that Saint Francis's alleged harm resulted directly from Hartford HealthCare's monopoly power and anticompetitive conduct. Hartford HealthCare's acquisition of physicians has made competing hospitals, including Saint Francis, less attractive to patients and simultaneously given Hartford HealthCare increased bargaining power over managed care plans.
However, the court held that Saint Francis's second theory of liability fell short. The complaint alleged that participation in tiered networking would "stimulate price competition between providers" and "significantly reduce health care costs" by requiring hospital systems to compete to be selected by the managed care plans as preferred providers. But Judge Nagala concluded that Saint Francis failed to "articulate a factual or legal theory under which [Hartford HealthCare's] refusal to participate in tiered networking programs violates antitrust law." The complaint also failed to identify any actual harm that Saint Francis suffered from that conduct.
Finally, the court held that Saint Francis defined a plausible relevant market, an essential element of its claim. The complaint alleged a relevant market of "adult acute inpatient healthcare services and adult professional specialist healthcare services provided to commercially insured patients in Hartford County." The court rejected Hartford HealthCare's contention that the complaint artificially limited the product market to commercially insured patients, finding that the allegations justified excluding patients insured by government programs.
Originally published by California Lawyers Association (linked under the E-Briefs section).
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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