Insurers, Hospitals Could Have Conspired Against Surgical Facilities

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reports.

Two managed care organizations (MCOs) and three hospitals in the Kansas City area could have engaged in a group boycott against physician-owned specialty surgical hospitals in violation of federal antitrust law, the federal district court in Witchita, Kansas has ruled.

Direct and circumstantial evidence that MCOs and hospitals acted to prevent such specialty hospitals from becoming part of the MCOs’ managed care plan networks sufficed to create a genuine issue of fact for a jury as to whether the defendants participated in an antitrust conspiracy.

Motions for summary judgment and partial summary judgment on the claim were, therefore, denied. However, a fourth hospital’s motion for partial summary judgment on the horizontal conspiracy claim was granted, owing to the complaining specialty hospital’s failure to demonstrate sufficient participation by the hospital in the conspiracy.

Evidence that a complaining specialty surgical hospital presented—showing the defending MCOs’ participation in an unlawful conspiracy with other health insurers and health care facilities—was sufficient to survive summary judgment, the court decided.

The evidence included a demonstration that, although one of the MCOs aggressively competed with other MCOs for members and gave good initial responses to the specialty hospital, the MCO then acted to exclude it subsequent to its attendance at meetings in which other MCOs expressed opposition to including specialty hospitals within their networks and planned to exclude them. Moreover, it could be inferred from testimony that the MCOs were part of a “gentleman’s agreement” among MCOs in the Kansas City area not to extend managed care contracts to specialty hospitals.

One of the defending MCOs also had spearheaded coordination of network hospitals’ waiver of network configuration clauses in their managed care contracts to enable the hospitals’ own majority-owned specialty hospitals to be part of the network, while at the same time not extending the same sort of waiver to independent, physician-owned facilities. The other MCO was shown to have participated in this effort, as well.

Owing to the existence of some direct evidence, a plausible economic motive, and the inferences of conspiracy that could be drawn from this circumstantial evidence, summary judgment in favor of the MCO would have been inappropriate.

The decision is Heartland Surgical Specialty Hospital, Inc., 2007-2 Trade Cases ¶75,957.