Hospital's Exclusive Pact with Medical Group Not Monopolization

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

A southwest Colorado hospital did not engage in monopolization or attempted monopolization in violation of federal or Colorado antitrust law by entering into an exclusive contract for nephrology physician services with one medical group and terminating the staff privileges of a competing kidney doctor, the U.S. Court of Appeals in Denver has decided.

A federal district court's grant of summary judgment in favor of the hospital (2008-2 Trade Cases ¶76,279) was affirmed.

The appellate court did not address the lower court's grounds for rejecting the terminated doctor's claims—that the hospital lacked monopoly power or the dangerous probability of achieving it.

Addressing that rationale on appeal was unnecessary because the decision could be affirmed "on any basis that [had] adequate support in the record," the court stated. The hospital sufficiently presented two such bases, in the court's view—the doctor's failures to establish anticompetitive conduct and antitrust injury.

Anticompetitive Conduct

The hospital's refusal to deal did not constitute anticompetitive conduct within the meaning of Sec. 2 of the Sherman Act or its state log analog, the appellate court held. A business, even a putative monopolist, had no antitrust duty to deal with its rivals, the court explained.

Forcing the hospital to share the source of its competitive advantage—its facilities—would lessen its incentive to undertake the risky investment in new endeavors or facilities. The hospital was entitled to recoup its investment without sharing with a competitor, in the court's view.

Moreover, the hospital's conduct was actually procompetitive, the court said. The exclusive contract with the medical group ensured consumers greater access to full-time nephrology services in the area and avoided a scenario in which the hospital prematurely exhausted the loss reserves it had set aside for its investment, not only chilling future investment but again leaving the area without any nephrologists.

Denominating the claim as sounding in monopoly leveraging did nothing to save it, the court added.

Antitrust Injury

The complaining physician also failed to show that he could have suffered antitrust injury from either the hospital's termination of his staff privileges or its entry into the exclusive contract with the rival medical group. In seeking reinstatement of active medical staff privileges, the excluded physician sought not the prevention or breaking apart of a monopoly, but the chance to share in that monopoly, according to the court. Thus, whatever the physician's injury, it was not one the antitrust laws were designed to protect consumers from suppliers, rather than suppliers from each other, the court noted.

Requiring the hospital to accommodate the excluded physician's demand would not necessarily benefit consumers, since the hospital could still impose terms and conditions to prevent him from undercutting the hospital's own nephrology practice.

Even if the physician sought an order in which the hospital had to share its facilities with him in a manner that was likely to help consumers, it would have been inappropriate for the judiciary to so dictate the terms of such an arrangement, the appellate court counseled. "The federal judiciary is not a price control agency," the court declared.

The September 29 decision in Four Corners Nephrology Associates, P.C. v. Mercy Medical Center of Durango appears at 2009-2 Trade Cases ¶76,756.