How far providers can go in expanding integrated delivery systems before they become anti-competitive is the central issue in a potentially precedent-setting antitrust lawsuit in Wisconsin.
In an ironic case of role reversal, the state's largest insurer is suing a group practice, contending that the practice has obtained control of so many physicians in one region that the insurer can't penetrate the market.
When insurers and providers face off in private antitrust lawsuits, it usually involves a provider suing the insurer, charging the insurer with restraint of trade for excluding the provider from the insurer's managed-care plan.
Not so in Wisconsin. There, Blue Cross and Blue Shield United of Wisconsin has charged the 400-physician Marshfield (Wis.) Clinic and its 75,000-enrollee HMO, Security Health Plan, with eight violations of federal and state law, including a violation of Section 1 of the federal Sherman Act, which bars conspiracies to retain trade.
The Milwaukee-based insurance company filed its suit last month in U.S. District Court in Madison, Wis. Last week, the clinic responded to the suit and denied all of the insurer's allegations. No trial date has been set.
According to the plan's complaint, the clinic has gained control over most or all of the physicians in 10 counties in north and north central Wisconsin through practice acquisitions, affiliations and internal growth. The plan said the clinic employs about 400 physicians and has affiliation agreements with at least 100 more. The plan also said the clinic has many exclusive referral arrangements with many non-affiliated physicians.
The plan says physicians who become employees or affiliates of Marshfield aren't permitted to work for other managed-care plans and are barred from establishing competing practices after they're no longer employed by the clinic.
Because Marshfield has tied up most of the physicians in the region, Blue Cross has been unable to penetrate the market with its competing HMO, Compcare Health Services Insurance Co., the complaint says. The HMO has about 153,000 enrollees in southeast and south central Wisconsin.
Ironically, Blue Cross was a co-owner of the Marshfield Clinic's HMO along with Saint Joseph's Hospital in Marshfield until 1986. At that point, the clinic bought out the other two partners.
The complaint also alleges that, in addition to harming Blue Cross, the clinic's monopoly over physician services in the region artificially has boosted overall healthcare costs, specifically prices charged to Blue Cross patients in the area with traditional indemnity coverage.
The plan wants the clinic to divest its managed-care plan and divest enough physician practices so the clinic couldn't exercise its monopoly. The plan also wants "millions" in damages, which would be tripled under federal antitrust law.
In its response, the clinic said the case was "without merit." The clinic said its physicians can and do provide care to patients enrolled in other managed-care plans, and its fees "are well within the range of fees charged by similar, sophisticated medical centers in the Midwest."
Saint Joseph's Hospital, a 524-bed facility in Marshfield, isn't a named defendant in the lawsuit but is mentioned in the complaint as a conspirator in the clinic's alleged attempt to control the healthcare delivery system in north central Wisconsin. The hospital and clinic are located on the same grounds, and the clinic's physicians are on the hospital's staff.
The hospital and clinic are separate legal entities, but they're "strategic partners" in developing an integrated delivery system, said Michael Schmidt, Saint Joseph's president and chief executive officer.
"We don't agree with the allegations against the clinic, and we are considering how we will support the clinic further in this matter," Mr. Schmidt said.