A federal judge in Honolulu last month dismissed an antitrust lawsuit filed by two defunct Nevada managed-care companies against the island's largest physicians group, five physicians, a healthcare coalition and the state medical association.
Sister companies International Healthcare Management and Health Hawaii Network filed suit in November alleging price-fixing, restraint of trade and other anticompetitive behavior by the Hawaii Coalition for Health, a not-for-profit consumer organization representing 400 doctors; the Hawaii Medical Association, which represents more than 65% of the island's nearly 2,000 physicians; Queen's Physician Group, an independent practice association representing 700 Hawaiian doctors; and five individually named physicians (Nov. 27, 2000, p. 4).
The managed-care companies, which sought to market their health plans to Hawaiian employers, claimed the doctors and their organizations colluded to restrain trade for physician services on the island and participated in a group boycott of their health plans from 1997 to 1999. The insurers alleged the doctors did this by disparaging the plans through a letter-writing campaign and by threatening to use their market power to urge doctors not to sign contracts with the plans. Those actions allegedly prevented the plans from developing a physician network and drove the companies out of business in 2000, costing them at least $65 million.
At the hearing, U.S. District Judge Helen Gilmor granted the doctors' motion for summary judgment to drop the case, according to lawyers for both sides. Gilmor told the parties that no unreasonable restraint of trade had been established. She will release her written opinion in about six weeks.
San Francisco antitrust lawyer John Alioto, of the firm Alioto & Alioto, which represents the managed-care companies, said he was shocked by Gilmor's decision, which she announced at the Sept. 10 hearing.
"She said at the hearing that while there was a conscious commitment to a common scheme, it was not for an unlawful purpose," he explained. "She said these organizations were doing exactly what they were formed to do and were not doing anything unlawful. We respectfully disagree and plan to appeal. The evidence is clear that they (the doctors) had a common scheme to collectively bargain with healthcare plans in violation of Section 1 of the Sherman Act. There is a high likelihood that this judgment will be reversed."
Section 1 of the Sherman Act prevents contracts, conspiracies and combinations that unreasonably restrain trade.
Laurence Popovsky, a lawyer with the San Francisco office of Heller Ehrman White & McAuliffe, which represents the Hawaii Medical Association, said Gilmor's decision supports the right of organized physician groups to collectively discuss terms of their managed-care contracts, "so long as they are not focused on price-fixing or backed by the threat of boycott. Here there was not a meaningful hint, although plaintiffs pretended otherwise, of serious price concerns, and the plaintiffs even acknowledged the absence of any evidence of a boycott."
International Healthcare Management, Health Hawaii Network and the American Medical and Life Insurance Co. formed a joint venture in 1997 with St. Francis Healthcare System, parent company of 249-bed St. Francis Medical Center in Honolulu, to set up the St. Francis plan. Alioto said St. Francis was financially harmed by the efforts of the physicians but was not a party to the suit.