Last week's decision by a federal judge to dismiss a lawsuit by an HMO against a three-hospital Pennsylvania system could have a chilling effect on similar antitrust lawsuits filed by doctors and health plans against hospitals, antitrust attorneys said.
In a July 21 summary judgment, U.S. District Judge Christopher Conner ruled that the 1994 merger between the Williamsport, Pa., hospitals forming the Susquehanna Health System was legally valid and dismissed a 2000 lawsuit filed by HMO HealthAmerica Pennsylvania, a Harrisburg, Pa.-based subsidiary of Coventry Health Care. Conner said the health plan failed to prove injury or harm from the merger.
HealthAmerica's suit had challenged the Susquehanna merger between Divine Providence Hospital and Williamsport Hospital and Medical Center, which also includes Muncy (Pa.) Valley Hospital, saying those hospitals and their physician groups conspired to fix healthcare prices in Lycoming County. HealthAmerica alleged that the system never really merged but exploited its market power to extract high prices from managed-care companies and other payers in violation of federal antitrust laws. Conner's finding that the merger was legal and not a sham, antitrust lawyers said, is important because he cited an earlier antitrust decision that held that merged entities cannot conspire among themselves if they are part of a single organization.
In his 35-page decision, Conner also ruled that HealthAmerica lacked the evidence to prove that the parties conspired to fix prices and conduct an illegal boycott and failed to prove they were harmed by the alleged price-fixing and alleged anticompetitive conduct.
"The antitrust laws were promulgated to protect competition, not competitors," Connor wrote.
The Susquehanna lawsuit was one of at least six filed in 2000 and 2001 by physicians and health plans, in a period when federal antitrust regulators seemed uninterested in hospital mergers and alleged market power. Several of those suits have since been settled, and Coventry, which filed three of them, has lost two. Two others are pending.
"It's difficult to say what impact the Susquehanna decision will have on any pending suits," said former Federal Trade Commission official Mark Horoschak, of the Charlotte, N.C., law firm Womble Carlyle Sandridge & Rice. "But it will have a significant effect on payers contemplating the possibility of suing health systems. If this decision is not reversed, it will send a clear signal that it's difficult to challenge the alleged market power of a provider system."
Horoschak said lawsuits can harm business relationships that physicians and health plans have with hospitals. "And with little assurance of prevailing in a courtroom, managed-care companies may find there's little to gain," he said.
But David Balto, a former FTC attorney now with the Washington office of White & Case, said the Susquehanna decision wouldn't discourage similar actions against hospitals.
"This was a district court decision and district courts have had disparate opinions on this issue," Balto said. "I think there's a decent chance that this case could be overturned, because it seems inconsistent with enforcement actions by state and federal antitrust agencies."
William Kopit, a Washington attorney with Epstein, Becker & Green who represented HealthAmerica, said the Susquehanna decision would not affect pending private antitrust cases.
"I still think private parties bring antitrust actions only when they think there are no good alternatives," said Kopit, who has filed three such suits. "Nobody sees litigation as the best option. These kinds of suits are typically undertaken as a last resort. I think that will continue."
However, Kopit said he senses a new antitrust attitude in Washington.
"It seems to me that federal antitrust authorities are much more aggressive now than they were two years ago," he said, citing the FTC's hospital look-back study reviewing-and possibly challenging-previously consummated hospital mergers. "And that may give aggrieved parties another option."
Kirby Smith, president and chief executive officer of Susquehanna Health System, conceded that the merger arrangement is unique. But he said the hospitals are pleased Conner found that the three-hospital alliance functions as a single entity.
Kopit said HealthAmerica has not yet decided whether it would appeal the case. John Sprague, an appellate antitrust attorney with the Philadelphia office of Post & Schell who represented Susquehanna, said the court ruled that there was not sufficient evidence to go to trial. "I believe that if it is appealed, the 3rd U.S. Circuit Court of Appeals would affirm Judge Conner's decision," he said.