Regional News/Midwest: Back in action

A federal appeals court has revived the prospects for a class-action lawsuit alleging anti-competitive price increases stemming from the much-litigated 12-year-old hospital merger of Evanston (Ill.) Northwestern Healthcare and Highland Park (Ill.) Hospital in Chicago's northern suburbs.

Plaintiffs including several patients and a union pension fund say the January 2000 hospital merger allowed the system—today known as NorthShore University HealthSystem—to illegally increase its prices at least 9% higher than they would have otherwise grown. Federal antitrust authorities in 2005 and 2007 found that the merger led to higher prices.

The class-action plaintiffs are asking to be awarded triple damages under the Clayton Act for the higher prices they paid, plus a permanent injunction against future “unlawful exercise of monopoly power” by the system's two hospitals on four campuses.

NorthShore has denied the market-power allegations and said the 2007 lawsuit should be blocked by statutes of limitations, since it came so long after the merger. The system also says no class should be certified in the lawsuit, since patients' individual healthcare prices depend on too many discrete factors to be considered common to all members—an argument that was struck down by the 7th U.S. Circuit Court of Appeals.

On Jan. 13, U.S. Circuit Judge David Hamilton wrote that a group of plaintiffs does not have to show they sustained damages to an identical degree in order to be certified as a class, but rather only that they can make a coherent argument to a jury that they were all affected by the same underlying price dynamics.

Hamilton ordered the district court that had denied class certification in April 2010 to re-examine the question of whether to allow the class to argue its price-fixing claims before a jury. He noted that although the complex market for healthcare services could require a more complicated analysis at trial than was presented by a plaintiffs' expert in the initial legal battle over class certification, that doesn't derail class certification.

“In essence, it is important not to let a quest for perfect evidence become the enemy of good evidence,” Hamilton wrote, adding later in the 45-page opinion that the district court erred because it “asked not for a showing of common questions, but for a showing of common answers to those questions.”

“We are reviewing the ruling with counsel and have no further comment,” NorthShore spokesman Jim Anthony said.

David Hanselman, a Chicago partner with McDermott Will & Emery not involved with the case, said the ruling in favor of the class-action plaintiffs was surprising particularly because it came out of the 7th Circuit, which is generally considered more conservative than other circuit courts.

“The court still held that a plaintiff seeking class certification needs to prove antitrust impact across the class,” he said. “But it held that the methodology employed by the plaintiffs' expert was potentially capable of doing so.”

The complaint—now called Messner v. NorthShore University HealthSystem and including consolidated claims from several lawsuits—was filed shortly after the Federal Trade Commission and an administrative law judge for the commission ruled that evidence including e-mails from the hospital executives showed that price increases had not only resulted from the merger, but that they had been a motivating factor behind it.

That long-fought case with the FTC became one of the seminal healthcare antitrust cases in recent years after the trade commission decided in 2007 that even though prices had risen through anti-competitive means, divestiture was too extreme a remedy given all the time that had passed.

The system was instead allowed to use the unusual remedy of maintaining separate bargaining teams with insurers as a way to prevent the system's market power from unduly influencing prices.