It’s All About Access to Patients—Health Care Provider Antitrust Challenges Against Dominant Hospital Systems
The U.S. Court of Appeals for the Seventh Circuit has given a new lease on life to a vascular surgeon’s antitrust claims that Indiana University Health (“IU Health”) is using its market power in primary care services to stifle competition in the market for vascular surgery services.
Last month, the Seventh Circuit reversed the dismissal of the surgeon’s complaint in Vasquez v. Indiana University Health, Inc. While the alleged harms to competition concern higher prices and a lower quality of care for consumers, the claims center around IU Health’s elimination of the physician’s access to patients.
Specifically, Dr. Vasquez alleges that IU Health monopolized the markets for primary care services and vascular surgery services by (1) utilizing “internal referral policies” that prohibit IU Health-affiliated and employed physicians from referring to non-IU affiliated physicians; (2) its revocation of Dr. Vasquez’s hospital privileges and credentialing for the IU Health’s health insurance products, which prevents him from providing vascular surgical services at the IU hospital or for treating IU Health insured patients; and (3) its acquisition of a primary care practice that will further eliminate referrals to independent doctors. Defendants convinced the district court to dismiss the antitrust claims on two, narrow grounds—Dr. Vasquez failed to plead a proper relevant geographic market, and his Section 7 claim was time-barred.
In reversing the lower court, the Seventh Circuit found that Dr. Vasquez adequately pleaded Bloomington as a relevant geographic market as health insurers—“the most directly affected”—face pressure to provide an adequate range of healthcare services in the market. Additionally, the court found that a hypothetical monopolist’s ability to cut “off the flow of new patients” via referrals to competitors in its geographic market further supports the plausibility of the alleged geographic market.
Moreover, the court was unpersuaded by the supposed significance of patient flows to areas outside of Bloomington, Indiana noting it was “just one piece of data in the broader picture.” In reversing the dismissal of Dr. Vasquez’s Section 7 claim, the court found that the complaint’s allegations afforded some leeway of when Dr. Vasquez “learned of the purported scheme.”
Although Dr. Vasquez’s case is moving forward, there will be additional challenges to his antitrust claims. As previewed in the motion to dismiss, IU Health intends to invoke the Health Care Quality Improvements Act, 42 U.S.C. § 11101 et seq., to claim antitrust immunity on the basis that it had a “reasonable belief” made “in furtherance of quality healthcare” to terminate the privileges of Dr. Vasquez at IU’s hospital in Bloomington.
The Vasquez case represents a growing trend of providers challenging the alleged anticompetitive practices of dominant healthcare systems to foreclose competition through a variety of means. At the center of each of these cases are allegations concerning the denial of access to the lifeblood of a provider’s practice—patients.
For example, a group of Florida physicians challenged the acquisition of the largest independent physician group by Health First, a vertically integrated healthcare system with hospitals, employed physicians, and a health plan. In addition to challenging the merger, the plaintiffs also alleged that the healthcare system monopolized healthcare services through a variety of practices, including mandating exclusive referrals and admissions to the system, and denying privileges or excluding providers from its health plans that failed to refer or admit patients Health First. After overcoming summary judgment, Health First settled with the plaintiffs.
Similarly, St. Luke’s Hospital sued ProMedica Health System after ProMedica’s health insurance subsidiary terminated its contracts with the competitor hospital. In its complaint, St. Luke’s alleges, in part, that the termination of the insurance contracts amounts to an anticompetitive refusal to deal, which will suppress competition in the marketplace by cutting off St. Luke’s from a significant number of insureds that utilize ProMedica health insurance plans. While the district court granted a preliminary injunction, the U.S. Court of Appeals for the Sixth Circuit overturned that decision, finding that the parties negotiated a “change in control” provisions that provided ProMedica with a “business justification” to terminate its prior course of dealing.
As articulated by President Biden’s Executive Order on Promoting Competition in the American Economy, there continues to be growing concern that dominant hospital systems have stifled competition. The effects of consolidation and market power are not only felt by consumers and businesses paying higher insurance premiums but also by rival providers being forced from the marketplace.
Conduct that eliminates a provider’s access to patients, including vertical or horizontal mergers, restrictive contractual agreements, elimination of privileges or credentialing, and exclusion of providers directly or indirectly through a health system’s health plan should all be closely scrutinized for potential anticompetitive effects.
Written by James J. Kovacs
Edited by Gary J. Malone