Ninth Circuit Slams The Gate On Prison Health Care Antitrust Suit

The U.S. Court of Appeals for the Ninth Circuit has affirmed the dismissal of Colonial Medical Group Inc.’s antitrust suit against a competing health care provider and a hospital that Colonial alleged engaged in anticompetitive conduct in a prison health care market.

Colonial, a medical services provider, had claimed that its competitor, Golden Empire Management Care and Managed Care Systems LP (“GEMCare”), unfairly secured an exclusive contract with Catholic Healthcare West (d/b/a Mercy Hospital) that would allow only GEMCare to provide medical services to prisoners in secure or guarded facilities in central California.

In affirming the district court’s decision, the panel of three judges held that Colonial failed to adequately allege a product market because it was “underinclusive.”  The complaint defined the market as medical services provided to state and federal inmates in central California.

The Ninth Circuit agreed with the trial court’s ruling that Colonial’s market definition failed to “account for ‘medical services provided to persons who, for example, are inmates of local jails or other locked facilities.’”  Nor did the complaint explain why those other services would not be interchangeable with the services included in Colonial’s flawed market definition, thus rendering the market definition too narrow.

The panel based its ruling solely on this defect, though it noted that the lower court also found that the complaint failed to adequately plead other essential elements of a Sherman Act claim.  The lower court’s decision, which includes those findings, is available here.

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