U.S. Court in Arkansas rejects cardiology practice's antitrust action against hospital, insurer

September 12, 2008

The U.S. District Court for the Eastern District of Arkansas dismissed an antitrust action brought by the Little Rock Cardiology Clinic against Baptist Health and Arkansas Blue Cross and Blue Shield.

This material originally appeared in the September 5, 2008, issue of Health Lawyers Weekly, a publication of the American Health Lawyers Association (www.healthlawyers.org).

The U.S. District Court for the Eastern District of Arkansas dismissed August 29 an antitrust action brought by the Little Rock Cardiology Clinic (clinic) against Baptist Health and Arkansas Blue Cross and Blue Shield (Arkansas Blue Cross).

The court said the claims against Arkansas Blue Cross were time-barred and held the claims against Baptist Health failed to define a valid relevant product or geographic market.The clinic and certain cardiologists (plaintiffs) initially sued Baptist Health, which operates five hospitals in Arkansas, in November 2006. Plaintiffs amended the complaint in 2007 to add Arkansas Blue Cross and certain related affiliates.

The complaint alleged claims against defendants under Sections 1 and 2 of the Sherman Act, seeking treble damages and injunctive relief under the Clayton Act.

The alleged wrongdoing began after the 1997 opening of the Arkansas Heart Hospital in Little Rock, whose part owners were cardiologists who practiced at the clinic. Before that time, these cardiologists participated in the Arkansas FirstSource network and were on staff at the Baptist Hospital in Little Rock.

According to plaintiffs, after Arkansas Heart Hospital opened, the clinic and the physicians who practiced there were excluded from the FirstSource network, allegedly to protect Baptist Health from competition.

In May 2003, Baptist Health adopted an “economic credentialing policy” to prohibit any physician from having or maintaining staff privileges at any of its facilities if they held an interest in a competing hospital. A court enjoined enforcement of that policy in February 2004. See Baptist Health v. Murphy, 226 S.W.3d 800 (2006).

Defendants moved to dismiss on statute of limitations grounds and because the relevant market alleged was incoherent and therefore incapable of forming the basis to adjudicate the antitrust claims.

The district court agreed that all the claims against Baptist Health and Arkansas Blue Cross should be dismissed.

The court held the claims against Arkansas Blue Cross were time-barred because the action was brought more than four years after the initial termination of their contracts with the FirstSource network.

In so holding, the court rejected plaintiffs’ argument that Blue Cross’ refusal to reimburse the catheterization lab the clinic opened in 2003 was a new and independent act showing a continuing conspiracy.

According to the court, this action merely represented the unabated initial consequences of Blue Cross' 1997 decision not to deal with the clinic and its physicians; therefore, no new actions occurred within the four-year statute of limitations period before the filing of the complaint.

The court did find, however, that Baptist Health’s adoption of the economic credentialing policy in 2003 could be regarded as an overt act in furtherance of the alleged monopolization of a market for hospital services for cardiology patients. Thus, the court concluded that the antitrust claims against Baptist Health were not time-barred.

But the court went on to hold that plaintiffs failed to allege a valid relevant market to support its Section 1 and 2 claims.

The court said plaintiffs’ relevant market allegations could be interpreted in two ways: (1) as defined in terms of cardiologists’ services, or (2) as including both cardiologists’ services and hospital services.

As to the first definition, the court said the Section 2 claim must be dismissed because no defendant offered the same services that the cardiologists did, i.e. the hospital did not compete in the market for cardiology services.

Likewise, the Section 1 claim failed because, where as here Baptist Health lacked market power, plaintiffs failed to allege any adverse effect on competition among cardiologists such as increased prices for or a decline in the quality or quantity of cardiology services.

As to the alternative interpretation of plaintiffs’ market allegations, the court refused to find that the services offered by a hospital and the services offered by a cardiologist to hospitalized cardiology patients could be lumped into one product market for purposes of antitrust analysis.

“Assuming . . . that hospitalized cardiology patients require services from both a cardiologist and a hospital, what follows is not that both sets of services are in the same product market but rather the opposite-the two sets of services are complements, not substitutes and therefore are not in the same product market,” the court said.

The court also noted one overarching problem with plaintiffs' market definition-i.e. its attempt to limit the relevant market to services provided to privately insured individuals.

The relevant market is all persons who need cardiologists’ services, including those with coverage through Medicare, Medicaid, and other public programs, the court said.

Finally, the court took issue with the complaint’s definition of the relevant geographic market as the cities of Little Rock and North Little Rock, finding the area too narrow and undermined by other factual allegations in the complaint.