Holland & Hart Healthcare Law Blog

“Barking” Radiologist Bites Hospital for $4 Million Dollars.

On March 4, 2008, this blog published a story about St. James Healthcare in Butte, Montana and its having obtained an injunction against a radiologist, Dr. Jesse Cole, enjoining him from allegedly threatening staff and contacting prospective radiologists being recruited to St. James. The article was entitled “Montana Court Muzzles Barking Radiologist.”  Well, the tide has turned and Dr. Cole has taken a bite out of the hospital and its parent company, the Sisters of Charity of Leavenworth Health System to the tune of $4 Million dollars.

 

FTC WORKING WITH CMS ON ACO ISSUES BUT SAYS ACO CLINICAL INTEGRATION SHOULD PASS ANTITRUST SCRUTINY

 

 It was raining here in Washington Wednesday, but the FTC is sunny about the compatibility of FTC guidance on clinical integration of health care providers and the thrust and aim of ACO healthcare delivery systems.  Marcus H. Meier, Assistant Director for theHealth Care Division, Bureau of Competition, Federal Trade Commission, said at the National Forum On Clinical Integration in Washington, D.C., that it  was likely that any organization that met the spirit and substance of a federally accepted Accountable Care Organization would also likely meet the qualifications for  clinically  integrated care organizations that would pass muster for group price negotiations.

 

THE GREAT NURSE ANESTHETIST “OPT OUT” DEBATE

 

 

Under Medicare rules Certified Registered Nurse Anesthetists (“CRNAs”) must be supervised by a physician, typically an anesthesiologists or perhaps by a surgeon in rural areas where anesthesiologists are not available.  Medicare has a state “opt out” provision which permits CRNAs to practice without supervision of a physician.  To date, 15 states have chosen to opt out and others like Colorado are considering doing the same.  Anesthesiologists are compensated for supervising CRNAs and can supervise up to 3 at a time because they are not required to be in the same room.

PROVIDER INTEGRATION AND THE ADVENT OF ACCOUNTABLE CARE ORGANIZATIONS (“ACOs”)

    Can financial incentives and physician practice structures be enlisted o enhance the quality and reduce the cost of healthcare?  Health Care Reform supporters believe they can and the new Patient Protection and Affordable Care Act ("PPACA")  signed into law by the President recently,  provides incentives for the development of ACOs for Medicare patients. ACOs have been described as HMO’s on steroids, but many wonder whether they will meet the same fate as the managed care systems of the past that focused on blind leveraged cost reductions and favorable beneficiary selection to achieve profits.

    

MONOPOLY AND THE BIG BAT THEORY IN ANTITRUST LAW

It perhaps deserves repeating that it is not illegal to be a monopoly in this country. In the 2004 case of Verizon Communs., Inc. v. Law Offices of Curtis v. Trinko, LLP, 540 U.S. 398, 407 (2004), the United States Supreme Court reasserted the rule, 

The mere possession of monopoly power and the concomitant charging of monopoly prices is not only not unlawful;  an important element of the free-market system. The opportunity to charge monopoly prices - -at least for a short period-- is what attracts “business acumen” in the first place; it induces risk taking that produces innovation and economic growth. To safeguard the incentive to innovate the possession of monopoly power will not be found unless it is accompanied by an element of anticompetitive conduct.

In  a sense the achievement of a monopoly is the brass ring of business. It is the ultimate success of having whipped the competition and being the last man standing. Assuming that the monopoly is achieved by fair competition, innovation, superior products, business smarts or lucky accident there is nothing wrong with charging what the traffic will bear until such time as a competitive counterweight arrives in the market.

10th Circuit Affirms Summary Dismissal of Nephrologists’ Monopolization Shootout in the Streets of Durango.

Dr. Mark F. Bevan has a thriving nephrology practice in Farmington, New Mexico. Mercy Medical Center of nearby Durango, Colorado repeatedly invited him to provide kidney dialysis and other nephrology  services in’ Durango, which he declined.   The hospital then with the financial support of the  Southern Ute Indian Tribe hired a different nephrologist to practice his craft in Durango. Under the pre-existing bylaws of the Hospital, the hiring of the new doctor automatically resulted in the cancellation of Dr. Bevan’s consulting privileges at the hospital. Consulting privileges were designed for the purpose of filling gaps in physician coverage. He was left with the status of being a member of the consulting staff. He then applied for active staff privileges at the hospital , but found it difficult to ethically meet the requirement in the by-laws that he reside within 30 minutes of the hospital. The hospital, in an attempt to pre-empt and residential success by Dr. Bevan, granted the new physician the exclusive right to practice nephrology at the hospital. Dr. Bevan responded with a claim of monopolization and attempted monopolization of the nephrology physician services in Durango in violation of Section 2 of the Sherman Act.

 

FEDERAL COURT IN CALIFORNIA REFUSES TO DISMISS ANTITRUST AND STATE LAW CLAIMS AGAINST HCA HOSPITAL AFFILIATES FOR CHANGING COVERAGE RULES TO EXCLUDE PHYSICIAN.

The magistrate Judge in Fox v. William Piche et al.,, No. C08-1098 RS (D.C. N.Cal., San Jose Div. 2008) refused to dismiss antitrust and some state court actions brought by a critical care pediatrician against a number of officers of HCA Good Samaritan Hospital in San Jose, California. Dr. Fox’s specialty involved the treatment of critically ill children who require mechanical ventilation. In 1999, the Good Samaritan adopted a rule requiring any physician practicing at the hospital designate two backup physicians with “identical” privileges. Prior to 1999 the hospital only required backups to have “appropriate” privileges. Dr. Fox alleged that the defendants changed the rules to exclude his back up physicians; retaliated against him in 2006 because he refused to sign a corporate loyalty oath; terminated his privileges by refusing to send him his reappointment letter; interfered with business relations between Dr. Fox and his referral services and disregarded the hospital and medical staff privileging bylaws. Fox alleged a conspiracy to prompt his suspension after he spoke out against transfering Pediatric Intensive Care (“PICU”) patients to another HCA facility and Good Samaritan entered into an agreement with another group to provide PICU services at Good Samaritan. The Court, while noting the heightened antitrust pleading standards set forth by the Supreme Court in Bell Atl. Corp. v. Twombly 127 S.Ct. 1955 (2007), (“[f]actual allegations must be enough to raise a right to relief above a speculative level)., denied the motion to dismiss the antitrust claims based on the alleged running of the four year statute of limitations, holding that Dr. Fox was entitled to reapply for privileges every two years and each “ensuing denial operated as a separate process even if the result seemed predictable in light of past practice. “Each denial inflicted new and accumulating injury on Fox in that the denial was not immutable or automatic.” The Court also refused to dismiss Dr. Fox’s claim of conspiracy in restraint of trade under Section 1 of the Sherman Act based on the Defendant’s claim of unilateral conduct. Under Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984) “[O]fficers or employees of the same firm do not provide the plurality of actors imperative for a §1 conspiracy.” Although the Court doesn’t explain his finding that the conspiracy claim is sufficiently pled against the employees of the hospital, he seems to rely on the defendant’s service on various medical staff committees as grounds. Hospitals and their medical staffs are separate legal entities in California. The Court upheld Dr. Fox’s pleading of a Section 2 Sherman Act claim as well. To plead a Section 2 claim a plaintiff must allege (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. The relevant market is defined as a pool of services that are reasonably interchangeable so as to be economic substitutes for each other. Dr. Fox alleges that Good Samaritan, because of the uniqueness of its pediatric intensive care unit is its own separate geographic market and children treated there constitute their own economic “aftermarket,” which they can only exit at significant switching cost. Dr. Fox asserts that PICU services constitute a separate product market because the patients are unable to substitute services from other providers and their parents and physicians do not price shop PICU services. He maintains that by controlling and manipulating the backup physician criteria at Good Samaritan, the Defendants have successfully excluded Dr. Fox in the market and created a monopoly for one PICU group at the facility. This case is still in the early stages of development and Dr. Fox’s allegations will be subject to a vigorous demand for proof, but is underscores the value, at least at the pleading stage, of being excluded from a narrow niche market.

Illinois Alleges “Price Fixing” Violation in Medicaid Boycott

Illinois Medicaid payments, by many accounts, are substantially below reasonable remuneration and doctors taking Medicaid patients do so at their personal cost.  Last month the Illinois Attorney General, Lisa Madigan, filed an antitrust action under the Illinois Antitrust Act against two physician groups representing ninety percent (90%) of the primary care market in Champaign County, Illinois for boycotting new Medicaid patients.  The case, The People of the State of Illinois ex rel. Lisa Madigan v. Carle Clinic Association, P.C.; Christie Clinic, P.C. (No. 07h115) is pending in the Sixth Judicial Circuit, Campaign County, Illinois, and asserts two counts under the state statute, which makes it illegal to:

make any contract with, or engage in any combination or conspiracy with, any person who is, or but for a prior agreement would be, a competitor of such person:
a.  for the purpose or with the effect of fixing, controlling or maintaining the price or rate charged for any commodity sold or bought by the parties thereto, or the fee charged or paid for any service performed or received by the parties thereto;
b.  fixing, controlling, maintaining, limiting, or discontinuing the production, manufacture, mining, sale or supply of any commodity, or the sale or supply of any service, for the purpose or with the effect stated in paragraph a. of subsection (1).

California Court Hold State Antitrust Immunity For PPOs Valid.

In Lori Rubenstein Physicial Therapy, Inc.,et al v. PTPN, Inc. et al, (Cal. App. 2007),the plaintiffs challenged legislation adopted by the State of California in (1982) that provided anti-trust immunity for preferred provider organizations ("PPOs") formed from groups of independent physicians to contract with health care insurers for alternative rates for their services. The defendants were PTPN, a physical therapy practice and Blue Cross of California, which gave PTPN an exclusive contract for physical therapy services. The plaintiffs were providers of physical therapy services who could not contact with Blue Cross. The suit alleged that PTPN's limitations on membership unlawfully restrains competition for Blue Cross insured patients and have foreclosed actual and potential competitors of PTPN from competing on the merits for patients with private health insurance. The California statute seems to be one of those "provider cooperation laws" passed by a number of states following California Liquor Dealer's Association v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), wherein the Supreme Court held that states could provide a blanket of antitrust immunity over private action if 1) the state policy was clearly articulated and 2) the activity was actively supervised by the state.  These statutes were never widely used perhaps because of concern over the "state supervision" requirements.

Price Fixing Along I-94

I-94 is the largely industrial highway linking Chicago and Detroit. Recent public and private actions assert price fixing activity in both cities. In metropolitan Chicago Advocate Health Partners, a “super physician hospital organization,” resolved its FTC investigation for price fixing and refusal to deal by agreeing to a proposed order which essentially prohibits using further negotiation with health plans on behalf of approximately 3,000 physicians in the area. See In Re Advocate Health Partners, FTC File No. 0310021 (12/29/06). Advocate Health Partners apparently undertook to negotiate private contracts with health insurers on behalf of a network of related PHO organizations which included pods of independent physicians and a subsidiary corporation of the Advocate Health Care Network Hospital System.