Antitrust - Abraham, et al. v. Intermountain Healthcare, Inc., et al., 461 F.3d 1249 (10th Cir. September 6, 2006)
Introduction
On September 6, 2006, the United States Court of Appeals for the Tenth Circuit upheld summary judgment in defendants’ favor in an antitrust action brought by optometrists against a managed
health care organization and a group of ophthalmologists. The summary judgment decision found that (1) the plaintiff optometrists did not present evidence of concerted action between defendant ophthalmologists and the managed
health care organization to exclude optometrists from lists of approved health care providers; (2) the defendant managed health care organization did not engage in a tying arrangement in violation of the Sherman Act because, as a
practical matter, a managed care provider cannot tie the sale of managed care plans to the sale of healthcare services for which the managed care provider ultimately pays; and (3) the plaintiff optometrists did not have standing
to assert an attempted monopolization claim in violation of Section 2 of the Sherman Act because the optometrists in no way sought to compete in the surgical facilities market the managed care provider allegedly sought to monopolize.
Alleged Antitrust Behavior
Plaintiffs in Intermountain are a group of forty-nine optometrists practicing in Utah, as well as their affiliated professional organizations. Plaintiffs allege that Intermountain Healthcare, Inc. (“IHC”),
the largest managed care company in
The crux of plaintiffs’ claims is an alleged agreement between IHC and its panel ophthalmologists whereby optometrists are excluded from the IHC panels in exchange for an agreement by panel ophthalmologists to refer patients
to IHC hospitals and surgical facilities. Id. Plaintiffs allege that this arrangement is a horizontal group boycott in violation of Section 1 of the Sherman Act. Plaintiffs also allege that IHC unlawfully tied
the sale of its managed care plans to the provision of surgical and non-surgical eye care, also in violation of Section 1. Finally, plaintiffs allege IHC and the defendant ophthalmologists conspired to monopolize the market
for surgical facilities in violation of Section 2 of the Sherman Act. Id. at 1255-56.
The District Court
The United States District Court for the Southern District of Utah granted summary judgment in favor of all defendants. The District Court found that the boycott claim was without merit because plaintiff optometrists failed to establish
the existence of any conspiracy and because they failed to show a “discrete ‘antitrust injury’” to themselves due to the defendants’ alleged misconduct.
The Appeals Court
The Group Boycott Claim – The appeals court began its analysis of the boycott claim by noting the importance of distinguishing between “unilateral and concerted action in proving
a violation of § 1.” Id. The Court reiterated that the heart of plaintiffs’ claim is that IHC excluded optometrists from its provider panels due to an agreement with the panel ophthalmologists. It
recounted the plaintiffs’ evidence of the alleged conspiracy, noting that the panel ophthalmologists complained about the inclusion of optometrists on IHC panels and lobbied successfully to keep optometrists off of the panels.
Id. at 1257-58.
The Court noted that, although it may appear that IHC and its panel ophthalmologists worked in concert to exclude optometrists, it was not necessarily improper for IHC to respond to the complaints of the ophthalmologists.
The Court found that plaintiffs failed to present this evidence of an unlawful agreement. The Court refused to infer an unlawful agreement from the fact that optometrists could offer less expensive services but were excluded
from the panels due to complaints by the ophthalmologists. The Court also refused to infer an unlawful agreement from the fact that panel ophthalmologists referred patients to IHC surgical facilities, finding that the case is absent
of any evidence connecting exclusion of optometrists to the ophthalmologists’ use of IHC facilities.
The Tying Claim – Plaintiffs alleged that IHC unlawfully tied the purchase of IHC managed care plans to the purchase of non-surgical eye care because IHC managed care members were forced to purchase eye
care services from IHC panel ophthalmologists. The District Court rejected this claim, finding that non-surgical eye care services and managed care plans are not distinct products. The appeals court disagreed with this finding,
but ultimately rejected plaintiffs’ tying claim on other grounds.
The Court noted that, in the only other case to address the issue of tying the sale of managed care plans to the sale of health services, Klamath-Lake Pharmaceutical Ass’n v. Klamath Medical Service Bureau, 701 F.2d
1276 (9th Cir. 1983), the Ninth Circuit found that managed care plans and health services are one product.
Instead, the Tenth Circuit found that a different flaw defeated plaintiffs’ tying claim. Although the Tenth Circuit treated the care plan and the health services as separate, it noted that IHC does not sell eye care services:
plaintiffs were alleging that the seller of the tying product (IHC) was requiring the purchaser to buy a tied product from a third party (the ophthalmologists). The Court noted that, in this situation, plaintiffs must
be able to show that IHC has an economic interest in the sale of the tied product by the ophthalmologists. Id. at 1265-66. The Court found that IHC has no economic interest in the sale of non-surgical eye care
because it is IHC that reimburses the panel ophthalmologists for their services. According to the Court, IHC could have no economic interest in the sale of eye care services when IHC actually expends funds for these services.
Attempted Monopolization Claim – The Tenth Circuit agreed with the District Court that plaintiffs lacked standing to assert a claim for attempted monopolization under Section 2 of the Sherman Act.
Plaintiffs alleged that IHC leveraged its power in the managed care market to increase its power in the surgical facilities market: IHC used its control over provider panels to encourage paneled providers to send as many patients
as possible to IHC’s surgical facilities. The Court noted that Section 2 claims extend to unilateral conduct. However, it concluded that plaintiffs seem simply to assume they have standing and fail to allege
an injury resulting from IHC’s alleged attempt to monopolize the surgical facilities market. Id. at 1267-68.
Conclusion
The Intermountain Court’s decision applied to an alleged group boycott decision a type of analysis commonly found in price fixing cases. As with price fixing, a group boycott is illegal if it is the result of an agreement; and not, if it is merely the result of parallel or complementary conduct. According to the Court, to make out their claim, the optometrists would need to show not merely that IHC gave in to pressure from the ophthalmologists,
but that IHC reached some agreement with them (for example, IHC received a kickback of a monopoly profit, or other quid pro quo for entering into the arrangement), or, the court implies, at least that the arrangement made
no economic sense in the absence of some type of agreement.