Specific Facts Suggest Hospitals and Insurers Agreed to Group Boycott

A per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, generally requires an agreement among horizontal competitors that unreasonably restrains trade. To withstand a motion to dismiss, a Section 1 plaintiff must allege facts that suggest direct of evidence of an agreement among the defendants, as opposed to alleging facts that merely are consistent with parallel conduct. These principles have been referred to by some courts as creating a heightened pleading standard for Section 1 claims.

In Arapahoe Surgery Center, LLC, et al. v. Cigna Healthcare, Inc., et al., 2015 U.S. Dist. Lexis 28375 (D. CO.), the Colorado District Court determined that the plaintiffs’ allegations of a group boycott were sufficient to meet the pleading requirements under Section 1, and therefore denied a motion to dismiss filed by three insurance carrier defendants. The specificity of the factual allegations concerning the agreement among the defendants, and the acts in furtherance thereof, underscore the importance of antitrust compliance in the healthcare and health insurance industries.

The plaintiffs, four ambulatory surgery centers, alleged that two hospitals HCA-HealthONE (“HCA”) and Centura Health Corporation (“Centura”), agreed to use their combined market power to compel physicians in the market not to refer patients to the plaintiffs, and enlisted various insurers, including, among others Cigna Healthcare, Inc. (“Cigna”), and a trade association, to take similar actions against physicians referring patients to plaintiffs.

The plaintiffs’ allegations of direct evidence of an agreement among defendants included two meetings attended by Cigna and other defendants where the alleged concerted action was discussed, and emails among HCA executives confirming the existence of the alleged conspiracy, including Cigna’s agreement to participate. The plaintiffs also identified Cigna’s acts in furtherance of the conspiracy by alleging that Cigna sent letters to specific physicians claiming contractual breaches as a pretext for their referrals to plaintiffs. As the Court concluded, plaintiffs’ facts are “sufficiently specific to ‘raise a reasonable a reasonable expectation that discovery will reveal evidence of an illegal agreement.’”

Although the plaintiffs do not appear to have alleged that Cigna entered into an agreement with a horizontal competitor of Cigna, the fact that Cigna participated in the agreement between HCA and Centura, which are horizontal competitors, was sufficient to expose Cigna to liability and treble damages under Section 1.

The boycotting of the plaintiffs’ ambulatory surgery centers to drive them out of business is precisely the type of agreement that gets per se treatment under the antitrust laws, and will be condemned even if features of the agreement appear to have some procompetitive justification, such as, as Cigna countered, lowering the costs for its enrollees.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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