(CN) – The 10th Circuit reinstated a Georgia hospital’s antitrust claims against a competitor that allegedly leveraged its market power by trying to force insurance companies to exclude the hospital from in-network contracts.
Palmyra Park Hospital, a for-profit, 248-bed hospital, sued Phoebe Putney Memorial Hospital, a nonprofit, 443-bed hospital. Both serve a 10-county area in southwest Georgia.
Phoebe Putney enjoys special market power as the only area hospital offering acute-care obstetrics and neonatology, and a cardiac catheterization lab.
Palmyra claimed that Phoebe Putney violated antitrust laws by threatening to demand higher reimbursement rates from insurers, including Blue Cross, unless it excluded Palmyra from its network, a practice known as “tying.” Not wanting to incur higher costs, Blue Cross agreed to exclude Palmyra from its list of in-network providers.
Palmyra said it lost $18 million in revenue as a result of being excluded from the Blue Cross network.
The trial court ruled that Palmyra lacked standing to sue, but the Atlanta-based federal appeals court reversed.
Palmyra has standing, Judge Gerald Tjoflat wrote for the three-judge panel, because its claims are not merely speculative. Phoebe Putnam’s actions prevent Palmyra from competing, as damages “flow directly from the diverted patients,” Tjoflat wrote.
These claims “are the type of injury that the antitrust laws are designed to remedy,” the appellate court wrote. And because insurers and policy-holders are not likely to sue, “a competitor like Palmyra is perhaps best suited to efficiently enforce the antitrust laws,” the court concluded.
In its extensive analysis of the market dynamics in which the parties operate, the court pointed out that tying agreements offer no real discount to insurers and actually reduces patient choice.
The 11th Circuit reversed and remanded the case.