The opinion of the court was delivered by: Richard Mills, District Judge:
Presented here is a novel twist to the issue of whether
physicians, lawyers and other professionals may be liable under
the Illinois Consumer Fraud Act.
True, one does not ordinarily think of medical doctors in the
business of selling products that defraud consumers.
However, the Illinois Consumer Fraud Act was amended to
prohibit not only unfair competition, but any deceptive act or
practice in the conduct of trade or commerce.
Thus, the issue before the Court: whether the practice of
medicine qualifies as trade or commerce for the purposes of the
Illinois Consumer Fraud Act. And specifically: whether an
alleged agreement between a psychiatric clinic and a hospital
to monopolize psychiatric services defrauds medical consumers.
There are three players involved in this dispute. Defendant
St. Mary's Hospital (SMH) is a non-profit hospital in Quincy,
Illinois. Plaintiff Dr. Michael T. Gadson is a psychiatrist.
Defendant Dr. Richard L. Newman is a psychiatrist and practices
medicine through the corporation "Newman Clinic Ltd."
Dr. Gadson alleges that on January 1, 1989, he entered into
a contract with SMH to serve as the director of the SMH
psychiatric "family" unit. Later, after becoming aware of the
Gadson-SMH contract, Dr. Newman and his clinic signed a
separate contract with SMH to manage all of SMH's psychiatric
units during the term of Dr. Gadson's contract. The arrangement
provided that SMH and Dr. Newman's clinic would jointly
establish "programs" for all inpatient psychiatric treatment at
SMH. One program, supervised by Dr. Gadson, would be for adult
psychiatry. Another program director would be appointed for a
"behavioral medicine" program. Dr. Newman's clinic would
develop specific treatments for patients in the program.
Psychiatrists participating in the program would be approved by
both Dr. Newman's clinic and SMH.
Under the arrangement, SMH physicians could refer patients to
the program. Psychiatrists from Dr. Newman's clinic could also
refer patients requiring hospital treatment to the program. SMH
agreed to pay Dr. Newman's clinic $90.00 per day per patient
admitted to the program.
Dr. Gadson charges that the arrangement between Dr. Newman
and SMH violates the Illinois Consumer Protection Act.
First, Dr. Gadson alleges that the arrangement operates as an
"undisclosed joint venture and profit center for SMH and Dr.
Newman and his Clinic to the exclusion of Dr. Gadson and other
potential competing entities, and to the detriment of health
care consumers in the area of Quincy, Illinois, served by SMH."
Second, that under the arrangement, financially responsible
patients upon emergency admission to SMH are self-referred by
Dr. Newman to himself and other psychiatrists employed at his
Third, that the arrangement provides "undisclosed financial
incentives" to Dr. Newman and psychiatrists of his clinic to
admit patients to SMH in order to increase the patient census
and revenue of SMH.
Fourth, that the arrangement provides "undisclosed financial
incentives" to Dr. Newman and psychiatrists of his clinic for
prescribing additional ancillary medical procedures to be
performed at SMH thereby increasing SMH revenue, increasing
health care costs, and decreasing competition in the Quincy
Fifth, that the arrangement provides for undisclosed
substitution of employees of SMH with employees of Dr. Newman
and his clinic with intent "to generate illegal, unethical, and
conflict of interest self-referral of patients covered by
Medicare," Medicaid, public aid assistance, insurance, and
financially responsible patients.
Plaintiff Dr. Gadson seeks relief under the Consumer Fraud
Act (Count IV), for conspiracy to commit consumer fraud (Count
V), and for declaratory judgment and injunction (Count VII).
Defendants SMH and Dr. Newman move to dismiss Counts IV, V,
and VII. In the alternative, they move for a more definite
statement of Count VII per Fed.R.Civ.P. 12(e).
II. Legal Standard on Motion to Dismiss
In ruling on a motion to dismiss, the Court "must accept well
pleaded allegations of the complaint as true. In addition, the
Court must view these allegations in the light most favorable
to the plaintiff." Gomez v. Illinois State Board of Education,
811 F.2d 1030, 1039 (7th Cir. 1987). Although a complaint is
not required to contain a detailed outline of the claim's
basis, it nevertheless "must contain either direct or
inferential allegations respecting all the material elements
necessary to sustain a recovery under some viable legal
theory." Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101,
1106 (7th Cir. 1984), cert. denied, 470 U.S. 1054, 105 S.Ct.
1758, 84 L.Ed.2d 821 (1985). Dismissal is not granted "unless
it appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim which would entitle him to
relief." Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 102, 2
L.Ed.2d 80 (1957).
Defendants SMH and Dr. Newman first argue that the Illinois
Consumer Fraud Act does not apply because the medical
profession does not engage in "trade or commerce." The fact
that a wrongdoer must engage in "trade or commerce" to be
liable under the Act is well established. For instance, the
stated purpose of the Illinois Consumer Fraud Act, as set forth
in its preamble, is "[t]o protect consumers and borrowers and
businessmen against fraud or deceptive acts or practices in the
conduct of any trade or ...