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Peoria Day Surgery Center v. OSF Healthcare System

January 18, 2007


The opinion of the court was delivered by: Michael M. Mihm United States District Judge


This matter is now before the Court on Defendant's Motion to Dismiss Counts VIII though XI of the Complaint. For the reasons set forth below, the Motion [#12] is DENIED.


The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331, as four of the claims arise under the Sherman Act, 15 U.S.C. §1, et seq.


Unless otherwise noted, the following summary is taken from the allegations in Plaintiff's Complaint, which are presumed to be true for the purposes of resolving this Motion. See Fed. R. Civ. P. 12(b)(6). Plaintiff is an ambulatory surgery center with 42 physician shareholders and approximately 80 physicians on staff, and is located in Peoria, Illinois. Defendant is a non-for-profit hospital also located in Peoria. In addition to its main facility, Defendant maintains an OSF St. Francis Outpatient Surgery Center, which provides ambulatory surgical procedures. Together, Defendant and its Outpatient Surgery Center performed approximately 14,600 ambulatory surgeries in 2004 (about 40% of the market), while Plaintiff performed 4,779 ambulatory surgeries (about 14% of the market). Even though there are other free-standing ambulatory surgery centers in the Peoria area as well as other large hospitals, Plaintiff is Defendant's most significant competitor for the provision of ambulatory surgical services.

Almost immediately upon Plaintiff's entry in to the market in 1990, Plaintiff obtained a contract to treat the health plan beneficiaries of Caterpillar, the largest employer in the Peoria area. Because of this and other successes by the Plaintiff, Defendant has engaged in several tactics to marginalize and eliminate Plaintiff as a competitor.

First, Defendant has interfered with the contractual relationship between Plaintiff and Caterpillar. In the mid-1990s, Defendant lowered its rates to Caterpillar and entered into a partially exclusive arrangement with Caterpillar for both in-patient and ambulatory surgery services. As a result of this contract, Plaintiff lost its blanket in-network status and became an out-of-network provider for Caterpillar beneficiaries for all services except ambulatory urology surgeries.

Plaintiff's split status as an in-network for urology services and out-of-network for other services continued until 2004, when Plaintiff sought to recruit a group of orthopedic surgeons who also practiced with Defendant. In retaliation, Defendant forced Caterpillar to terminate Plaintiff's status as a limited in-network facility in May 2004. Making it clear that Defendant controlled Caterpillar's decision, Caterpillar told Plaintiff to discuss the matter with Defendant, and if Defendant agreed to Caterpillar re-establishing Plaintiff in its network, Caterpillar would do so. Plaintiff met with Defendant and Defendant refused.

Despite its conversion to a total out-of-network provider to Caterpillar employees, Plaintiff continued to receive Caterpillar beneficiaries as patients. In March 2006, Caterpillar informed Plaintiff that as of April 1, 2006, it would cease paying for any services Plaintiff provided to Caterpillar beneficiaries, depriving Plaintiff of all revenue from Caterpillar. Plaintiff claims that Caterpillar's announced reason for this decision -- that Plaintiff had failed to collect co-payments and deductibles from Caterpillar patients -- was pretextual, and that Defendant had pressured Caterpillar to stop making any payments to Plaintiff.

Defendant's latest effort to dominate the market for ambulatory surgical services in the Peoria area is the signaling of its intent to enter into exclusive provider agreements with United Healthcare and Blue Cross-Blue Shield ("BCBS"), the two remaining major payers of health care services in the area. In addition, the John Deere Health Plan, historically the third or fourth largest payer of health care services in the Peoria area, has been recently acquired by United Healthcare. During a March 2006 meeting between representatives of Plaintiff and Defendant, Defendant's representative confirmed that Defendant is negotiating exclusive provider contracts with United Healthcare and BCBS. Plaintiff claims that if Defendant is successful, Plaintiff will likely be eliminated as a competitor, other smaller independent private health plans will suffer, large governmental payers, such as Medicare, will pay more for ambulatory surgery services, and the Peoria area will lose the principal benefit of market competition-higher quality care for lower prices.

Plaintiff's eleven-count Complaint seeks orders temporarily and permanently enjoining Defendant from entering into agreements with either United Healthcare (including John Deere) or BCBS that grant Defendant exclusive or partially exclusive rights to provide ambulatory surgical services in the Peoria area, as well as damages it has suffered as a result of the Defendant-induced breach of contract by Caterpillar. Counts I, II, III, IV allege that Defendant's conduct violates various provisions of the Sherman Antitrust Act. Counts V, VI, and VII allege that Defendant's conduct violates various provisions of the Illinois Antitrust Act. Counts VIII, IX, X, and XI of the Complaint claim Interference with Plaintiff's Contractual Relations with Caterpillar, United Healthcare, BCBS, and John Deere, respectively.

Defendant has moved to dismiss all of the state-law interference with contractual relationship claims, Counts VIII, IX, X and XI. Plaintiff has ...

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