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Marion Healthcare, LLC v. Southern Illinois Healthcare

United States District Court, S.D. Illinois

May 29, 2015

MARION HEALTHCARE, LLC, Plaintiff,
v.
SOUTHERN ILLINOIS HEALTHCARE and HEALTH CARE SERVICE CORPORATION doing business as BlueCross and BlueShield of Illinois, Defendants.

MEMORANDUM AND ORDER

STACI M. YANDLE, District Judge.

This matter comes before the Court on (1) defendant Health Care Service Corporation, doing business as BlueCross and BlueShield of Illinois' ("BCBSI") Motion to Dismiss Plaintiff Marion HealthCare, LLC's ("MHC") Second Amended Complaint (Doc. 59); (2) BCBSI's Motion to Strike Amended Complaint (Doc. 61); and (3) Defendant Southern Illinois Healthcare's ("SIH") Motion to Dismiss for Failure to State a Claim (Doc. 62).

Procedural History

In its First Amended Complaint, Plaintiff raised the following five claims against SIH: (1) Count I - exclusive dealing with BCBSI in violation of Section 1 of the Sherman Act (15 U.S.C. § 1) and Clayton Act (15 U.S.C. § 14); (2) Count III - exclusive dealing with BCBSI in violation of the Illinois Antitrust Act; (3) Count V - tying arrangement with BCBSI in violation of Section 1 of the Sherman Act (15 U.S.C. § 1) and Clayton Act (15 U.S.C. § 14); (4) Count Six - tying arrangement with BCBSI in violation of the Illinois Antitrust Act (740 ILCS 10/3); and (5) Count IX - monopolization in violation of Section 2 of the Sherman Act (15 U.S.C. § 2).

In its First Amended Complaint, Plaintiff raised the following six claims against BCBSI: (1) Count II - exclusive dealing with SIH in violation of Section 1 of the Sherman Act and Clayton Act (15 U.S.C. § 14; (2) Count IV - exclusive dealing with SIH in violation of the Illinois Antitrust Act; (3) Count VII - tying arrangement with SIH in violation of Section 1 of the Sherman Act (15 U.S.C. § 1) and Clayton Act (15 U.S.C. § 14); (4) Count VIII - tying arrangement with SIH in violation of the Illinois Antitrust Act (740 ILCS 10/3); (5) Count X - price discrimination against MHC in violation of Section 2 of the Clayton Act (15 U.S.C. § 13); and (6) Count XI - tortious interference with a business expectancy.

With respect to MHC's First Amended Complaint, Judge Herndon dismissed with prejudice the following claims: (1) Counts I, II, V, VII, and X to the extent those counts stated claims pursuant to Sections 2 or 3 of the Clayton Act; (2) the tying claim contained in Count VII; (3) the monopolization claim contained in Count IX; (4) the Illinois Antitrust claims contained in Counts III, IV, VI, and VII to the extent that each is based upon the portion of the Illinois law that is substantially similar to the Clayton Act; (5) the Illinois Antitrust claims contained in Count IV as to BCBSI to the extent it is based on the portion of Illinois law that is substantially similar to the Sherman Act based upon tying; and (6) the tortious interference with a business expectancy contained in Count XI claim against BCBSI (Doc. 57).

Judge Herndon dismissed without prejudice the following claims: (1) Plaintiff's Sherman Act claims as to SIH contained in Counts I, V, and IX; (2) the Sherman Act claim as to BCBSI regarding exclusive dealing contained in Count II; (3) the Illinois Antitrust claims contained in Counts III and VI as to SIH to the extent that each is based upon the portion of Illinois law that is substantially similar to the Sherman Act; and (4) the Illinois Antitrust claims contained in Count IV as to BCBSI to the extent it is based on the portion of Illinois law that is substantially similar to the Sherman Act based upon exclusive dealing (Doc. 57).

Thereafter, MHC filed its Second Amended Complaint raising the following claims: (1) Count I - exclusive dealing against SIH in violation of Section 1 of the Sherman Act (15 U.S.C. § 1); (2) Count II - exclusive dealing against BCBSI in violation of Section 1 of the Sherman Act (15 U.S.C. § 1); (3) Count III - exclusive dealing against SIH in violation of the Illinois Antitrust Act; (4) Count IV - exclusive dealing against BCBSI in violation of the Illinois Antitrust Act; (5) Count V - tying against SIH in violation of Section 1 of the Sherman Act (15 U.S.C. § 1); (6) Count VI - tying against SIH in violation of the Illinois Antitrust Act (740 ILCS 10/3); and (7) Count VII - monopolization against SIH in violation of Section 2 of the Sherman Act (15 U.S.C. § 2). Defendants bring their Motions to Dismiss MHC's Second Amended Complaint for failure to state a claim.

Background

Plaintiff, MHC, is a multi-specialty freestanding outpatient surgery center which offers outpatient surgical services. Plaintiff does not offer inpatient services. Plaintiff opened for business in 2004, and is located in the relevant geographic area, defined by Plaintiff as the counties of Williamson and Jackson, and the surrounding areas bordering these counties. Defendant SIH is a nonprofit corporation that owns a variety of acute-care hospitals which provide both inpatient and outpatient medical services. Further, SIH owns various freestanding outpatient surgical service providers.

Plaintiff alleges that the relevant product markets consist of two distinct sets, "the first set encompassing the second." The first set consists of "(a) general acute-care inpatient hospital services, including pediatric services and neonatal care services (generally referred to as "hospital services"), and (b) outpatient surgical services, where both (a) and (b) services may be reimbursed by any payors, including commercial insurance, government payors (e.g., Medicare, Medicaid) and self-pay." (Doc. 58 p. 2, par. 1). The second set of relevant product markets are submarkets of the first set and consist of "(1) general acute-care inpatient hospital services, including pediatric services and neonatal care services (generally referred to as "hospital services") reimbursed by commercial health insurers, and (2) outpatient surgical services reimbursed by commercial health insurers." Id.

Plaintiff alleges the relevant geographic markets are comprised of Williamson County, Illinois, Jackson County, Illinois and the surrounding area. Id. (par. 3). In the relevant geographic market, Plaintiff maintains SIH is a "must have" hospital system for health plans because it is the largest hospital in the region and the only local provider of certain essential services. Plaintiff alleges that within the relevant geographic area, SIH has a 77% market share for inpatient surgical cases ( Id., par 81 (h)) and a 76% market share of outpatient surgical cases. Id. (p. 30 par. 82 (a)).

Defendant BCBSI is allegedly the largest health insurance company in Illinois and the dominate health insurer in the relevant geographic area. Thus, BCBSI is the dominant provider of health insurance covering inpatient and outpatient services. Plaintiff claims that it has submitted multiple applications to BCBSI seeking acceptance as an in-network provider and that BCBSI has denied their request each time. Plaintiff alleges BCBSI informed them that BCBSI had an exclusive contract with SIH, which prohibited or precluded BCBSI from contracting with competitors for in-network coverage in the area. Plaintiff further alleges that it, and others, cannot remain competitive as long as this agreement with BCBSI and SIH exists. It is this exclusive agreement that forms the foundation of Plaintiff's claims.

Plaintiff claims that SIH willfully maintained and extended its monopoly power through the use of exclusionary contracts. Particularly, Plaintiff alleges that BCBSI had a compelling business need to include SIH in its network of inpatient service providers. Yet, in consideration of discounts to BCBSI on inpatient services, SIH included exclusionary language in the agreements with commercial insurers. Plaintiff argues the agreement improperly and illegally tied discounts for coverage of SIH's inpatient hospital services with exclusive contracting for in-network coverage of SIH's outpatient services and illegally coerced BCBSI into entering the agreement. This arrangement prohibits BCBSI from contracting for in-network coverage with ...


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