PEORIA – Whether a smaller health care provider was prevented by a larger competitor from competing made a difference in a recent federal court decision that could set precedent in exclusive contracts, according to a Washington-based antitrust attorney.

In late September, the U.S. District Court for the Central District of Illinois in Peoria ruled that OSF Saint Francis Medical Center, the largest hospital in Peoria, did not violate federal antitrust law when it entered into contracts with major commercial health insurance companies. Those contracts required the insurers to exclude its principal competitor, Unity Point Health - Methodist, from their provider networks.

Methodist claimed those exclusive contracts foreclosed them from competing for commercially insured patients’ business. The district court disagreed, saying Saint Francis' contracts with the health insurance companies did not amount to an unreasonable restraint of trade or an unlawful monopoly.

In issuing that decision, the court granted summary judgment to Saint Francis Medical Center on all its claims.

Methodist filed its initial antitrust lawsuit against OSF Healthcare in U.S. district court in 2013, claiming its larger competitor continually stymied Methodist's efforts to join preferred provider networks of some of the area's most profitable health insurers. Methodist alleged OSF Healthcare engaged in practices that limit competition, drove up costs and reduced quality of care and consumer choice.

In March of 2015, Methodist could claim a win when the same court allowed Methodist’s suit to proceed despite the case's narrow market definition that excluded government payers.

"This decision is particularly interesting for its ruling in favor of defendant, Saint Francis, in an exclusive dealing case, despite alleged market power," Farrah Short, an associate with Mintz Levin in Washington, said during a recent Cook County Record email interview. "Typically, antitrust enforcers and policy makers have been supportive of exclusive networks as a mechanism to reduce health care costs, in the absence of market power." 

It wasn't the size of either health care facility that made a difference in the case, Short said. 

"Here, Saint Francis is the largest hospital in the relevant market, and arguably a must-have hospital due to its tertiary services offerings," she said. "But the court’s focus was less on Saint Francis’ market power, and more on whether Methodist was truly foreclosed from competing." 

The U.S. district court's decision earlier this fall addressed foreclosure from competition by rejecting Methodist’s claims that being excluded from a contract foreclosed Methodist from competing for all the patients covered by the plan.

There are lessons health systems should, and should not, take from that ruling, Short said.

"As with all rule of reason analyses, the decision here is very fact-specific," Short said. "In the consolidating health-care environment, health systems with market power should not view this as a get-out-of-jail-free card."

However, the ruling does provide positive guidelines about exclusive contracts, Short said.

"It does provide an important reminder on the importance of legitimate business reasons for utilizing exclusive arrangements," she said. "And it raises the bar for smaller competitors attempting to allege substantial foreclosure. The court here placed a fair amount of emphasis on the availability of alternate means of competing, and it rejected an all-or-nothing approach to measuring foreclosure."

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