A federal judge won’t pull the plug on a class action complaint accusing NorthShore University Health System of using a planned merger to monopolize services in Chicago’s northern suburbs before raising prices.
The lawsuit originated in 2007, when a group of health insurers and patients sought to bring antitrust charges against the chain. But the mergers and acquisitions in question stretch back to early 2000, when the system formerly known as Evanston Northwestern Healthcare — which also owned Glenbrook Hospital — formally completed its merger with Highland Park Hospital. In the years since, along with formally rebranding as NorthShore, the company added a Skokie hospital to its portfolio.
U.S. District Judge Edmond Chang issued an opinion Feb. 20 in what he said was the parties’ fifth set of briefings related to class certification, specifically NorthShore’s attempt to decertify based largely on the hospital system's claims that the class representatives selected by the plaintiffs have been inadequate. Chang said he earlier granted provisional approval to a decertification motion, but allowed the class counsel to propose a new representative.
Chang said that representative, David Freedman, is “proper and adequate,” enabling him to fully consider remaining decertification arguments, as well as renewed cross motions for summary judgment.
NorthShore has maintained the pricing change stemmed from the recommendation of its consulting firm, Bain & Co., hired before the Highland Park merger. The Federal Trade Commission filed an administrative complaint regarding the merger and price increase, ultimately ordering the company to allow payors and managed care organizations with pre-existing contracts to negotiate those deals in 2008. No MCO engaged in that process.
In arguing for decertification, NorthShore asserted the class doesn’t satisfy predominance or superiority requirements. In seeking summary judgment, it said the complaint doesn’t properly define the market NorthShore is said to have monopolized and also argued the FTC’s action precludes further damages. The class motion for summary judgment said liability is evident specifically because of its market definition and argued NorthShore’s affirmative defense fails.
Chang wrote that although the class has changed experts, its method of showing the market impact of the alleged antitrust conduct is largely similar and remains built on significantly reliable and relevant data. He likewise said NorthShore’s challenge to the predominance element falls short as the methodology it attacked is “essentially the same” as what was on the table when a U.S. Seventh Circuit Court of Appeals panel found the allegations are sufficiently common to all class members. The superiority argument failed because of its reliance on whether the class could establish predominance.
“Plaintiff has demonstrated,” Chang wrote, “that the class can use common evidence — the post-merger price increases NorthShore negotiated with insurers — to show that all or most of the insurers and individuals who received coverage through those insurers suffered antitrust injury as a result of the merger.”
In considering the dispute over the allegedly monopolized market, Chang said the definition is a factual question to be decided at trial, meaning either side needs to show a genuine dispute over whether a market exists to survive summary judgment.
“Neither side’s evidence is dispositive,” Chang wrote. Although NorthShore relied on diversion ratios, which analyze customers who leave a potential market for goods and services, Chang said in the health care context insurers arguably are “the most relevant buyers.” But the class’ evidence also falls short, as a reasonable jury could determine “the relevant geographic market is indeed broader than just the three hospitals that the plaintiff proposes.”
Regarding whether the 2008 FTC action neutralizes a subsequent lawsuit, Chang said many class members, including Freedman, never saw the letter NorthShore sent informing managed care organizations of their right to renegotiate an existing contract. Furthermore, he noted the letter didn’t give any indication that failing to renegotiate would cost an MCO the chance to sue down the road. Nor was there any guarantee reopening the contract would lower prices or restore competition.
“It is true that the mitigation doctrine bars recovery to plaintiffs who idly sit by and knowingly allow their damages to accumulate while doing nothing to avoid them,” Chang wrote. “But at the same time, plaintiffs are not required to engage in futile efforts.”
Finally, Chang said the class is entitled to summary judgment on NorthShore’s affirmative defense, in which it said the merger created several efficiencies, notably in quality of care. The class challenged both the legal viability of that defense as well as whether NorthShore’s expert opinions were admissible.
Chang said the latter argument was persuasive, agreeing with the class’ contention NorthShore’s expert, Dr. Gregg Meyer, “collected qualitative and quantitative data from after the merger, analyzed it, found quality improvements, and then jumped to the conclusion that the merger led to the improvements in quality,” adding he didn’t “explain how he reached that conclusion and admitted to not having performed any kind of but-for causation analysis.”
The judge directed the parties to file status reports that include the resumption of settlement negotiations, an estimated number of trial days and further information on testimony, and whether NorthShore will seek interlocutory appeal of Chang's judgment through the Seventh Circuit. Chang set a March 14 due date.
NorthShore is represented in the case by attorney Conor A. Reidy, of the firm of Winston & Strawn, of Chicago.
The plaintiffs are represented by attorneys Marvin A. Miller, Matthew E. Van Tine and Kathleen E. Boychuck, of Miller Law LLC; and Joseph M. Burns, of the firm of Jacobs, Burns, Orlove & Hernandez, both of Chicago.