The Seventh Circuit Court of Appeals ruled that a vascular surgeon’s antitrust suit against Indiana University Health (IU Health) may proceed after the Bloomington surgeon alleged IU Health purchased the hospital at which the surgeon was on staff, then terminated his privileges when he would not agree to be employed by the health care network. The case is Vasquez v. Indiana University Health, Inc., 1:21-cv-01693-JMS-MG (S.D. Ind. 2021).
Background
Dr. Ricardo Vasquez was on staff at several hospitals in central Indiana including Bloomington Hospital, Monroe Hospital and Indiana Specialty Surgery Center. Dr. Vasquez’s lawsuit claimed that when IU Health purchased one of the competing hospital systems in the area, he became the only independent vascular surgeon in the region. IU Health allegedly then pressured Dr. Vasquez to become an IU Health employee, which he refused to do. When Dr. Vasquez finalized plans to perform transcarotid artery revascularizations at one of the hospitals competing with IU Health, he was reportedly targeted by Bloomington Hospital Chief Medical Officer Daniel Handel who falsely claimed that Dr. Vasquez had been sued 26 times. Dr. Vasquez’s hospital privileges at Bloomington Hospital were then revoked. Later, IU Health also revoked Dr. Vasquez’s status as a participating provider in the IU Health Plans, making it difficult for him to receive referrals from primary care providers and forcing IU Health Plan patients to pay out of pocket to see him. As a result, Dr. Vasquez alleged that the “targeted scheme” adversely affected his reputation and practice.
Antitrust Suit Against IU Health
Dr. Vasquez filed a federal antitrust suit against IU Health claiming antitrust violations under the Sherman Act and the Clayton Act. He argued that the health system wanted him to become an IU Health employee rather than remaining an independent physician so that IU Health could dominate the Bloomington market and charge higher prices for any patient receiving vascular surgery services in the Bloomington or Indianapolis areas.
The lawsuit also alleged IU Health employs 97 percent of the primary care providers in Bloomington and over 80 percent of the primary care providers in the wider geographic market. Because vascular surgeons rely on primary care doctors for patient referrals, Dr. Vasquez alleged that IU Health could use its market power to limit or eliminate referrals of new patients to competing vascular surgeons in Bloomington, including Dr. Vasquez. By doing so, Indiana University Health could create a monopoly which caused patients to travel substantial distances to receive medical care, resulting in decreased quality of care, decreased patient safety, and increased prices in the Bloomington healthcare market.
In response, IU Health filed a Motion to Dismiss the complaint, arguing that Dr.. Vasquez’s complaint did not adequately define the geographic market for an antitrust claim and his allegations of market dominance were implausible.
Jane Magnus-Stinson, the federal district judge for the Southern District of Indiana agreed with IU Health’s position and dismissed the case.
Seventh Circuit Court of Appeals Ruling
On appeal, a three-judge panel for the Seventh Circuit Court of Appeals reversed the district court decision. The Seventh Circuit began by outlining the “hypothetical monopolist test.” If a hypothetical monopolist could increase profits by raising prices above competitive levels, then that region would be deemed a relevant geographic market. Conversely, if customers could counteract price increases by purchasing from outside the region, it would not be considered a relevant market.
Dr. Vasquez argued that Bloomington was a pertinent geographic market, noting that most Bloomington patients would prefer not to travel to another city for treatment and highlighting how IU Health employed 97 percent of primary care physicians in Bloomington – which would require nearly every vascular surgery patient in Bloomington to receive a specialist referral from IU Health primary care services.
The Seventh Circuit agreed with Dr. Vasquez on how an alleged monopolist could dominate Bloomington’s vascular-surgery market. Also, the Court ruled that Dr. Vasquez had presented sufficient evidence to show that Indiana University Health already dominated the Bloomington market, stating
A hypothetical monopolist over vascular surgery in Bloomington would be able to abuse its market power considerably by jacking up payor prices and freezing out potential competitors. In particular, because much vascular surgery is performed in a hospital setting with special equipment, a hypothetical vertically integrated monopolist that controlled the hospital, the equipment, and most of the surgeons would be well‐positioned to engage in anticompetitive practices.
Additionally the Court ruled that,
A hypothetical monopolist over primary‐care services in Bloomington would control not only that market but also the flow of patients to vascular surgeons. By cutting off the flow of new patients to its vascular‐surgery competitors, the monopolist could capture the entire market, thereby positioning itself to raise payor prices without repercussion.
Therefore, the U.S. Court of Appeals reversed the district court’s decision and remanded the case for further proceedings. As of the date of this post, the case is ongoing.
Takeaway Points
- This case also involved other legal issues including defamation and statute of limitations. I didn’t include those in the discussion as they were outside the main scope of the article. Just realize that the alleged monopoly wasn’t the only legal issue involved in the case.
- While some hospital systems and even some staffing companies in the medical industry may have considerable market power in a given geographic region, there are ways for healthcare providers to fight back against an illegal monopoly.
- The Clayton Act makes it unlawful to discriminate in pricing to consumers where the effect of such discrimination may be to lessen competition or tend to create a monopoly in any line of commerce or to injure, destroy, or prevent competition.
- The Sherman Act defines a monopoly as having more than 70-80% market share. See this brief from the Department of Justice.
- One instance of HCA Healthcare purchasing hospital systems and then significantly cutting services was labeled a “hospital cartel” by North Carolina State Treasurer Dale Folwell.
- Here is another example of an antitrust complaint filed in North Carolina against HCA Healthcare.
- Federal antitrust laws come with stiff penalties. Those found guilty of violating federal antitrust laws could be liable for treble damages (three times actual damages), attorney’s fees, court costs, and prejudgment interest on any awards. See 15 U.S.C. § 15(a).
- Because of the potential for large damage awards, attorneys are more likely to take matters involving antitrust cases on a contingency basis.
- There may be significant public policy considerations behind preventing mergers of smaller hospitals with large hospital systems. This study from the Rural Policy Research Institute at the University of Iowa notes that while affiliation with a larger hospital system may allow financially struggling rural hospitals to remain open, the affiliations often result in a “reduction in the volume of outpatient visits and mental/substance use disorder stays, and the elimination of surgical, primary care, skilled nursing facilities, and obstetric service lines” and “may result in increased patient costs (travel and time) and delay in seeking care, particularly for health care services that are time-sensitive, chronic, and complex.” A key finding of the study was that “service additions occurred more
frequently in hospitals that left systems (35.4 percent), while the majority of service losses occurred in hospitals that joined systems (46.2 percent).” - Despite the potential negative implications of large hospital mergers, several states have enacted laws that exempt hospital acquisitions from state antitrust laws according to this article from Beckers Hospital Review (.pdf here). See also this NC Newsline Article (.pdf here).
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