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The Eighth Circuit ended its 2009 with a ruling in an antitrust case. The decision turned on market definition — a key battle in cases that don't involve per se unlawful things like cartels that fix prices, restrict output, or allocate customers or territories. (Market definition lets us figure out if "market power" or "monopoly power" exists and who has it. A narrow one may inflate the share of the biggest firm.) We regret to say the court did a less than stellar job.
Cardiologists who had built their own surgical hospital in Little Rock, Arkansas, brought the action under sections 1 and 2 of the Sherman Act. They sued the largest health management organization, Blue Cross & Blue Shield, and the biggest hospital company, Baptist Health, for locking them out of the market for Little Rock-area patients whose private insurance foots their medical bills. Blue Cross and Baptist Health achieved the lock out by refusing to pay for services that patients got from "competing" hospitals such as the plaintiff-cardiologists'.
The cardiologists' complaint excluded from the "product market" patients who paid with Medicare or Medicaid benefits. It noted that private insurance, on the one hand, and Medicare/Medicaid, on the other, each covered about half of paying patients.
The Eighth Circuit panel upheld dismissal of the complaint. It ruled that the cardiologists couldn't just leave out half of the potential patients simply because the government — instead of private insurers — paid their medical bills. It said:
LRCC's claims boil down to the allegation that, due to Baptist Health's allegedly unlawful actions, LRCC has access to fewer patients. The relevant question, then, is to whom might the cardiologists at LRCC potentially provide medical service? LRCC's complaint provides the answer: LRCC can provide service to "patients . . . from either a government program such as Medicare or Medicaid, or from a private insurer." (emphasis added). Patients able to pay their medical bill, regardless of the method of payment, are reasonably interchangeable from the cardiologist's perspective — the correct perspective from which to analyze the issue in this case.
Little Rock Cardiology Clinic PC v. Baptist Health, N0. 08-3158, slip op. at 8 (8th Cir. Dec. 29, 2009).
Why does the ruling leave us cold? Because the panel leaps from the fact that many patients pay with government money to the notion that they "are reasonably interchangeable" with private insurance patients. How does the court support its reasonable interchangeability conclusion? It doesn't, except by ipse dixit ("he himself said it").
But let us pause on the question. Do docs in fact view the folks that Medicare or Medicaid covers as pretty much the same as patients with private insurance? Doesn't Medicare/Medicaid reimburse at low, low rates? And, even if docs do regard (stingier) government payments as similar enough to (higher) private insurance remittances, why on earth did Blue Cross and Baptist Health bother to shut the LRCC cardiologists out of the private insurance piece of the patient pie?
The opinion disappoints also in that it doesn't mention the complaint does allege that the lock-up of private insurance patients hurt LRCC by forcing its cardiologists to do more government business. The scheme, it alleged, changed "the plaintiffs' payor mix to a higher percentage of Medicare and Medicaid patients than would have obtained in a competitive market, which resulted in substantial lost revenues to plaintiffs." Third Am. Complaint ¶ 193.
But perhaps the plaintiffs didn't say anything about reasonable interchangeability, leaving the court to draw its own inferences? No. Sorry. The panel inferred reasonable interchangeability despite the plaintiffs' express allegations that it didn't exist. Their Honors did so because, they said, plaintiffs looked at the product market from the perspective of patients (what payment options they had) rather than from that of the cardiologists (what patients they could treat).
Cardiologists could also choose, you know, to limit their practices to people who couldn't pay at all. How would their non-paying patients fit in the product market definition? Wouldn't including them in the definition ignore the fact that doing surgery for free isn't the same as doing it profitably?
Maybe Medicare and Medicaid do pay enough to make their beneficiaries reasonably interchangeable with private insurance patients. The court simply assumed they do. We doubt that would do in the pre-Twombly and –Iqbal world, which didn't allow judges to make subjective "plausibility" assessments of allegations. We respectfully would like a bit more than a pro-dismissal assumption.