A federal judge in Hawaii has dismissed an antitrust lawsuit that alleged a number of parties, including a state medical association, had agreed to fix fees and other terms under which physicians would provide services for a health care provider network. The suit also alleged that the parties had agreed to organize and participate in a physician-group boycott of the network.1
The plaintiffs in this case are appealing the ruling to the U.S. Court of Appeals for the 9th Circuit, which has jurisdiction over federal courts in Hawaii, Alaska, Arizona, California, Idaho, Montana, Nevada, Oregon, Washington and Guam.
The plaintiffs are two affiliated Nevada companies, International Healthcare Management, or IHM, and Health Hawaii Network, or HHN. HHN entered a joint venture agreement with St. Francis Health System to offer a new managed health care plan in Hawaii called the St. Francis Provider Plan. The plan was to be marketed to employers by IHM and underwritten by the American Medical and Life Insurance Co. HHN was responsible for creating a health care provider network for the St. Francis Provider Plan, and HHN sent a physician provider agreement to Hawaii physicians.
Dentists should be very cautious about undertaking collective activity.
According to the plaintiffs’ complaint, filed in the U.S. District Court for the District of Hawaii, they initially were successful in attracting several hundred physicians to their provider network. However, by February 1998, the plaintiffs alleged, the defendants agreed among themselves to jointly negotiate with the plaintiffs to increase reimbursement rates and to change other terms of the physician provider agreement.
The defendants in the case included the Hawaii Medical Association; Queen’s Physician Group; several individual physicians; and the Hawaii Coalition for Health, a physicians’ group referred to in the suit as the Coalition. According to the lawsuit, the Coalition regularly evaluates provider agreements on behalf of its members.
The plaintiffs charged in their lawsuit that the defendants had violated federal and state antitrust laws, and had tortiously interfered with prospective business advantage and contracts in violation of state law.
The plaintiffs claimed that the defendants advised physicians not to deal with HHN, that HHN subsequently was unable to attract new physicians, and that physicians who previously had agreed to participate began to cancel their contracts. Consequently, the plaintiffs alleged, they were unable to market the St. Francis Plan to employers in Hawaii.
According to the lawsuit, in February 1999, American Medical Insurance canceled its management contract with IHM, and in spring 2000, St. Francis terminated the St. Francis Plan joint venture. As a result, the lawsuit claims, IHM’s managed care presence in Hawaii was ended, and the plaintiffs also were unable to offer or provide a physician network to competing insurance companies. The defendants denied the plaintiffs’ allegations that they had violated the law, and moved for summary judgment.
The court found that the plaintiffs had failed to produce any evidence that any of the defendants agreed to or participated in any effort to fix the fees that plaintiffs would pay for physician services. While the Coalition and the Hawaii Medical Association sought to negotiate certain terms of the physician provider network with the plaintiffs, the plaintiffs themselves had acknowledged that none of the defendants "mount[ed] a frontal attack on the current HHN fee schedule,"1 and that Queen’s Physician Group did not participate in any efforts to negotiate some of the terms of the agreement.
The court noted in its opinion that the plaintiffs had pointed to evidence that the Coalition proposed that HHN’s fee schedule take into account provider costs and that physicians be given the right to appeal unfair reimbursement rates. The court also noted that the plaintiffs had relied on evidence that the Hawaii Medical Association had proposed that individual physicians be given 30 days to comment on proposed fee changes before the changes became effective. However, the court observed, such fee-related proposals would not be illegal even if they were made by competing physicians.
The trial court relied on a prior ruling from the 9th Circuit, in which the appellate court stated that the marketplace for health care was "unusual" in that medical plans "serve, effectively, as the bargaining agent for large groups of consumers; they use the clout of their consumer base to drive down health care service fees."2
The appellate court went on to observe that "in light of these departures from a normal competitive market, individual health care providers are entitled to take some joint action (short of price fixing or a group boycott) to level the bargaining imbalance created by the plans and provide meaningful input into the setting of fee schedules."2
For example, the appellate court had found that providers might jointly negotiate issues such as payment procedures, the type of documentation they must provide, patient referral methods, and dispute resolution. The 9th Circuit also found that providers might "pool cost data in justifying a request for an increased fee schedule."2
The trial court found that the defendants’ fee-related proposals were the type of lawful "joint action" described in the 9th Circuit case. Furthermore, the court noted that in another case, the 9th Circuit had concluded that conduct would not be construed to violate the applicable federal antitrust law unless consumer welfare had been harmed. There was no evidence that any of the proposals made by any of the defendants in this case harmed patient welfare; thus, there also was no evidence that the defendants had violated federal antitrust law, the court concluded.
Moreover, the trial court found there was no evidence that the Hawaii Medical Association or the Coalition had the authority or ability to bind any physicians to any revised agreement that might have resulted from those organizations’ discussions with the plaintiffs. The court also found no evidence that either the medical association or the Coalition had attempted to coerce physicians to sign, or not to sign, the agreement. The court observed that while the medical association and the Coalition may have influenced individual physicians in their roles as advocacy organizations, each physician made an individual decision on whether to sign the agreement.
The court’s opinion was not changed by evidence that the medical association, the Coalition and Queen’s Physician Group were part of a "consortium" of organizations that, in 1997, jointly negotiated changes in the provider agreement offered by the Hawaii Medical Service Association, or HMSA, the dominant managed health care organization in the state.
The court noted that HMSA was not a plaintiff in this case, and that there was no admissible evidence that participation in the "consortium" that negotiated with HMSA was tantamount to an agreement to participate in negotiations with the plaintiffs. In addition, there was no evidence that the organizations had violated antitrust laws in attempting to persuade HMSA to change its provider agreement.
In addition, the court found that the plaintiffs had failed to submit evidence that any of the defendants organized or participated in a group boycott against the plaintiffs with the intention of supporting a physician price-fixing arrangement. The court noted that the plaintiffs had conceded during oral argument that there was no such group boycott. The plaintiffs had pointed to communications from the Coalition to its members in which it stated that the plaintiffs had refused to negotiate with the Coalition regarding any of the agreement terms. They also cited an "Alert" prepared by the Coalition, the Hawaii Medical Association and another group and sent to medical association members. The Alert, court records show, reported on a meeting that those organizations had with the Hawaii Insurance Commissioner about the plaintiffs and the plaintiffs’ refusal to negotiate any of the terms of the agreement.
The court noted that none of these communications mentioned the plaintiffs’ fee schedule, and none of the communications suggested that any physician was prohibited, by ethical or other obligations, from making up his or her own mind on whether to sign the agreement. The court concluded that the state medical association and the Coalition had "simply voiced their concerns about Plaintiff HHN’s [physician provider agreement] so that physicians could make an informed decision about whether to join HHN—conduct which was within those organizations’ roles as professional and health care advocacy organizations."1
Thus, the court found that communication from the medical association and the Coalition to their members did not support the allegation that the defendants violated antitrust laws through a group boycott, and, further, that there was no evidence of a boycott by Hawaii physicians.
Without any agreement or threat to boycott the plaintiffs, or any attempt to fix prices, the joint efforts by the Hawaii Medical Association and the Coalition could not have caused any antitrust injury to the plaintiffs, the court concluded. The plaintiffs’ allegations, the court noted, were based in part on a letter from the Coalition to the Hawaii State Insurance Commissioner seeking an investigation of the plaintiffs’ connection to a prior bankrupt health plan. They also were based on the Coalition’s later efforts to persuade the Insurance Commissioner and Hawaii State Department of Labor to investigate the plaintiffs’ publication of a participating provider list that the Coalition believed was misleading.
To the extent that their allegation were based on these specifics, the court said, the plaintiffs failed to produce any evidence that the Coalition was not petitioning the government and therefore was protected from potential antitrust liability under the Noerr-Pennington doctrine.
The Noerr-Pennington doctrine grants immunity from antitrust liability for attempts to influence the passage or enforcement of laws based on the First Amendment right to petition the government.
As for the plaintiffs’ claim that the defendants violated state antitrust laws, the court found that state statute provided that Hawaii antitrust laws are to be construed in accordance with judicial interpretations of similar federal antitrust statutes. In addition, the court found, under Hawaii case law, there is no viable claim for tortious interference with prospective economic advantage, absent evidence that the defendant’s conduct "was wrongful by some measure other than the fact of interference itself."1
Since the court concluded that the defendants did not violate antitrust laws, and the plaintiffs did not suggest any other legal theory under which the defendants had violated this law, the court found that the plaintiffs could not continue to pursue that claim. In addition, the court concluded that the plaintiffs had presented no evidence to support their claim for tortious interference with their contracts.
Consequently, the court granted the defendants’ motions for summary judgment. In so doing, it upheld the right of the defendants to engage in some joint actions without violating the antitrust laws, so long as the defendants’ actions did not include a group boycott or price fixing.
It is interesting to note that in its opinion, the court did not comment on the Coalition’s policy of evaluating provider contracts on behalf of its members. This suggests that the court saw no problem with such evaluations. Thus, this decision supports the American Dental Association’s practice of offering informational reviews of unsigned provider contracts to its members through the ADA Contract Analysis Service.
As noted above, however, the 9th Circuit will be reviewing this case on appeal. The ADA’s Division of Legal Affairs will continue to monitor this case. In spite of this decision, dentists should be very cautious about undertaking collective activity. If the 9th Circuit affirms, technically this decision would apply only in the states over which this court has jurisdiction.
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