Antitrust verdict in Marshfield Clinic case still ominous.
Several days later, the jury awarded the plaintiffs, Blue Cross and Blue Shield United of Wisconsin, approximately $16 million dollars, which, under federal antitrust law, was automatically tripled to approximately $48 million. However, at a hearing on March 16, 1995, Judge John C. Shabaz granted remittitur, reducing the award to $5.6 million, which will be tripled to about $17 million.
In a written opinion released on March 22, 1995, the court described the damages awarded by the jury as "clearly excessive, totally monstrous, contrary to the evidence presented at trial, and based on a figure lacking adequate foundation." Specifically, the court noted that the plaintiffs had failed to prove that all of the damages that they claimed had actually been caused by the defendants' illegal conduct. The court's order stated that if the defendants failed to accept the reduced damages award by April 3, 1995, a new trial on damages would be scheduled. Whether or not a new trial occurs on the damages issue, both plaintiffs and defendants could eventually appeal the case to a higher court. The defendants have already stated that they intend to appeal.
Certain Practices Prohibited by Court's Order
Although he reduced the damages award, Judge Shabaz also entered injunctive relief in favor of the plaintiffs. The Judge stated that, although the monetary relief awarded was sufficient to compensate plaintiffs both for the losses they have sustained and for those they will sustain, the fact that the defendants continued to deny any wrongdoing meant that there was a threat that they would continue to violate the antitrust laws and, thus, that injunctive relief was appropriate.
Thus, Judge Shabaz prohibited Marshfield Clinic from entering into or enforcing certain types of agreements - specifically, those concerning supervision; administration of health plans; allocation of customers, territories, product, or service markets; setting of fees or prices; and free flow of health plan patients - with several clinics and HMOs that were not owned by the Marshfield Clinic. However, the court did not grant the plaintiffs' request that the Clinic be forced to divest itself of several of the clinics that it owns. The court noted that there were less drastic remedies available and that the balance of equities did not favor divestiture because the Clinic came into the areas in question at the request of local providers in order to preserve and expand access to care.
The court also prohibited the Clinic from, among other things, entering into or enforcing any agreements or understandings that prohibited or tended to limit Marshfield physicians from providing cross-coverage to non-Marshfield physicians; that required physicians or other providers to refer patients not in Marshfield's HMO to the Marshfield Clinic; that tended to limit the hospital privileges of any qualified physician not employed by Marshfield Clinic; or that restrained the ability of a Marshfield physician to practice in any location after terminating employment with Marshfield.
The court's order also prohibited Marshfield Clinic and its HMO from discriminating against Blue Cross and its HMO in providing them access to Marshfield physicians, products, and services for the purpose of establishing an HMO in the area. The plaintiffs had argued that the Marshfield physicians constituted an "essential facility" because the Blue Cross HMO, Compcare, could not establish a competing HMO in the area. The jury apparently agreed, and the Judge upheld this decision, stating, in the opinion of March 22, 1995, that a reasonable jury could have found that it was feasible for Marshfield to offer its doctors to Blue Cross/Compare to form an HMO that would compete with Marshfield's HMO. The order provides that all of the prohibitions will last for three years.
Clinic Controlled Large Share of Physicians
The plaintiffs had argued that Marshfield Clinic had violated the antitrust laws through activities that included employing or contracting with a large percentage of the physicians in the market and refusing to allow its physicians to affiliate with any HMO that competed with its HMO. The plaintiffs also maintained that Marshfield Clinic's conduct had raised the cost of health care in Wisconsin, intimidated independent physicians, and made it impossible for patients in many communities to receive care from anyone other than a Marshfield Clinic-affiliated or -employed physician. According to the complaint, Marshfield Clinic's charges were 27 percent higher than the average rates of other physicians in the state of Wisconsin for the same procedures and that its rates for anesthesiology exceeded state averages by 291 percent.
The complaint also alleged that, in four counties in Wisconsin, physicians affiliated with or employed by Marshfield Clinic constituted more than 80 percent of the practicing medical doctors. Additionally, it was alleged that, in five counties, Marshfield's affiliated or employed physicians constituted all of the family practitioners in the county. Also according to the complaint, there were a number of counties in which Marshfield's employed or affiliated physicians constituted 100 percent of the physicians in one or more of the following specialties: general surgery, orthopedic surgery, orthopedics, pediatrics, radiology, urology, and anesthesiology.
According to published reports, Marshfield Clinic has 23 satellite offices, employs more than 420 physicians and 2,600 nonphysicians, is affiliated with more than 100 other physicians, and has referral relationships with some nonaffiliated physicians.
Jury Found That HMOs Are a Separate Market
The complaint alleged that Marshfield's HMO, Security Health Plan, had more than 90 percent of the HMO enrollees in nine Wisconsin counties. Although Security Health Plan's market share would have been smaller if the relevant market were defined to include both HMOs and indemnity-style health insurance, the jury accepted the plaintiffs' contention that HMOs constituted a distinct product that consumers did not consider interchangeable with other forms of health care financing.
Although many observers have focused a large degree of attention on the fact that the jury found HMOs to be a separate market, Warren Greenberg, Phd, an economist and a professor of health economics at George Washington University who testified as an expert witness for the plaintiffs, feels that this emphasis is misplaced. Although he testified as an expert witness for the plaintiffs, he stated that he did not believe that HMOs constituted a separate market and testified that the proper market in this case was health care financing. However, he feels that the main issue was that the Marshfield physicians would not deal with any other prepaid plan. The physicians "were an essential facility," said Greenberg, "whether the HMOs were a separate market or not ... these physicians cannot boycott a non-Marshfield plan."
The jury also found that the defendants had monopoly power and that they had engaged in anticompetitive conduct to obtain or maintain that power. The jury also found that the defendants illegally entered into agreements with competitors or potential competitors to allocate customers, allocate territories, allocate markets, and to fix fees or prices.
Marshfield Made Care Available in Underserved Areas
Marshfield Clinic stated that it had brought physicians and high-quality care into previously underserved rural areas. Marshfield's primary care physicians generally treat patients in Marshfield's satellite offices but refer patients to Marshfield's main facility for specialty care. Nonetheless, the verdict demonstrates that, even where physicians believe they are helping the community by making services available to previously unserved populations, they are not necessarily insulated from antitrust liability.
Certain Factors May increase Antitrust Risk
There is no simple, bright line test to determine when the contracting practices of an integrated delivery system will violate the antitrust laws. However, there are a variety of factors that may increase antitrust risk: provider control of the system or network; exclusive arrangements with physicians or other providers (whether through explicit contracts or unwritten agreements or understandings); a market share in excess of 30 percent of the enrollees in the geographic market; a market share in excess of 30 percent of the physicians in a given specialty in the geographic market; or agreements (whether explicit or not) among competitors or potential competitors to fix prices or allocate markets. This list is not all-inclusive, but it does include some of the most commonly found "risk factors" that suggest that further analysis of antitrust issues may be warranted.
In this complex area, where even the successful defense of a lawsuit can be very expensive, it is wise for any integrated delivery system that enjoys a substantial market position to carefully evaluate the implications of its growth and contracting programs.
A recent jury verdict in an antitrust case involving Marshfield Clinic highlights the potential antitrust risks faced by integrated delivery systems with large market shares. The Clinic was found guilty of anticompetitive practices, and the jury awarded the plaintiffs treble damages of about $48 million. Even though the judge subsequently reduced the amount of the award, the implications of the decision for integration in the health care field are ominous. "Health Law" is a regular feature of Physician Executive from the Washington, D.C., law firm Epstein Becker & Green. Mark Lutes of that law firm serves as a editor of the column.
Mark E. Lutes and Tanya B. Vanderbilt are attorneys in the Washington, D.C., offices of Epstein Becker & Green.
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|Author:||Vanderbilt, Tanya B.|
|Date:||May 1, 1995|
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