Health Insurers in Rhode Island and Western New York Sued by Providers for Alleged Antitrust Violations

By James M. Burns

In the last two months, two new antitrust actions have been filed against health insurers that raise interesting issues about an insurer’s obligation to contract with a health care provider that it chooses not to deal with, and whether a refusal to do so can give rise to antitrust liability.

In the first case, filed in early June, Steward Health System, a Massachusetts-based health system, commenced an antitrust case against Blue Cross Blue Shield of Rhode Island in the federal district court in Rhode Island. Steward contends that BCBS-RI derailed Steward’s proposed acquisition of Landmark Medical Center, a Woonsocket, Rhode Island hospital that was in financial distress, for anticompetitive reasons. Specifically, Steward alleges that it has a reputation for providing low-cost health care in Massachusetts, and does so by partnering with low cost health insurers who offer consumers lower cost, limited network insurance products. According to Steward, BCBS-RI, the dominant insurer in Rhode Island, feared that Steward’s entry into the Rhode Island market would jeopardize BCBS-RI’s market position, and there BCBS-RI refused to negotiate an in-network contract with Landmark at “reasonable” rates, knowing that the absence of such a contract would ensure that Steward could not go forward with its announced acquisition. Steward’s complaint further alleges that BCBS-RI also terminated an existing network contract that it had with St. Anne’s, a Steward hospital located near the Massachusetts/Rhode Island border that served both Rhode Island and Massachusetts patients, despite Steward’s offer to continue the relationship on terms that were favorable to BCBS-RI, maintaining that this conduct was taken in furtherance of the alleged anticompetitive scheme to ensure that Steward would not make inroads into the Rhode Island market. As this summary of the allegations makes clear, the case raises interesting issues about how the antitrust laws treat an alleged monopolist’s refusal to deal with third parties, and thus will be a closely watched case going forward.

The second case, filed in the Western District of New York on June 25, raises similar issues, albeit in a different context. In Insource Development Services v. HealthNow, the plaintiff, an urgent care center, alleges that health insurer HealthNow, the dominant insurer in the region, conspired with United Memorial Health Center to ensure the demise of Insource. (United operates the only competing urgent care centers in the area, and has network contract with HealthNow for both its hospital services and the urgent care centers it operates.) According to the plaintiff, after Insource had engaged in extensive discussions with HealthNow about a network contract, United reached an anticompetitive agreement with HealthNow to terminate the negotiations and exclude Insource from the HealthNow network. Insource further alleges that United and HealthNow engaged in similar conduct against another potential rival urgent care center, Lakeland, which was successful in keeping Lakeland out of the market. The case, like the Steward case, will require the court to consider what obligations, if any, the antitrust laws impose upon a dominant insurer that chooses not to contract with a provider. Stay tuned.