Complaint against healthcare company provides sufficient evidence for non-interchangeability of emergency care and emergency services | A&O Shearman

On September 5, 2024, the United States District Court for the Middle District of Florida denied Health First, Inc.’s motion to dismiss plaintiffs’ amended complaint in a class action lawsuit alleging monopolization and anticompetitive practices in the health care market in Brevard County, Florida. Powers, et al. v. Health First, Inc.No. 6:23-cv-375-JSS-RMN (MD Fla. Sept. 5, 2024). The Court held that plaintiffs’ amended complaint provided a sufficiently detailed explanation of why emergency rooms and similar services are not interchangeable with emergency rooms, thereby correcting the deficiencies in the earlier complaint regarding the definition of the relevant product market. The Brevard County plaintiffs may now proceed to discovery on all four counts of their alleged violations of Sherman Act Sections 1 and 2, and the Florida Antitrust Act.

Plaintiffs, residents of Brevard County, Florida, filed their initial class action lawsuit on March 1, 2023, alleging four causes of action: (1) monopolization of the acute care inpatient, emergency room, and outpatient care market in Southern Brevard County in violation of Section 2 of the Sherman Act; (2) horizontal market partitioning in restraint of trade in violation of Section 1 of the Sherman Act; (3) exclusive dealing in violation of Section 1 of the Sherman Act; and (4) violation of the Florida Antitrust Act. Specifically, plaintiffs alleged that defendant monopolized the health care market in Southern Brevard County by leveraging its large market share and vertically integrated business model to illegally control physician referrals in order to limit referrals to other competing acute care hospitals and physicians; effecting and obtaining preferential vertical agreements with competing health plans, physicians, and other providers; and threatening and deterring competitors from entering the market; and to enter into a horizontal market sharing agreement with an acute care competitor. Defendant’s conduct allegedly resulted in uncompetitively high prices and diminished quality of care for defendant’s health plan enrollees. Importantly, plaintiffs in their initial complaint defined the relevant geographic market as Brevard County or Southern Brevard County and the relevant product market as “the sale of inpatient, emergency department, and outpatient acute care hospital services by (defendant) and competing hospitals.”

Defendant filed a motion to dismiss all counts, arguing that plaintiffs’ definition of the relevant product market was deficient because it did not adequately define “acute care.” The court agreed, and on September 7, 2023, defendant’s motion to dismiss counts one, three, and four was granted, but plaintiffs were permitted to amend their complaint. Plaintiffs filed their first amended class action complaint on September 21, 2023.

Plaintiffs’ amended complaint refined the product market definition by removing outpatient care and adding references to hospital billing codes for place of service (“POS”) to further define what services fell within the definition. Defendant responded by arguing that plaintiffs’ revised product market definition was still deficient because it did not include non-hospital providers as reasonably interchangeable substitutes for emergency department care. Plaintiffs attempted to distinguish emergency departments from urgent care facilities and other non-hospital facilities by citing defendant’s data showing that a significant portion (74%) of acute care patients were admitted through the emergency department, which can provide integrated and comprehensive emergency care not available in other facilities.

The court denied defendant’s motion to dismiss the amended complaint, finding that plaintiffs had sufficiently pleaded their claims. The court noted that plaintiffs had provided a detailed explanation in support of their position that emergency rooms and similar services are not interchangeable substitutes for emergency rooms. In denying the motion to dismiss, the court emphasized that because the scope of a relevant product market involves an examination not only of the product at issue but also of what other products consumers would reasonably select as substitutes, the parameters of a particular market are questions of fact that need not be resolved at the stage of a motion to dismiss.

The Court held that plaintiffs had plausibly alleged a relevant product market and that discovery would be necessary to determine whether an interchangeable substitute actually exists. This case is a useful reminder that antitrust plaintiffs can sufficiently allege a relevant product market to survive a motion to dismiss by providing sufficient information to plausibly suggest the contours of the alleged relevant markets.

Links and downloads

(View source.)