FEDERAL COURT IN CALIFORNIA REFUSES TO DISMISS ANTITRUST AND STATE LAW CLAIMS AGAINST HCA HOSPITAL AFFILIATES FOR CHANGING COVERAGE RULES TO EXCLUDE PHYSICIAN.
The magistrate Judge in Fox v. William Piche et al.,, No. C08-1098 RS (D.C. N.Cal., San Jose Div. 2008) refused to dismiss antitrust and some state court actions brought by a critical care pediatrician against a number of officers of HCA Good Samaritan Hospital in San Jose, California. Dr. Fox’s specialty involved the treatment of critically ill children who require mechanical ventilation. In 1999, the Good Samaritan adopted a rule requiring any physician practicing at the hospital designate two backup physicians with “identical” privileges. Prior to 1999 the hospital only required backups to have “appropriate” privileges. Dr. Fox alleged that the defendants changed the rules to exclude his back up physicians; retaliated against him in 2006 because he refused to sign a corporate loyalty oath; terminated his privileges by refusing to send him his reappointment letter; interfered with business relations between Dr. Fox and his referral services and disregarded the hospital and medical staff privileging bylaws. Fox alleged a conspiracy to prompt his suspension after he spoke out against transfering Pediatric Intensive Care (“PICU”) patients to another HCA facility and Good Samaritan entered into an agreement with another group to provide PICU services at Good Samaritan.
The Court, while noting the heightened antitrust pleading standards set forth by the Supreme Court in Bell Atl. Corp. v. Twombly 127 S.Ct. 1955 (2007), (“[f]actual allegations must be enough to raise a right to relief above a speculative level)., denied the motion to dismiss the antitrust claims based on the alleged running of the four year statute of limitations, holding that Dr. Fox was entitled to reapply for privileges every two years and each “ensuing denial operated as a separate process even if the result seemed predictable in light of past practice. “Each denial inflicted new and accumulating injury on Fox in that the denial was not immutable or automatic.”
The Court also refused to dismiss Dr. Fox’s claim of conspiracy in restraint of trade under Section 1 of the Sherman Act based on the Defendant’s claim of unilateral conduct. Under Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984) “[O]fficers or employees of the same firm do not provide the plurality of actors imperative for a §1 conspiracy.” Although the Court doesn’t explain his finding that the conspiracy claim is sufficiently pled against the employees of the hospital, he seems to rely on the defendant’s service on various medical staff committees as grounds. Hospitals and their medical staffs are separate legal entities in California.
The Court upheld Dr. Fox’s pleading of a Section 2 Sherman Act claim as well. To plead a Section 2 claim a plaintiff must allege (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. The relevant market is defined as a pool of services that are reasonably interchangeable so as to be economic substitutes for each other. Dr. Fox alleges that Good Samaritan, because of the uniqueness of its pediatric intensive care unit is its own separate geographic market and children treated there constitute their own economic “aftermarket,” which they can only exit at significant switching cost. Dr. Fox asserts that PICU services constitute a separate product market because the patients are unable to substitute services from other providers and their parents and physicians do not price shop PICU services. He maintains that by controlling and manipulating the backup physician criteria at Good Samaritan, the Defendants have successfully excluded Dr. Fox in the market and created a monopoly for one PICU group at the facility. This case is still in the early stages of development and Dr. Fox’s allegations will be subject to a vigorous demand for proof, but is underscores the value, at least at the pleading stage, of being excluded from a narrow niche market.