Marion HealthCare, LLC v. Southern Illinois Healthcare et al

Filing 90

ORDER. Defendant BCBSI's Motion to Dismiss Counts II and IV of Plaintiff's Second Amended Complaint (Doc. 59) is GRANTED with prejudice. The Court DENIES Defendant BCBSI's Motion to Strike (Doc. 61) as MOOT. Defendant SIH's Motion to Dismiss Counts I, III, V, VI, and VII of Plaintiff's Second Amended Complaint (Doc. 62) is DENIED in its entirety. Signed by Judge Staci M. Yandle on 5/29/15. (ajr)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
MARION HEALTHCARE, LLC,
Plaintiff,
Case No. 12-cv-871-SMY-PMF
vs.
SOUTHERN ILLINOIS HEALTHCARE and
HEALTH CARE SERVICE CORPORATION
doing business as BlueCross and BlueShield of
Illinois,
Defendants.

MEMORANDUM AND ORDER
This matter comes before the Court on (1) defendant Health Care Service Corporation,
doing business as BlueCross and BlueShield of Illinois’ (“BCBSI”) Motion to Dismiss Plaintiff
Marion HealthCare, LLC’s (“MHC”) Second Amended Complaint (Doc. 59); (2) BCBSI’s
Motion to Strike Amended Complaint (Doc. 61); and (3) Defendant Southern Illinois
Healthcare’s (“SIH”) Motion to Dismiss for Failure to State a Claim (Doc. 62).
Procedural History
In its First Amended Complaint, Plaintiff raised the following five claims against SIH:
(1) Count I – exclusive dealing with BCBSI in violation of Section 1 of the Sherman Act (15
U.S.C. § 1) and Clayton Act (15 U.S.C. § 14); (2) Count III – exclusive dealing with BCBSI in
violation of the Illinois Antitrust Act; (3) Count V – tying arrangement with BCBSI in violation
of Section 1 of the Sherman Act (15 U.S.C. § 1) and Clayton Act (15 U.S.C. § 14); (4) Count Six
– tying arrangement with BCBSI in violation of the Illinois Antitrust Act (740 ILCS 10/3); and
(5) Count IX – monopolization in violation of Section 2 of the Sherman Act (15 U.S.C. § 2).

In its First Amended Complaint, Plaintiff raised the following six claims against BCBSI:
(1) Count II – exclusive dealing with SIH in violation of Section 1 of the Sherman Act and
Clayton Act (15 U.S.C. § 14; (2) Count IV – exclusive dealing with SIH in violation of the
Illinois Antitrust Act; (3) Count VII - tying arrangement with SIH in violation of Section 1 of
the Sherman Act (15 U.S.C. § 1) and Clayton Act (15 U.S.C. § 14); (4) Count VIII - tying
arrangement with SIH in violation of the Illinois Antitrust Act (740 ILCS 10/3); (5) Count X –
price discrimination against MHC in violation of Section 2 of the Clayton Act (15 U.S.C. § 13);
and (6) Count XI – tortious interference with a business expectancy.
With respect to MHC’s First Amended Complaint, Judge Herndon dismissed with
prejudice the following claims: (1) Counts I, II, V, VII, and X to the extent those counts stated
claims pursuant to Sections 2 or 3 of the Clayton Act; (2) the tying claim contained in Count VII;
(3) the monopolization claim contained in Count IX; (4) the Illinois Antitrust claims contained
in Counts III, IV, VI, and VII to the extent that each is based upon the portion of the Illinois law
that is substantially similar to the Clayton Act; (5) the Illinois Antitrust claims contained in
Count IV as to BCBSI to the extent it is based on the portion of Illinois law that is substantially
similar to the Sherman Act based upon tying; and (6) the tortious interference with a business
expectancy contained in Count XI claim against BCBSI (Doc. 57 ).
Judge Herndon dismissed without prejudice the following claims: (1) Plaintiff’s Sherman
Act claims as to SIH contained in Counts I, V, and IX; (2) the Sherman Act claim as to BCBSI
regarding exclusive dealing contained in Count II; (3) the Illinois Antitrust claims contained in
Counts III and VI as to SIH to the extent that each is based upon the portion of Illinois law that is
substantially similar to the Sherman Act; and (4) the Illinois Antitrust claims contained in Count
IV as to BCBSI to the extent it is based on the portion of Illinois law that is substantially similar
to the Sherman Act based upon exclusive dealing (Doc. 57 ).
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Thereafter, MHC filed its Second Amended Complaint raising the following claims: (1)
Count I – exclusive dealing against SIH in violation of Section 1 of the Sherman Act (15 U.S.C.
§ 1); (2) Count II – exclusive dealing against BCBSI in violation of Section 1 of the Sherman
Act (15 U.S.C. § 1); (3) Count III – exclusive dealing against SIH in violation of the Illinois
Antitrust Act; (4) Count IV – exclusive dealing against BCBSI in violation of the Illinois
Antitrust Act; (5) Count V – tying against SIH in violation of Section 1of the Sherman Act (15
U.S.C. § 1); (6) Count VI – tying against SIH in violation of the Illinois Antitrust Act (740 ILCS
10/3); and (7) Count VII – monopolization against SIH in violation of Section 2 of the Sherman
Act (15 U.S.C. § 2). Defendants bring their Motions to Dismiss MHC’s Second Amended
Complaint for failure to state a claim.
Background
Plaintiff, MHC, is a multi-specialty freestanding outpatient surgery center which offers
outpatient surgical services. Plaintiff does not offer inpatient services. Plaintiff opened for
business in 2004, and is located in the relevant geographic area, defined by Plaintiff as the
counties of Williamson and Jackson, and the surrounding areas bordering these counties.
Defendant SIH is a nonprofit corporation that owns a variety of acute-care hospitals which
provide both inpatient and outpatient medical services. Further, SIH owns various freestanding
outpatient surgical service providers.
Plaintiff alleges that the relevant product markets consist of two distinct sets, “the first set
encompassing the second.” The first set consists of “(a) general acute-care inpatient hospital
services, including pediatric services and neonatal care services (generally referred to as
“hospital services”), and (b) outpatient surgical services, where both (a) and (b) services may be
reimbursed by any payors, including commercial insurance, government payors (e.g., Medicare,
Medicaid) and self-pay.” (Doc. 58 p. 2, par. 1). The second set of relevant product markets are
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submarkets of the first set and consist of “(1) general acute-care inpatient hospital services,
including pediatric services and neonatal care services (generally referred to as “hospital
services”) reimbursed by commercial health insurers, and (2) outpatient surgical services
reimbursed by commercial health insurers.” Id.
Plaintiff alleges the relevant geographic markets are comprised of Williamson County,
Illinois, Jackson County, Illinois and the surrounding area. Id. (par. 3). In the relevant
geographic market, Plaintiff maintains SIH is a “must have” hospital system for health plans
because it is the largest hospital in the region and the only local provider of certain essential
services. Plaintiff alleges that within the relevant geographic area, SIH has a 77% market share
for inpatient surgical cases (Id., par 81 (h)) and a 76% market share of outpatient surgical cases.
Id. (p. 30 par. 82 (a)).
Defendant BCBSI is allegedly the largest health insurance company in Illinois and the
dominate health insurer in the relevant geographic area. Thus, BCBSI is the dominant provider
of health insurance covering inpatient and outpatient services. Plaintiff claims that it has
submitted multiple applications to BCBSI seeking acceptance as an in-network provider and that
BCBSI has denied their request each time. Plaintiff alleges BCBSI informed them that BCBSI
had an exclusive contract with SIH, which prohibited or precluded BCBSI from contracting with
competitors for in-network coverage in the area. Plaintiff further alleges that it, and others,
cannot remain competitive as long as this agreement with BCBSI and SIH exists. It is this
exclusive agreement that forms the foundation of Plaintiff’s claims.
Plaintiff claims that SIH willfully maintained and extended its monopoly power through
the use of exclusionary contracts. Particularly, Plaintiff alleges that BCBSI had a compelling
business need to include SIH in its network of inpatient service providers. Yet, in consideration
of discounts to BCBSI on inpatient services, SIH included exclusionary language in the
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agreements with commercial insurers. Plaintiff argues the agreement improperly and illegally
tied discounts for coverage of SIH’s inpatient hospital services with exclusive contracting for innetwork coverage of SIH’s outpatient services and illegally coerced BCBSI into entering the
agreement. This arrangement prohibits BCBSI from contracting for in-network coverage with
competing freestanding outpatient surgery centers in the region. As such, Plaintiff contends the
arrangement constitutes exclusive “dealing and tying” in violation of the Sherman Antitrust Act.
Plaintiff maintains that as a result of the agreement between SIH and BCBSI, SIH has
been able to retain monopoly power in the two relevant markets in the defined geographical area.
Plaintiff contends that it and others cannot effectively compete because SIH and BCBSI have
substantially reduced the number of patients who would otherwise use SIH’s competitors.
Plaintiff claims that patients have been required to pay more at SIH for services, compared to the
same procedure in a non-SIH owned facility. Thus, Plaintiff alleges that SIH’s contracts have
prevented the public from receiving competitive services from other competitors for the cheapest
costs.
In sum, Plaintiff maintains that SIH, via its exclusionary contracts with BCBSI, has
violated antitrust law through exclusive dealing, tying, and monopolization. Plaintiff alleges that
SIH’s exclusionary contracts with BCBSI violate antitrust law and have delayed and prevented
expansion by competitors in the relevant geographic area, have limited price competition, have
reduced quality competition in the area and have reduced healthcare options for patients in need
of outpatient surgery, all without a valid business justification.
Analysis
A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) allows for dismissal upon
“failure to state a claim upon which relief can be granted.” To state a claim, a pleading need only
contain “a short and plain statement of the claim showing that the pleader is entitled to relief.”
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Fed. R. Civ. P. 8(a)(2). Further, the court must review a complaint in the light most favorable to
the plaintiff, accept as true all well-pleaded facts alleged, and draw all possible inferences in the
plaintiff’s favor. Tamayo v. Blagojevich, 526 F. 3d 1074, 1081 (7th Cir. 2008). Detailed factual
allegations are not required, but the pleading must contain “sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 500 U.S. 544, 570 (2007)). A plaintiff can plead
himself out of court by pleading facts that show that he has no legal claim.” Atkins v. City of
Chicago, 631 F.3d 823, 832 (7th Cir. 2011). Finally, the court must not apply a heightened
pleading standard in antitrust cases. Endsley v. City of Chicago, 230 F.3d 276, 282 (7th Cir.
2000).
BCBSI’s Motion to Dismiss (Doc. 59)
BCBSI contends Plaintiff’s Second Amended Complaint must be dismissed pursuant to
Fed. R. Civ. P. 12(b)(6). Specifically, BCBSI asserts that as a matter of law, MHC cannot assert
exclusive dealing claims against it as a purchaser of the services at issue. BCBSI further asserts
that MHC has failed to plead the essential elements of an exclusive dealing claim against it.
BCBSI argues dismissal is appropriate for following reasons: (1) BCBSI cannot be held liable
under Section 1 of the Sherman Act or Section 3(4) of the Illinois Antitrust Act because BCBSI
is a “purchaser”; (2) MHC’s claims fail to the extent they allege the same relevant product
markets that this Court rejected when it dismissed MHC’s First Amended Complaint for failure
to plead a plausible relevant product market; (3) MHC’s relevant geographic market definition is
too vague to permit an assessment of substantial foreclosure; and (4) MHC only makes
conclusory allegations of substantial foreclosure and fails to allege facts sufficient to support a
plausible claim of substantial foreclosure from the market for outpatient surgery services. The
Court only considers BCBSI’s first argument for the following reason.
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Section 1 of the Sherman Act provides that “[e]very contract, combination in the form of
trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or
with foreign nations, is declared to be illegal.” 15 U.S.C. § 1. To plead a violation of § 1 of the
Sherman Act, a plaintiff must plead: “(1) a contract, combination, or conspiracy; (2) a resultant
unreasonable restraint of trade in [a] relevant market; and (3) an accompanying injury.” Agnew
v. Nat’l Collegiate Athletic Ass’n, 683 F.3d 328, 335 (7th Cir. 2012). Because “[t]he purpose of
the Sherman Act is to protect consumers from injury that results from diminished competition,”
“the plaintiff must allege, not only an injury to himself, but an injury to the market as well.”
Agnew, 683 F.3d at 334-35.
MHC brings its exclusive dealing claims against BCBSI under Section 1 of the Sherman
Act and Section 3(4) of the Illinois Antitrust Act. (Doc. 58 Counts II and IV). However, if an
exclusive dealing claim “does not fall within the broader prescription of [Section] 3 of the
Clayton Act, it follows that it is not forbidden by those of [Section 1].” Tampa Elec. Co. v.
Nashville Coal Co., 365 U.S. 320, 335 (1961). Further, Illinois courts—when interpreting claims
under the Illinois Antitrust Act—are tasked with looking to federal courts’ construction of
antitrust laws that are substantially similar to those of Illinois. State of Ill., ex rel. Burris v.
Panhandle E. Pipe Line Co., 935 F.2d 1469, 1479-80 (7th Cir. 1991).
Courts have held that Section 3 of the Clayton Act defines liability in terms of a person
who makes a sale or contracts for sale, but does not provide for liability of the buyer. McGuire v.
Columbia Broad Sys., Inc., 399 F.2d 902, 906 (9th Cir. 1968); see Car Carriers, Inc. v. Ford
Motor Co., 745 F.2d 1101, 1110 (7th Cir. 1984), cert. denied, 470 U.S. 1054 (1985) (finding a
buyer liable under Section 1 of the Sherman Act “‘would undermine the principles of
competition the antitrust laws were designed to secure’”)(citing Dunn& Mavis, Inc. v. Nu-Car
Driveway, Inc., 691 F. 2d 241, 244 (6th Cir. 1982)).
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More on point is Genetic Sys. Corp. v. Abbott Labs., 691 F. Supp. 407 (D.D.C. 1988).
In that case, defendant Red Cross entered into a two-year exclusive agreement with defendant
Abbott Laboratories to supply equipment used to screen donated blood for transmissible
diseases, including hepatitis, and the HTLV antibody (AIDS). Id. at 410. Plaintiff Genetic
Systems claimed that this agreement effectively froze the plaintiff out of the market for blood
test equipment and jeopardized the company’s ability to survive. Id. at 412. Plaintiff filed suit
against Red Cross and Abbott alleging violations of Section 1 of the Sherman Act and Section 3
of the Clayton Act. Id. at 413. The district court dismissed the exclusive dealing claims against
the buyer Red Cross. Id. at 414. Specifically, the district court derived “from the plain language
of the statute, the relevant legislative history, and the observations of commentators” that Section
3 of the Clayton Act does not impose any liability on purchasers or buyers for exclusive dealing
contracts. Id. at 414 (citing McGuire v. Columbia Broadcasting Sys., Inc., 399 F. 2d 902 (9th Cir.
1968); see also J. von Kalinowski, Antitrust Laws and Trade Regulation, Section 12.02(3)
(1988). Further, the district court determined that this conclusion to not impose liability on the
buyer “is consistent with the fundamental antitrust concept that the alleged sins of the sellers
should not be visited on buyers because of the risk of chilling competition.” Id. at 415. Plaintiff
nevertheless alleged that the defendant acted as more than solely a purchaser, and entered into
“active collaboration” in “knowingly join[ing]” in the exclusionary contract. Id. However, the
district court determined that the plaintiff’s attempt to fit the “square conduct” of the defendant
into the “round hole of Section 3 [of the Clayton Act] cannot succeed.” Id.
Here we find nearly identical facts to those addressed by the Court in Genetic Sys. BCBSI
contends that exclusive dealing claims under Section 3 of the Clayton Act—and thus section 1 of
the Sherman Act and Section 3(4) of the Illinois Antitrust Act—may not be brought against the
buyer of the at-issue service (Doc. 60). MHC admits that BCBSI is the buyer/purchaser of these
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outpatient surgical services. Further, MHC does not refute that Section 3 does not impose
liability to buyers or purchasers (Doc. 72, p. 4). Instead, Plaintiff argues that “[i]n the exceptional
case where the buyer has actively (and aggressively) promoted the exclusive arrangement, in
close collaboration with the seller, the buyer has ‘partaken of and promoted the sins’ and should,
therefore, be liable under Section 1.” Id. (p. 5).
MHC fails, as did the plaintiff in Genetic Sys., to direct the Court’s attention to any case
that has construed Section 3 of the Clayton Act to cover “the sins of the purchaser or buyer”.
Instead, like the plaintiff in Genetic Sys., MHC urges the Court to extend liability because
BCBSI has “actively (and aggressively) promoted the exclusive arrangement.” However, the
Court cannot simply ignore the above-referenced case law.
This Court finds that MHC’s claims against BCBSI for violations of Section 1 of the
Sherman Act—as well as Section 3(4) of the Illinois Antitrust Act—cannot stand. Thus,
BCBSI’s Motion to Dismiss Counts II and IV of Plaintiff’s Second Amended Complaint is
GRANTED with prejudice. Given that all counts against BCBSI are dismissed, BCBSI’s Motion
to Strike (Doc. 61) is DENIED as MOOT.
SIH’s Motion to Dismiss
MHC alleges three distinct causes of action against SIH in violation of federal and state
antitrust law: Count I – exclusive dealing claims against SIH in violation of Section 1 of the
Sherman Act (15 U.S.C. § 1); Count III – exclusive dealing against SIH in violation of the
Illinois Antitrust Act (740 ILCS 10/3); Count V – tying against SIH in violation of Section 1of
the Sherman Act (15 U.S.C. § 1); Count VI – tying against SIH in violation of the Illinois
Antitrust Act (740 ILCS 10/3); and Count VII – monopolization against SIH in violation of
Section 2 of the Sherman Act (15 U.S.C. § 2).

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SIH moves to dismiss MHC’s Second Amended Complaint pursuant to Fed. R. Civ. P.
12(b)(6). Specifically, SIH contends that (1) MHC’s tying claim under § 1 One of the Sherman
Act and the Illinois Antitrust Act fails to allege facts supporting Plaintiff’s claims that SIH
forced or coerced BCBSI to contract with SIH for outpatient surgery services as a condition of
contract for inpatient hospital services; (2) MHC’s exclusive dealing claim under the § 1 of the
Sherman Act and the Illinois Antitrust Act fails to allege that the exclusive contract between SIH
and BCBSI foreclosed MHC from the alleged market for the sale of inpatient and outpatient
surgery services to all potential buyers, including commercial payors, government payors, and
patients who self-pay; and (3) MHC fails to allege that SIH acquired or maintained its allegedly
dominant position in the alleged relevant markets through anticompetitive conduct. (Doc. 62, p.
2).
In cases involving exclusive dealing, courts have determined that an exclusive-dealing
arrangement does not violate antitrust laws unless the court believes that performance of the
contract will preclude competition in a “substantial share of the line of commerce affected.”
Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327 (1961). In Tampa Elec. Co. v.
Nashville Coal Co., the Supreme Court set forth factors to consider in order to determine what
constitutes a “substantial share” including: (1) “the line of commerce involved must be
determined, where it is in controversy, on the basis of the facts peculiar to the case”; (2) “the area
of effective competition in the known line of commerce must be charted by careful selection of
the market area in which the seller operates, and to which the purchaser can practicably turn for
supplies”; and (3) the competition foreclosed by the contract must be found to constitute a
substantial share of the relevant market.” Id. at 327-28. Foreclosure exists when there is a
significant limitation on other’s ability to enter or remain in the market. Id. In order to further
determine substantiality, courts have weighed the probable effect the contract will have on the
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relevant area of effective competition, taking into account the relative strength of the parties, the
proportionate volume of commerce in relation to the total volume of commerce in the relevant
market area, and the immediate and future effects which pre-emption of the share of the market
might have on effective competition. Id. at 329. However, a mere showing that the alleged
contract itself involves a substantial amount of dollars is “ordinarily of little consequence.” Id.
SIH does not dispute the existence of the first two factors set forth in Tampa Elec. Co.
Instead, it argues that MHC fails to allege an exclusive dealing claim because it did not properly
plead substantial foreclosure from the relevant market. (Doc. 63, p. 7). In particular, SIH
contends that MHC only alleges foreclosure from 30 percent of patients in the relevant
geographic market, leaving 70 percent for access by MHC. Id. (p. 8). Further, SIH argues that
this 30 percent is an overstatement, and even if true, is not substantial enough to constitute
foreclosure according to case law. See id. MHC counters that it is not the percentage of the
patients that is at issue, but the revenue generated. (Doc. 71, p. 5). MHC argues that it is
foreclosed from the higher reimbursement rates of commercial insurers and cannot make up the
difference with the “non-negotiable, typically at or below cost” reimbursements from Medicare,
Medicaid and TRICARE. Id. (p. 6).
This Court has previously held that a vertical exclusive dealing arrangement, like the one
alleged in the current case, is not presumed illegal. (Doc. 57). Thus, the Court determined that
the analysis is subject to the Rule of Reason framework. Id. Under Rule of Reason analysis (the
standard framework):
The plaintiff carries the burden of showing that an agreement or contract has an
anticompetitive effect on a given market within a given geographic area. As a
threshold matter, a plaintiff must show that the defendant has market power—that
is, the ability to raise prices significantly without going out of business—without
which the defendant could not cause anticompetitive effects on market pricing. If
the plaintiff meets his burden, the defendant can show that the restraint in
question actually has a procompetitive effect on balance, while the plaintiff can
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dispute this claim or show that the restraint in question is not reasonably
necessary to achieve the procompetitive objective.
Agnew, 683 F.3d at 335-36 .
Taking this into consideration, MHC has sufficiently pled its claims against SIH. MHC
has alleged substantial foreclosure in detail and provided substantiation of those contentions.
(Doc. 58, p. 29-31, par.’s 81-82). Specifically, MHC has alleged that it has been foreclosed
access to payments for both inpatient and outpatient surgical services from all payors (Id., par. 81
(b)(72.3%) & 82 (e)(77.2%)). Further, MHC alleges the market power that SIH wields in the
relevant geographic area is substantial. The Second Amended Complaint states that within the
relevant geographic area, SIH has a 77% market share for inpatient surgical cases (Id., par 81
(h)) and a 76% market share of outpatient surgical cases. Id. (p. 30 par. 82 (a)). The complaint
further alleges that, as a result of SIH’s market power in the relevant product, and geographic
market, competitors have been unable to expand. Id. (p. 26, par. 76-79). These amounts are well
above the 30-40 percent range. As a result, SIH's market power would seem to be a “substantial
share” or “significant fraction” of the relevant market. SIH's substantial share of the market
power has prevented entry or maintenance in the in-network surgical services market of BCBSI.
Accordingly, SIH’s Motion to Dismiss Count I and III of MHC’s Second Amended Complaint is
DENIED.
SIH next argues MHC’s claims of an illegal tying arrangement alleged in Counts II and
IV must be dismissed. An essential characteristic of an invalid tying claim is the “seller’s
exploitation of its control over the tying product to force the buyer into the purchase of a tied
product that the buyer either did not want at all or might have preferred to purchase elsewhere on
different terms.” Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 12 (1984), abrogated on
other grounds by Ill. Tool Works, Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006). When there is
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“forcing” present, competition on the merits in the market for the tied item is improperly
restrained, and there is a violation of the Sherman Act. Id. The Supreme Court has condemned
tying arrangements where the seller has some “market power” to improperly force a purchaser to
do something that he normally would not have done in a competitive market. Id. at 13. In order
to establish the per se illegality of a tying arrangement, a plaintiff must demonstrate that (1) the
tying arrangement is between two distinct products or services, (2) the defendant has sufficient
economic power in the tying market to appreciably restrain free competition in the market for the
tied product, and (3) a not insubstantial amount of interstate commerce is affected.” Reifert v.
South Cent. Wisconsin MLS Corp., 450 F.3d 312, 316 (7th Cir. 2006).
MHC alleges that SIH has monopoly power in the inpatient surgical services market.
MHC alleged that SIH maintained a 75% share of the market for acute care services and used
this power to coerce BCBSI to agree to not provide in-network insurance coverage for outpatient
surgical services provided by MHC. (Doc. 58, p. 58-59, par. 157 & par. 158). According to
MHC, SIH was able to achieve this agreement by granting BCBSI access to discounted rates
from SIH for services in exchange for an “agreement to exclude.” Id. Lastly, MHC argues that
BCBSI would not have agreed to this arrangement had SIH not been a “must have” inpatient
surgical services hospital. Id. (p. 59, par. 161). SIH maintains that despite the use of “coercion”
many times throughout the complaint, BCBSI and SIH negotiated the rates and arrangements of
the contract. (Doc. 63, p. 10 (citing Doc. 58, par. 20)). According to the SIH, this negotiation
refutes MHC’s claims of “coercion.” Id.
MHC has properly alleged an illegal tying arrangement between SIH and BCBSI in
violation of the Sherman Act. MHC asserts that because SIH has significant market power in the
in- and out- patient services market (72.3% and 76% respectively), MHC agreed to exclude outof-network outpatient surgical service providers. MHC further asserts that BCBSI agreed to its
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arrangement with SIH because SIH is a “must have” surgical services provider hospital.
According to MHC, SIH coerced BCBSI, and it was not the exercise reasonable and independent
business judgment that led BCBSI to agree to the arrangement. Accordingly, SIH’s Motion to
Dismiss Count V and Count VI is DENIED.
Lastly, SIH seeks to dismiss Count VII of Plaintiff’s Second Amended Complaint,
arguing MHC fails to plead that SIH acquired or maintained an alleged monopolistic position
unlawfully. Section 2 of the Sherman Act, 15 U.S.C. § 2, makes it unlawful for a firm to
“monopolize.” To prove monopolization under § 2, a plaintiff must allege: “(1) the possession of
monopoly power in the relevant market and (2) the willful . . . maintenance of that power as
distinguished from growth or development as a consequence of a superior product, business
acumen, or historical accident.” United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966).
The Supreme Court has defined monopoly power as “the power to control prices or
exclude competition.” United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391
(1956). A plaintiff may establish monopoly power by evidence that a firm has profitably raised
prices above the competitive level. United States v. Microsoft Corp., 253 F.3d 34, 51 (D.C. Cir.
2001). In the absence of direct proof, market power may be derived from circumstantial
evidence, including “a firm’s possession of a dominant share of a relevant market that is
protected by entry barriers.” Id. Without countervailing evidence of the possibility of
competition from new entrants, evidence of a dominant market share is sufficient to show
monopoly power. Id. However, possessing monopoly power does not by itself constitute
monopolization.. Grinnell Corp., 384 U.S. at 570-71. Rather § 2 of the Sherman Act makes it
unlawful to maintain monopoly power through exclusionary conduct. Verizon Commc’ns, Inc. v.
Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004).

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The test for exclusionary conduct is set forth in United States. v. Microsoft Corp. First, a
plaintiff must prove that a monopolist’s conduct has had an “anticompetitive effect.” Microsoft,
253 F.3d at 58. Second, if a plaintiff is successful in showing an anticompetitive effect, the
alleged monopolist may proffer a non-pretextual “procompetitive justification” for its conduct.
Id. at 59. Lastly, if the alleged monopolist’s proffering of procompetitive justification is
unrebutted, the plaintiff “must demonstrate that the anticompetitive harm of the conduct
outweighs the procompetitive benefit.” Id.
Here, MHC has pled sufficient facts to infer market power due to SIH’s charging of
“supracompetitve prices” for the sustained period, without consequence. See Doc. 58, p. 42,
par.’s 116-17. Additionally, market-share data, provided by MHC, allows an inference of SIH’s
monopoly power. See id. (p. 29-30).
MHC also alleges that SIH has willfully maintained its monopoly through its actions of
exclusive dealing and tying arrangements in violation of § 2. (Doc. 58, p. 66 par. 178). In order
to show an anticompetitive effect, MHC alleges significant foreclosure from the most profitable
health-insurance contracts and thus, foreclosure from the ability to compete adequately in the
market. See id. (par. 107). MHC maintains that as a result of this foreclosure, it and others cannot
remain viable and competitive with SIH. Id. (par. 179) and that this arrangement has prevented
significant competition and has harmed consumers in the relevant geographic market. See id.
(par. 179, 180); see also Microsoft Corp., 253 F.3d at 58 (“[The anticompetitive effect] must
harm the competitive process and thereby harm consumers.”). MHC claims consumers have
suffered direct harm through increased prices for patients and employers, suppressing price
competition, decreasing the number of options available, and decreasing the overall quality of
care. Id. These alleged facts allow the inference that the exclusive dealing and tying

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arrangements had an anticompetitive effect on the relevant markets. Accordingly, SIH’s Motion
to Dismiss Count VII of MHC’s Second Amended Complaint is DENIED.
Conclusion
Defendant BCBSI’s Motion to Dismiss Counts II and IV of Plaintiff’s Second Amended
Complaint (Doc. 59) is GRANTED with prejudice. The Court DENIES Defendant BCBSI’s
Motion to Strike (Doc. 61) as MOOT.
Defendant SIH’s Motion to Dismiss Counts I, III, V, VI, and VII of Plaintiff’s Second
Amended Complaint (Doc. 62) is DENIED in its entirety.
IT IS SO ORDERED.
DATED: May 29, 2015
s/ Staci M. Yandle
STACI M. YANDLE
DISTRICT JUDGE

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