Illinois ASC’s Antitrust Claims Against Hospital Survive Summary Judgment

On December 30, 2009, Judge Michael M. Mihm of the United States District Court for the Central District of Illinois denied summary judgment with respect to Peoria Day Surgery Center’s (PDSC) claims alleging that OSF Healthcare System (OSF), d/b/a Saint Francis Medical Center (SFMC), violated the Sherman Act and tortiously interfered with the prospective economic advantages between PDSC and Midwest Orthopedic Center (MOC), which was considering entering into a joint venture with PDSC.  Accordingly, Judge Mihm’s decision permits PDSC to pursue these claims against SFMC at trial.1 

Judge Mihm’s December 30th decision also granted summary judgment with respect to PDSC’s claims alleging SFMC tortiously interfered with the contractual relationships and prospective economic advantages between PDSC and Caterpillar, and PDSC and Humana, dismissing these claims.2

PDSC’s second amended complaint, which was filed on April 7, 2009,  alleged that SFMC engaged in illegal tying by entering into an exclusive contract with Caterpillar in 2001 under which SFMC would be reimbursed at an in-network rate for the provision of inpatient and outpatient ambulatory surgery services to members of Caterpillar’s self-insured health policy.3  Under the agreement, Caterpillar would reimburse other ambulatory surgery centers (ASCs), including PDSC, at an out-of-network level of 70%, requiring members to pay the remaining 30%.4

In addition, PDSC claimed that SFMC violated the Illinois Antitrust Act by tortiously interfering with: (1) the contractual relationships and prospective economic advantages between PDSC and Caterpillar; (2) PDSC’s prospective economic advantages with MOC; and, (3) the contractual relationships and prospective economic advantages between PDSC and Humana.5

In response to PDSC’s complaint, SFMC filed a motion for summary judgment, claiming that there exist no genuine issues of material fact, and therefore, SFMC is entitled to judgment as a matter of law.6

Judge Mihm’s decision is the latest development in litigation between PDSC and SFMC, which first commenced in September 2006.7 However, similar antitrust suits have been brought by physician-owned facilities against hospitals in Kansas, Texas, and Arkansas.8 Litigation in these cases centers on alleged attempts by hospitals to restrict competition from physician-owned facilities.  These practices are receiving increased attention because such anticompetitive actions by hospitals may result in higher costs and lower quality for patients.9  Judge Mihm’s December 30, 2009 decision to allow PDSC to pursue its antitrust claims against SFMC, along with increased antitrust litigation against hospitals nationwide, may cause some hospitals to reexamine potential anticompetitive behaviors and take steps to ensure their facilities comply with both state and federal antitrust laws.10

1
Peoria Day Surgery Center v. OSF Healthcare System, d/b/a Saint Francis Medical Center, No. 06-1236, (C.D. Ill. Dec. 30, 2009) (order granting in part and denying in part motion for summary judgment).

2
Peoria Day Surgery Center v. OSF Healthcare System, d/b/a Saint Francis Medical Center, No. 06-1236, (C.D. Ill. Dec. 30, 2009) (order granting in part and denying in part motion for summary judgment).

3
Peoria Day Surgery Center v. OSF Healthcare System, d/b/a Saint Francis Medical Center, No. 06-1236, (C.D. Ill. Dec. 30, 2009) (order granting in part and denying in part motion for summary judgment).

4
Peoria Day Surgery Center v. OSF Healthcare System, d/b/a Saint Francis Medical Center, No. 06-1236, (C.D. Ill. Dec. 30, 2009) (order granting in part and denying in part motion for summary judgment).

5
Peoria Day Surgery Center v. OSF Healthcare System, d/b/a Saint Francis Medical Center, No. 06-1236, (C.D. Ill. Dec. 30, 2009) (order granting in part and denying in part motion for summary judgment).

6
Peoria Day Surgery Center v. OSF Healthcare System, d/b/a Saint Francis Medical Center, No. 06-1236, (C.D. Ill. Dec. 30, 2009) (order granting in part and denying in part motion for summary judgment).

7
“The Appropriate Role of the Internal Revenue Service with Respect to Tax-Exempt Organization Good Governance Issues” By Bonnie S. Brier and Ana Thompson, Advisory Committee on Tax Exempt and Government Entities, June 11, 2008, p. 1, 6.

8
“Surgery Center Wins Right to Pursue Antitrust Claim” By Amy Lynn Sorrel, American Medical News, February 1, 2010, http://www.ama-assn.org/amednews/2010/02/01/gvsb0201.htm (Accessed 2/2/2010). 

9
“Surgery Center Wins Right to Pursue Antitrust Claim” By Amy Lynn Sorrel, American Medical News, February 1, 2010, http://www.ama-assn.org/amednews/2010/02/01/gvsb0201.htm (Accessed 2/2/2010).

10
“Surgery Center Wins Right to Pursue Antitrust Claim” By Amy Lynn Sorrel, American Medical News, February 1, 2010, http://www.ama-assn.org/amednews/2010/02/01/gvsb0201.htm (Accessed 2/2/2010).

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Todd A. Zigrang

Todd A. Zigrang, MBA, MHA, CVA, ASA, FACHE, ABV, is the President of Health Capital Consultants (HCC), where he focuses on the areas of valuation and financial analysis for hospitals, physician practices, and other healthcare enterprises. Mr. Zigrang has over 28 years of experience providing valuation, financial, transaction and strategic advisory services nationwide in over 2,000 transactions and joint ventures. Mr. Zigrang is also considered an expert in the field of healthcare compensation for physicians, executives and other professionals.

Mr. Zigrang is the co-author of "The Adviser’s Guide to Healthcare – 2nd Edition" [2015 – AICPA], numerous chapters in legal treatises and anthologies, and peer-reviewed and industry articles such as: The Accountant’s Business Manual (AICPA); Valuing Professional Practices and Licenses (Aspen Publishers); Valuation Strategies; Business Appraisal Practice; and, NACVA QuickRead. In addition to his contributions as an author, Mr. Zigrang has served as faculty before professional and trade associations such as the American Society of Appraisers (ASA); the National Association of Certified Valuators and Analysts (NACVA); Physician Hospitals of America (PHA); the Institute of Business Appraisers (IBA); the Healthcare Financial Management Association (HFMA); and, the CPA Leadership Institute.

Mr. Zigrang holds a Master of Science in Health Administration (MHA) and a Master of Business Administration (MBA) from the University of Missouri at Columbia. He is a Fellow of the American College of Healthcare Executives (FACHE) and holds the Certified Valuation Analyst (CVA) designation from NACVA. Mr. Zigrang also holds the Accredited Senior Appraiser (ASA) designation from the American Society of Appraisers, where he has served as President of the St. Louis Chapter. He is also a member of the America Association of Provider Compensation Professionals (AAPCP), AHLA, AICPA, NACVA, NSCHBC, and, the Society of OMS Administrators (SOMSA).

Jessica L. Bailey-Wheaton

Jessica L. Bailey-Wheaton, Esq., is Senior Vice President and General Counsel of HCC. Her work focuses on the areas of Certificate of Need (CON) preparation and consulting, as well as project management and consulting services related to the impact of both federal and state regulations on healthcare transactions. In that role, Ms. Bailey-Wheaton provides research services necessary to support certified opinions of value related to the Fair Market Value and Commercial Reasonableness of transactions related to healthcare enterprises, assets, and services.

She serves on the editorial board of NACVA’s The Value Examiner and is the current Co-Chair of the American Bar Association (ABA) Health Law Section’s Membership Committee and the Young Lawyer Division (YLD) Liaison to the ABA Health Law Section Governing Council. She has previously presented before the ABA, American Health Law Association (AHLA). NACVA, the National Society of Certified Healthcare Business Consultants (NSCHBC), and the American College of Surgeons.

Ms. Bailey-Wheaton is a member of the Missouri and Illinois Bars and holds a J.D., with a concentration in Health Law, from Saint Louis University School of Law.

Janvi R. Shah

Janvi R. Shah, MBA, MSF, CVA, serves as Senior Financial Analyst of HCC. Mrs. Shah holds a M.S. in Finance from Washington University Saint Louis and the CVA designation from NACVA. She develops fair market value and commercial reasonableness opinions related to healthcare enterprises, assets, and services. In addition she prepares, reviews and analyzes forecasted and pro forma financial statements to determine the most probable future net economic benefit related to healthcare enterprises, assets, and services and applies utilization demand and reimbursement trends to project professional medical revenue streams and ancillary services and technical component (ASTC) revenue streams.

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