Agreements between hospitals and health insurers are coming under increasing scrutiny, especially by competing hospitals. In one such recent case in Georgia, Palmyra Park Hospital brought suit against its competitor, Phoebe Putney Memorial Hospital. Palmyra claimed that Phoebe Putney leveraged its monopoly in certain specialties to force health insurers to exclude Palmyra as an in-network provider. In short, Palmyra alleged, Phoebe Putney told health insurers that if the health insurers included Palmyra in their provider networks, Phoebe Putney would demand significantly higher reimbursement rates for three services — obstetrics, neonatology and cardiac catheterization services — which it effectively monopolized because of state certificates of need. Limited to out-of-network status, Palmyra claimed it lost significant patient volume and corresponding revenue.

The U.S. district court dismissed the case, holding that Palmyra was not “an efficient enforcer of the antitrust laws” and, therefore, did not have standing to make an antitrust claim.

The 11th Circuit Court of Appeals disagreed, keeping the case alive and sending it back to the district court for further proceedings. In its decision, the court of appeals succinctly laid out the incentive for Phoebe Putney to undertake such conduct, and for health insurers to acquiesce in it. The case serves as a reminder that many agreements in the healthcare field are fraught with antitrust peril, even if they seem to meet all of the other complex health care regulatory requirements.

A member of the Taft healthcare or antitrust teams can advise clients of the antitrust risk in such agreements or whether they may have a remedy for anticompetitive agreements reached by their competitors.