Premier Health Partners wins antitrust appeal in Sixth Circuit, affirming dismissal of suit targeting managed care contracts with insurers

Client(s) Premier Health Partners

Jones Day client Premier Health Partners obtained a win in an important antitrust appeal before the U.S. Court of Appeals for the Sixth Circuit. The court affirmed the district court's dismissal with prejudice of a lawsuit filed by The Medical Center at Elizabeth Place ("MCEP"), which argued that the rate-for-volume clauses Premier used in its managed care contracts with insurers were inherently, or per se, illegal. The Sixth Circuit's opinion is one of the first to evaluate how the antitrust laws apply to the conduct of a legitimate joint venture in its relationships with suppliers and customers following the Supreme Court's holding in Texaco, Inc. v. Dagher, 547 U.S. 1 (2006), that the "core activity" of a legitimate joint venture is not subject to antitrust's per se rule.

Premier is a joint operating company that manages and operates four tightly-integrated hospitals. It is the largest hospital system in Dayton, Ohio, accounting for approximately 50 percent of hospital admissions. Premier, like most hospitals, included clauses in its managed care contracts with insurers that set rates based on the size of the network. In 2012, MCEP, which is a small, physician owned hospital, filed a complaint alleging that Premier used those clauses to block insurers from contracting with MCEP. MCEP also alleged that Premier directed steps against physicians who invested in or were affiliated with MCEP. These steps included declining to refer patients to those physicians and exercising covenants not to compete in medical center lease agreements with those physicians to terminate those leases.

MCEP's claims were dismissed by the district court in a 2014 summary judgment, but the Sixth Circuit reversed that decision in 2016. The district court then dismissed Premier's other summary judgment motions and set a trial date in August 2017. Four days before the trial was set to begin, the court dismissed the litigation with prejudice, finding that contracting practices are a core activity of joint ventures, and that therefore Premier's contracting policies and its relationships with physicians could not be inherently illegal. MCEP again appealed.

The Sixth Circuit affirmed the dismissal. It held that Premier's insurer and physician policies, while not "core activities" for purposes of Dagher, were not inherently illegal because they were reasonably ancillary to the legitimate joint venture. A policy is "reasonably ancillary," the court held, if there is "a plausible way in which the challenged restraints contribute to the procompetitive efficiencies of the joint venture." Separately, the court affirmed the district court's conclusion that MCEP had improperly attempted to raise an untimely new claim that was not included in the complaint. The U.S. Supreme Court denied MCEP’s petition for certiorari.

Med. Center at Elizabeth Pl. v. Atrium Health System, et al., Nos. 17-3863, 14-4166 (6th Cir.); No: 19-322 (U.S.); Medical Center at Elizabeth Place LLC v. MedAmerica Health Systems Corporation, et al., No. 3-12-cv-00026 (S.D. Ohio);