The United States District Court for the District of New Jersey dismissed antitrust claims by a charity hospital that alleged two medical centers colluded to squeeze the hospital out of the market for cardiac services. Deborah Heart and Lung Center, a charity hospital located in Browns Mills, New Jersey, asserted that The Cardiology Group, P.A. (CGPA) and Virtua Memorial Hospital Burlington County attempted to foreclose Deborah from the market by shunting cardiac patients to Penn Presbyterian Medical Center in Philadelphia in violation of Section 1 of the Sherman Act.
Prior to the lawsuit, CGPA typically referred its patients in need of invasive diagnostic catheterization or advanced cardiac interventional procedures to Deborah. Because Virtua could not perform such cardiac services without the proper state license, any CGPA patient currently at Virtua would also be transferred to Deborah or a competing, licensed hospital.
In 2006, however, the relationship between the groups deteriorated when Deborah terminated the privileges of a physician who had recently moved from Deborah to CGPA. According to Deborah, Virtua attempted to recruit the doctor in order to build up and license its own cardiac surgery institute. Deborah contends that Virtua also conspired with CGPA to force Deborah into either a merger or a complete shutdown by channeling all cardiac services to Virtua once the state cardiac surgery licensed was obtained.
After the suspension of the doctor’s privileges, CGPA began to redirect its referrals to Penn Presbyterian instead of Deborah, and CGPA and Penn Presbyterian entered into an affiliation agreement to strengthen the relationship. Deborah alleged that Virtua was an unnamed party to the agreement, which aimed to cut Deborah out of the market altogether.
Deborah brought a Section 1 antitrust claim in federal court but failed to convince the court that the defendants’ action produced anticompetitive harm to the relevant market. Anticompetitive effects can be demonstrated in two ways: (1) through direct evidence of actual anticompetitive effects; or (2) through proof of the defendants’ market power, which acts as a proxy for anticompetitive effect.
Deborah attempted to demonstrate actual anticompetitive effects but made a key misstep: rather than demonstrating harm to the entire market, as required by the relevant case law, Deborah produced evidence of harm to only one hospital – itself – and its loss of patients from CGPA, whose market share in the relevant cardiac services market is about8 percent. Deborah claimed these patients did not experience Deborah’s “superior patient satisfaction scores,” fast response times, or lower out-of-pocket costs. Fatally to its claim, however, Deborah provided no evidence that at least a majority of the remaining 92 percent of the market experienced decreased patient satisfaction, decreased consumer choice, increased costs, or any indicia of anticompetitive harm. A Section 1 claim based on actual anticompetitive effects depends on market-wide effects, not harm to a single competitor. The court thus dismissed the case.
The case is Deborah Heart and Lung Center v. Virtua Health Inc., et al., Civil Action No. 1:11-cv-01290 (D.N.J. Mar. 24, 2015).
