First Published in Antitrust News & Notes, January 2010
By Dionne C. Lomax and Robert P. Boxie, III
The recent decision from the Tenth Circuit Court of Appeals in Four Corners Nephrology Assocs., P.C. v. Mercy Medical Center of Durango1 extends the reasoning of two Supreme Court cases — Pacific Bell2 and
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Trinko 3 — to the healthcare antitrust context. In Four Corners, the Tenth Circuit held that a hospital has no antitrust duty to deal or share its facilities with a competing physician, and such exclusion is not deemed a violation of the antitrust laws.
Background: Four Corners Nephrology Assocs., P.C. v. Mercy Medical Center of Durango
Plaintiff, Dr. Mark Bevan, a successful nephrologist in Farmington, New Mexico, brought claims under Section 2 of the Sherman Act, 15 U.S.C. § 2, and the Colorado Antitrust Act, alleging that Mercy Medical Center’s (Mercy) decision to exclude him and other nephrologists from admitting patients to the hospital amounted to the unlawful monopolization, or attempted monopolization, of the market for nephrology physician services in the Durango, Colorado, area.4 Defendant Mercy, after having invested a considerable amount of money to ensure the success of its nephrology practice, denied that its decision to deal exclusively with its in-house nephrologist and refusal to deal with Dr. Bevan constituted anticompetitive conduct in violation of Section 2 of the Sherman Act. The Tenth Circuit agreed.
In order to provide Colorado residents and the members of the Southern Ute Indian Tribe with greater access to kidney dialysis and other nephrology services in the Durango area, Mercy and the Tribe decided to join efforts and open a nephrology practice as the sole provider of nephrology services at the hospital. After having tried, unsuccessfully, for several years to woo Dr. Bevan and his associates to relocate to Durango, Mercy hired another doctor to fill that role. As a result, Dr. Bevan’s privileges to practice at Mercy were terminated, consistent with the hospital’s bylaws. He then applied to be part of the hospital’s active staff, but was denied. Mercy concluded that having additional doctors would reduce the number of patients for its newly-hired doctor and cause the practice to become unprofitable if other doctors had the same privileges.5
Tenth Circuit Court Affirms Supreme Court Precedent
In response to Mercy’s actions, Dr. Bevan filed a lawsuit alleging violations of federal and state antitrust law. The district court granted summary judgment to Mercy on the basis that it lacked monopoly power in the relevant market.6 On appeal, the Tenth Circuit affirmed, but on different grounds. In rejecting Dr. Bevan’s claims, the court stated that Mercy had no antitrust duty to share its facilities with Dr. Bevan at the expense of its own nephrology practice. Moreover, the court relied on recent Supreme Court precedent that a business (and even a putative monopolist) has “no antitrust duty to deal with its rivals,” and that businesses are generally “free to choose the parties with whom they deal, as well as the prices, terms, and conditions of that dealing.”7
Right to Refuse to Deal With a Competitor is Not Without its Limitations
However, the right to refuse to deal with a competitor is not without its limitations. The court recognized an exception to the general rule in Aspen Skiing Co. v. Aspen Highlands Skiing Corp.8 That case represented the “outer boundary” of Section 2 liability, in that a duty to deal may be imposed (cautiously) when a business has terminated a profitable relationship for an anticompetitive reason. Those facts were not present in Mercy’s actions: the hospital refused to deal with Dr. Bevan to avoid an unprofitable relationship in order to protect and maximize its chances of making money, rendering the exception in Aspen Skiing inapplicable.
Furthermore, the court also stated that granting Dr. Bevan access to Mercy’s facilities, and thus sharing in its “putative monopoly,” is not required by the antitrust laws, in that such an action would not advance competition, but rather advantage competitors. After rejecting Dr. Bevan’s antitrust claim, the court found that Dr. Bevan failed to show any legally cognizable antitrust injury that the court could remedy for a monopolization claim. The court, emphasizing that antitrust laws are not concerned with a producer’s loss, stated that the law “protect[s] consumers from suppliers rather than suppliers from each other,”9 and affirmed summary judgment in favor of Mercy.
For more information, please contact Vinson & Elkins lawyers Dionne C. Lomax or Robert P. Boxie, III. Visit our website to learn more about V&E's Antitrust practice. (Get a .pdf of this issue of Antitrust News & Notes, January 2010 e-newsletter here.)
1 582 F.3d 1216 (10th Cir. 2009).
2 Pac. Bell Tel. Co. v. Linkline Communications, Inc., 129 S.Ct. 1109 (2009).
3 Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004).
4 Both Durango and Farmington are located in the Four Corners area, which encompasses the common border between Colorado, Utah, New Mexico, and Arizona.
5 As an incentive to lure physicians to reside in Durango, the hospital and the Tribe agreed to underwrite up to $2.5 million in losses they expected the practice to incur.
6 Four Corners Nephrology Assocs., P.C. v. Mercy Med. Ctr., No. 05-CV-2084, 2008 Dist. LEXIS 41164 (D. Colo. May 22, 2008).
7 Pac. Bell Tel. Co., 129 S.Ct. at 1115, 1118; see also Trinko, 540 U.S. at 407 (Sherman Act does not restrict the right of a private business “freely to exercise his own independent discretion as to parties with whom he will deal”). See also Christy Sports, LLC v. Deer Valley Resort Co., Ltd., 555 F.3d 1188, 1194 (10th Cir. 2009) (reiterating that the “Supreme Court has recognized the economic value of allowing businesses to decide with whom they deal”).
8 Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985).
9 Stamatakis Indus., Inc. v. King, 965 F.3d 469, 471 (7th Cir. 1992).