Insights

PPO May Exclude Providers if Existing network Already Adequately Serves a Geographic Area

A California state court held that a PPO may exclude providers from its network if the PPO's existing providers already adequately serve a geographic area. The plaintiff in Lori Rubinstein Physical Therapy v. PTPN filed suit against PTPN, a network of independent rehabilitation practitioners, and Blue Cross of California, alleging that PTPN's PPO arrangement with Blue Cross violated California's Cartwright Act and was unfair competition under Section 17200 of California's Business and Professions Code. The PPO arrangement excluded new physical therapists from the network if they operated within a specified radius of an existing member. Although PTPN offers non-members a place on a waiting list, the average time on the list is five years, with some therapists on the list waiting for as long as twelve years.

The court first held that the allegations did not support a finding that the Cartwright Act was violated. According to the court, under Section 1373.9(c) of California's Health and Safety Code, Blue Cross is not required to give consideration to affiliation with providers who propose to serve a geographic area served adequately by its existing network. Furthermore, the complaint failed to adequately allege a geographic area which was not adequately served, but merely identified California as the relevant geographic market.

The plaintiffs also failed to allege an antitrust injury. Observing that the inherent nature of a PPO requires that "there has to be some criteria that PPOs may lawfully utilize to exclude competitors," the court noted that the geographic limitation "has appeal in that respect."

A copy of the opinion can be found at this link.

For additional information about this Antitrust Update, please contact Toby G. Singer, leader of the Health Care Antitrust Practice.

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