Insights

Florida Hospital Seeks Divestiture of Rival's Assets

Wuesthoff Health System, a Florida health system operating two hospitals in Brevard County, filed suit against Health First, a competing health system, alleging Health First of engaging in a number of anticompetitive practices in violation of the antitrust laws. The plaintiffs claim, among other things, that Health First exploited the market power it gained from the merger between Holmes Regional Medical Center and Cape Canaveral Hospital to extract higher prices. Furthermore, according to the complaint, the merger was one more of form than substance, with the two hospitals retaining separate staff, failing to share profits and losses, and retaining independent liability for indebtedness. The lack of integration has resulted in inefficiencies, including some duplicate services. The plaintiffs also accuse Health First of acquiring physician groups for the sole purpose of ensuring that the patients of those physicians are admitted exclusively to Health First hospitals, alleging that Health First's acquisitions of physician groups otherwise made no economic sense. Lastly, the plaintiffs claim that Health First abused the regulatory process by filing meritless Certificate of Need applications.

This is the second time Wuesthoff has filed an antitrust suit against Health First. The first lawsuit, filed in 1998, was settled in 2000 when Wuesthoff agreed to withdraw its suit in exchange for Health First dropping its opposition to Wuesthoff's plans to build a hospital in Melbourne, Florida.

The current lawsuit alleges eight antitrust violations:

Unlawful merger in restraint of trade. Health First was created in mid-1995 through a merger between Holmes Regional Medical Center and Cape Canaveral Hospital. According to the plaintiffs, prior to the merger, managed health plans could choose to selectively contract between Wuesthoff's hospital and Cape Canaveral. After the merger, however, Health First required health plans to contract with all of its hospitals, which it was able to do because of Holmes Regional's status as a "must have" hospital.

Monopolization of the market for general acute care inpatient hospital services in southern Brevard County

Attempted monopolization of the market for general acute care inpatient hospital services in southern Brevard County

Illegal tying. According to the complaints, Health First engaged in unlawful tying by requiring managed health care plans to contract with both Holmes Regional and Cape Canaveral hospitals.

Conspiracy in restraint of trade. The plaintiffs allege that several independent physician practice groups agreed to admit at least 50% of their patients to Cape Canaveral Hospital, in exchange for Health First's agreement not to acquire physician practices in the Melbourne area that would compete with the conspiring physician practices.

Monopolization of the Medicare managed care market. The complaint alleges that Health First's health plan has a 90% share of the market for Medicare managed care, and that the Health First health plan steered its enrollees to Health First hospitals. Plaintiffs claim that Health First offers preferential pricing to its health plan, in order for the health plan to increase its enrollment and reduce the competitiveness of other health plans that offered rival hospitals.

Attempted monopolization of the small group commercial managed care market. The plaintiffs claim that Health First's health plan has a market share of more than 50% in the market for small employer group commercial insurance and that the health plan steered its enrollees to Health First hospitals.

Conspiracy to monopolize the market for general acute care inpatient hospital services in central and southern Brevard County. The plaintiffs allege that Health First conspired with several physician practice groups to admit patients to Health First hospitals, and not to Wuesthoff's hospital facilities.

 

In addition to damages, Wuesthoff is asking the court for an order requiring Health First to divest one of its hospitals, its physician group, and its health plan. Wuesthoff is also seeking to invalidate certain Health First agreements.

A copy of the complaint is available at this link.

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

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