I. Background
In this antitrust action, Plaintiffs Steward Health Care System, LLC, Blackstone Medical Center, Inc., f/k/a Steward Medical Holding Subsidiary Four, Inc., and Blackstone Rehabilitation Hospital, Inc. (collectively, "Steward") claim Defendant Blue Cross & Blue Shield of Rhode Island ("Blue Cross") unlawfully blocked Steward from entering the Rhode Island health care and health insurance markets, by thwarting its attempt to purchase a failing community hospital in receivership, Landmark Medical Center ("Landmark"), in Woonsocket, Rhode Island. (Pls.' Corrected Statement of Disputed Facts ("SDF") ¶ 49, ECF No. 171-1.)
This is a complicated case, and the area of antitrust law governing the claims is, to put it kindly, confused and opaque. As explained in detail below, the Court's view on the outcome of this motion has changed as a result of careful and complete review of the record and the law; and without question, this is a close case-one that highlights the difficulty of applying less-than-clear antitrust doctrines and precedents to one of the most complicated and volatile sectors of the national economy. In the end, the analysis below has convinced the Court that a trial is required on all counts of Steward's Amended Complaint (ECF No. 90), and therefore Blue Cross's Motion for Summary Judgment (ECF No. 157) will be denied in full (Counts I-XVIII).
A. Landmark
Landmark Medical Center ("Landmark") is a "community based" hospital
As early as 1996, Lifespan sought to potentially acquire Landmark. (Id. ¶ 65.) Lifespan's interest resurfaced in the context of Landmark's receivership proceedings in April 2009 when the Special Master requested that Maria Montanaro, then-CEO of Thundermist Health Center ("Thundermist"),
B. The Steward Model
Steward is a for-profit hospital system,
Steward's vision was to offer a new, atypical health-care-provider model to Rhode Island. (SDF ¶ 35.) This model was premised on "(1) right-siting care, such that community-based, routine services are performed in community settings, whether hospitals, urgent care centers, ambulatory services centers, or physicians' offices; (2) improving the quality of care provided in the community; [and] (3) negotiating on behalf of an integrated network of physicians and hospitals to drive lower premiums." (SDF ¶ 40.) In exchange for participation in its own "narrow network," Steward would accept lower reimbursement rates. (Id. )
As a part of Steward's vision, its executives believed it could turn around the quality problems Landmark faced; indeed, "that was the fundamental premise of Steward's turnaround plan for the hospital." (SDF ¶ 54.) "Landmark quality of care is generally good, although it has room for improvement." (Id. )
Steward's long term goals extended beyond Landmark; it wanted to acquire more hospitals in Rhode Island. (SDF ¶ 28.) To this end, Steward petitioned the state legislature to amend the Rhode Island Hospital Conversion Act "to eliminate a three-year waiting period between hospital acquisitions by for-profit hospitals, which would have allowed Steward to buy more than one Rhode Island Hospital in a three year period." (SAUF ¶ 139.)
C. The Caritas and Steward Bid To Acquire Landmark
In August 2010, over one year after the receivership commenced, Caritas, Stewаrd's predecessor, submitted a bid to acquire Landmark.
In May 2011, Steward submitted a new bid to acquire Landmark. (SDF ¶ 79.) An APA was proposed, and although amended fifteen times, this mostly extended the closing deadlines. (Id. ¶¶ 79, 81, 82.) While the various APA versions included numerous conditions, "[n]ot all important matters were included as conditions in the APA,
For example, the APA submitted in March 2012 included the following conditions: "An agreement to purchase 100% of Rhode Island Specialty Hospital" ("RISH"); a Memorandum of Understanding ("MOU") with Thundermist; and "[a]n agreement to purchase the interest of 21st Century Oncology ('21st Century') in Southern New England Regional Cancer Center ('SNERCC'), a cancer treatment facility owned jointly by 21st Century and Landmark."
The key to Steward's effort to acquire Landmark was an acceptable arrangement with Blue Cross on reimbursement rates, because, as with all Rhode Island hospitals, this was the primary source of income for services rendered at Landmark. (See id. ¶ 98; SAUF ¶ 173.) For about a year from September 2011 to September 2012, with the assistance of various facilitators, Steward and Blue Cross exchanged numerous and detailed reimbursement-rate proposals for Landmark. (SDF ¶ 86.) Over the course of these negotiations, Steward saw Blue Cross as "moving backwards" because its offers of rate increases always included "quality targets that were unrealistic, given Landmark's condition." (Id. ) Blue Cross would not discuss modifying these targets, even though it had done so for other providers. (Id. ¶ 88.) In one of the last mediation sessions the parties had with the Rhode Island Attorney General, the Attorney General informed Steward executives that Blue Cross "just do[es]n't want you to do business in this state." (Id. ¶ 86.)
Steward believed Blue Cross's proposed quality metrics (a part of Blue Cross's Standard Quality Program) were unattainable, so over the long course of negotiations, it proposed quality metrics different than those Blue Cross advanced, but which it believed to be achievable. (SDF ¶ 100.) For example, in September 2011, Steward introduced a proposal for quality metrics "based on year-over-year improvement at Landmark, as opposed to targets based on national averages." (Id. ) At every turn, Blue Cross rejected Steward's proposals and refused to stray from its Quality Program's methodology.
Beyond the financial issues, Steward needed and wanted Blue Cross to be a " 'willing partner.' " (Id. ¶ 88.) After all, the viability of Steward's proposed model turned on a "non-hostile relationship" with Blue Cross. (Id. ) Although not expressly set out as an APA condition, everyone involved understood that an agreement with Blue Cross was essential for a successful
On August 6, 2012, negotiations being facilitated by the Attorney General came to an acrimonious stop when Steward's team walked away in response to what it viewed as an unproductive, obstinate negotiating approach by Blue Cross. (Id. ¶ 86.) Steward's decision to walk away was met with considerable anger because at the time, some viewed Steward as petulantly abandoning a process that so many people had invested in deeply.
On September 4, 2012, Steward sent a letter to Justice Silverstein that offered two, alternative paths to finalizing the Landmark acquisition. (SDF ¶ 114.) One path consisted of "satisfying the three conditions, with or without an agreement with Blue Cross." (Id. ) The other required an agreement with Blue Cross but waived the RISH and Thundermist conditions, and allowed Steward to "deal with SNERCC later." (Id. ) A final mediation session with retired Chief Justice Frank Williams of the Rhode Island Supreme Court occurred on September 12, 2012. (Id. ¶ 89.) Alas, this mediation too was unsuccessful. (See id. ) Steward publicly announced its decision to withdraw its Landmark bid on September 27, 2012. (Id. ) Steward announced,
In order to move forward with Steward's model of care several conditions needed to be met. These conditions were clearly spelled out in the Asset Purchase Agreement and accepted by the Court. These conditions have not been met. When we were notified that these conditions could not be met, we presented a second path by which we would waive two of these conditions. This alternate condition was also not met.
(Id. ¶ 117.) The difference between Steward's and Blue Cross's rate proposals is the subject of considerable dispute, but, as calculated by Steward, was $3 million. (See SDF ¶ 97.)
D. The "Red Team"
Blue Cross's Chief Financial Officer ("CFO") Michael Hudson, an individual involved in Steward negotiations from August to September 2012, spearheaded what Blue Cross called the "Red Team" in July 2012. (SDF ¶ 87.) The Red Team was a group of Blue Cross employees charged with identifying and analyzing potential competitive threats. (SDF ¶ 87; SAUF ¶ 142.) One of those employees was Linda Winfrey, an Assistant Vice President at Blue Cross responsible for gauging "risks to the enterprise up to and including disruption of services." (SDF ¶ 87.) AVP Winfrey had been considering these issues for Blue Cross since at least May 2012, when she circulated (and later presented at an executive leadership meeting) a document that highlighted Blue Cross's most pressing threats; at the top of that list was the "potential of new competitors entering the market including Accountable Care Organizations (ACO)," which could "result in significant enrollment losses and could negatively affect our long term viability as a health plan." (Id. ) In a similar presentation in July 2012, "Competition in the Post-PPACA World," "ACO: Supplier Leverage" and "Limited Network Carrier (Steward/Fallon?)" were pinpointed as "new threats" with a high "likelihood of entry to RI market" and a substantial "adverse impact on BCBSRI." (Id. ) AVP Winfrey also approved the idea of analyzing Steward's
Blue Cross expressed concern about ACOs and risk-based contracting, which could strip some or all of an insurance company's traditional functions, and the profits associated with insurance companies bearing risk. (See, e.g., SAUF ¶ 146; SAUF Ex. 35, ECF No. 177-36 at 12 ("[T]he possibility exists for the ACO to develop a level of integration that makes an outside insurer redundant"); Dep. of Dorothy Coleman ("Coleman Dep.") at 435:3-13, 437:18-438:5, SAUF Ex. 7, ECF No. 214-7 (highlighting risk that ACO might team up with an insurance company, which could severely test Blue Cross's relevance) ). Blue Cross viewed these issues, referred to as "disintermediation," and the process of "providers becoming payers," as existential threats. (See SAUF ¶ 146.) Blue Cross CEO Peter Andruszkiewicz testified in his deposition that "disintermediation," i.e., "providers becoming payers" and "eliminat[ing] the intermediary known as the payer" "was a concern among my team, me, and every health insurance executive in the United States at this time frame." (Dep. of Peter Andruszkiewicz ("Andruszkiewicz Dep.") at 93, SAUF Ex. 6, ECF No. 214-6.) Likewise, Mark Waggoner, a member of Blue Cross's Executive Leadership Team ("ELT") and a key participant in Caritas discussions, recalled "discussion at Blue Cross at about this same time about the possibility that the ACO model or integrated delivery system could in some sense replace a conventional insurance company" because "you saw some of that happening in some parts of the country" and disintermediation was the "trend in [nationwide] conversations at that point in time." (Dep. of Mark Waggoner ("Waggoner Dep.") at 298, SAUF Ex. 11, ECF No. 214-11.)
The Red Team also analyzed other prospective scenarios, including one in which Prime entered Rhode Island. (SAUF ¶ 147; SAUF Ex. 37, ECF No. 177-38; SAUF Ex. 38, ECF No. 177-39.)
E. Blue Cross's Contract with Landmark
Under the twelfth amendment to Landmark's Hospital Participation Agreement with Blue Cross, the Landmark-Blue Cross contract was set to expire July 16, 2012. (SDF ¶ 102.) With negotiations faltering, on May 21, 2012, Blue Cross filed an application for a material modification with the Rhode Island Department of Health ("DOH"), which included draft notice letters informing Blue Cross's subscribers and providers that Landmark might go "out of network." (Id. ¶ 104.) Upon receipt of Blue Cross's material-modification application, the DOH informed Blue Cross that it should send "revised member and physician notification letters" detailing "that until the Department completes its review of this potential change and issues its determination, members will be able to continue to receive covered services at [Landmark and RHRI] at the in-network benefit level, if [the material modification] is not approved prior to the termination of the contract." (Id. ¶ 105.)
This material modification request sent shock waves through the receivership players. On July 2, 2012, Special Master Savage, noting the critical stage of negotiations between Steward and Blue Cross, sought a temporary restraining order ("TRO") from Justice Silverstein to stop Blue Cross from putting Landmark out of network and distributing the letters to subscribers and providers. The Superior
In June 2012, Blue Cross's contracting group considered the risks facing Blue Cross if it chose not to renew any of its contracts with various community hospitals, including Landmark. (SAUF ¶ 179.) Blue Cross knew that removing a hospital from its network could substantially cost Blue Cross because it would force its subscribers to access other, more expensive, in-network hospitals (such as Rhode Island Hospitаl, Miriam Hospital, or Women's & Infants Hospital). (Id. ) Blue Cross also knew that without a contract, Landmark might be forced to close. (Id. ) Steward suggests, and Court accepts as true for purposes of this motion, that "Blue Cross knew that the material modification process typically took 4-6 months, and that the cost of being out of contract with [Landmark/]Steward in advance of DOH approval would cost Blue Cross an estimated $3 million per month." (Id. ¶ 180.) Even without contemplating this cost, Steward adds, it would cost Blue Cross much more to remove Landmark from its network than "what Steward was then seeking in terms of reimbursement rate increases." (Id. ¶ 181.) Nevertheless, in spite of knowing full well the short term costs of its decision, Blue Cross concluded that the "path forward for Landmark was to 'hold our position since the material modification ha[d] already been filed.' " (Id. )
Steward states: "Despite the financial risk to Blue Cross of pursuing the material modification, Blue Cross' demands in exchange for a swift resolution on the material modification were those that it believed were necessary to end Steward's bid for the hospital. As Mike Hudson, Blue Cross' CFO and then lead negotiator with Steward explained, he was not going to even talk further with Steward until he learned whether Landmark accepted Blue Cross' terms, since those terms '[c]ould force Steward's hand-if they [Landmark] agreed to the contract, then Steward is likely out." (Id. ¶ 184.)
F. Blue Cross Reaches a Deal with Prime over Landmark
Once Steward withdrew from the process, Prime
G. Procedural History
Steward filed its first complaint against Blue Cross on June 4, 2013, in which Steward alleged that Blue Cross's unilateral conduct violated Section 2 of the Sherman Act and Section 6-36-5 of the Rhode Island Antitrust Act. (Compl. ¶¶ 62-114, ECF No. 1.) On July 15, 2013, Blue Cross moved to dismiss Steward's complaint (ECF No. 16); this Court denied Blue Cross's motion on February 19, 2014 (ECF No. 34); see also Steward Health Care Sys., LLC v. Blue Cross & Blue Shield of R.I.,
On July 14, 2017, Blue Cross moved for summary judgment on all counts of Steward's amended complaint. Steward filed a response in opposition (ECF No. 172) on August 11, 2017, to which Blue Cross replied (ECF No. 219) on August 25, 2017. The Court heard oral argument by the parties on September 26, 2017 (ECF No. 229). With a firm trial date approaching in January 2018, on November 29, 2017, the Court issued a Notice Regarding Defendant's Motion for Summary Judgment (ECF No. 338) indicating that it tentatively had decided to grant Blue Cross's summary-judgment
II. Legal Standard
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.' " Evergreen Partnering Grp., Inc. v. Pactiv Corp.,
The onus is on the moving party to demonstrate that no genuine dispute of material fact exists. Celotex Corp. v. Catrett,
III. Discussion
A. The Refusal-To-Deal Claim (Counts I, II, V, VI, IX, X, XIII, and XIV)
In 1980, Judge Keith of the Sixth Circuit Court of Appeals complained that the question of when "a monopolist ha[s] a duty to deal ... is one of the most unsettled and vexatious in the antitrust field." Byars v. Bluff City News Co.,
Section 2 of the Sherman Act makes it unlawful to "monopolize, or attempt to monopolize ... any part of the trade or commerce among the several States, or with foreign nations."
The two leading cases in this area- Aspen Skiing and Trinko-are well-known, often-cited, and require detailed discussion. Aspen Skiing involved the Aspen ski area, which comprised four distinct mountains. The defendant owned three mountain areas, and the plaintiff owned the fourth. For more than fifteen years, the parties had arranged to issue a joint-ski pass for access to all four mountains. So when the defendant suddenly terminated the joint-ski-pass agreement, the plaintiff-concerned that skiers would no longer frequent its mountain without a joint-ski pass available-"tried a variety of increasingly desperate measures to re-create the joint ticket, even to the point of in effect offering to buy the defendant's tickets at retail price." Trinko,
Several years later, in Trinko, the Court reconsidered Aspen Skiing and distinguished it.
Both Aspen Skiing and Trinko provide significant guidance on what a refusal-to-deal claim might ( Aspen Skiing )-or might not ( Trinko )-look like. But neither dictated what such a claim must look like. As this Court reads these cases, they do not specify granular factual predicates that must be present for a refusal-to-deal claim to move forward; rather, the Supreme Court identified facts that, in the circumstances of each case, pointed toward conduct that may or may not be characterized as "exclusionary" or "anticompetitive." Aspen Skiing,
Much of the confusion over Aspen Skiing and Trinko results from courts of appeals that either misread or deliberately extend the holdings of these cases, construing them in a rigid fashion to require, for example, an explicit prior course of dealing.
The First Circuit has not had occasion to interpret Trinko, but what it has said about Aspen Skiing is instructive. In Data General Corp. v. Grumman Sys. Support Corp., the court interpreted Aspen Skiing as "casting serious doubt on the proposition
Other Courts have likewise acknowledged that refusal-to-deal law generally-and Aspen Skiing and Trinko specifically-is concerned with harm to competition without a valid business justification, which can manifest itself in myriad ways. See, e.g., In re Thalomid & Revlimid Antitrust Litig., No. 14-6997 (KSH) (CLW),
The question this Court must decide on summary judgment, then, is whether a genuine and material factual dispute exists as to whether Blue Cross's conduct, which Steward characterizes as a unilateral refusal to deal with Steward, amounts to illegal exclusionary conduct as opposed to lawful, vigorous competition. Data General provides a rubric to assess this question. There, the court set forth a burden-shifting framework that requires a plaintiff to prove a prima facie case that includes showing "a monopolist's unilateral refusal to deal with its competitors (as long as the refusal harms the competitive process)." Data General,
In general, a business justification is valid if it relates directly or indirectly to the enhancement of consumer welfare. Thus, pursuit of efficiency and quality control might be legitimate competitive reasons for an otherwise exclusionary refusal to deal, while the desire to maintain a monopoly market share or thwart the entry of competitors would not. In essence, a unilateral refusal to deal is prima facie exclusionary if there is evidence of harm to the competitive process; a valid business justification requires proof of countervailing benefits to the competitive process.
Blue Cross has not structured its summary judgment argument to correspond to the Data General burden shifting rubric; it has instead directed its argument almost exclusively at Steward's theory at the prima-facie stage, while peppering its argument here and there with legitimate business reasons for its behavior. Likewise, the Court will not attempt to frame its analysis along a strict Data General framework, but will deal with the arguments, essentially as presented by Blue Cross. The bottom line is that the evidence Steward has presented meets its prima facie burden, and Blue Cross's claim of legitimate business reasons-to the extent the Court can identify them
Aspen Skiing and Trinko, properly read, provide useful guidance as to whether Blue Cross's conduct amounted to a refusal to deal motivated by anticompetitive animus. While the indicators of anticompetitive animus here vary somewhat from what the Supreme Court identified in Aspen Skiing and Trinko, those differences are reflective of the very different marketplaces at issue (healthcare and health insurance as opposed to ski resorts and regulated telecommunications). Potentially anticompetitive behavior by market participants is bound to manifest itself differently in different markets. See Eastman Kodak Co. v. Image Tech. Servs., Inc.,
Here, Steward sets forth an abundance of evidence that points toward a "distinctly anticompetitive bent," which could in turn persuade a reasonable jury that Blue Cross unlawfully monopolized the relevant markets by excluding Steward from Rhode Island.
Some of the evidence that supports Steward's theory, viewed in the light most favorable to Steward, is as follows.
It is undisputed that Blue Cross and Landmark entered into a hospital-participation agreement in 2006, which had been routinely extended multiple times. (SDF ¶ 57.) That all ended when Blue Cross allowed its contract with Landmark to expire on July 16, 2012. (See id. ¶¶ 102, 109.) In May 2012, while in the midst of difficult negotiations with Steward in connection with Steward's bid to acquire Landmark through the receivership, Blue Cross filed the necessary papers with the DOH for a "material modification"-i.e., official permission to remove Landmark from its provider network. (SDF ¶ 104; SDF Ex. 202, ECF No. 212-45.) This step was not necessarily unusual, as Blue Cross had, on other occasions, taken steps to institute the material modification process with the DOH when negotiations with other hospitals stalled. (SAUF ¶ 175.) Blue Cross, however, did not stop there. Although it had not yet received DOH approval, on July 9, 2012, Blue Cross informed subscribers via letter that the Landmark contract would expire on July 16, and "[i]f the [DOH] approves the network change, Landmark Medical Center will be considered out of network on August 1, 2012 ...." (SAUF Ex. 84 at 2, ECF No. 215-9.) Blue Cross added, "Despite our continued efforts to resolve the current situation, we feel it's important to notify our members that a resolution is doubtful at this time." (Id. )
Never before had Blue Cross mailed a letter to doctors and subscribers notifying them of the immediate and impending removal of a member hospital from its network. To be clear, it was not just the notification that was remarkable; never before or since has Blue Cross kept true to its initial material modification application promise by actually allowing a hospital to go "out of network."
The consequences of Blue Cross permitting a hospital to-for the first time ever-go "nonparticipating," and of sending a letter to members about it were significant; so significant, in fact, that the Special Master tried to put a halt to it and to extend Blue Cross's contract with Landmark. (SDF ¶ 103; SDF Ex. 90, ECF No. 210-2; SDF Ex. 219, ECF No. 213-14.) On July 2, 2012, the Special Master moved for
Blue Cross's conduct in removing Landmark from its network and prematurely notifying subscribers about such a possibility strayed far from its ordinary course of dealing with Landmark, or any other hospital for that matter. A reasonable jury could conclude that Blue Cross's uniquely hard-core approach with respect to Landmark, just as negotiations with Steward were at a critical stage, was not a legitimate business decision, but was designed to kill the Steward acquisition. Indeed, Blue Cross itself implicitly recognized this in its application for material modification to the DOH: "Despite our best efforts to provide Steward with a fair and reasonable rate ... we are concerned that we may not be able to come to an agreement with Steward .... If we are not able to come to agreement with Steward by [July 16, 2012], Landmark will then become nonparticipating in the BCBSRI network." (SDF Ex. 202 at 2.)
Blue Cross knew how its demands could impact Steward. As Blue Cross CFO (and then-lead negotiator) Mike Hudson made clear in an email leading up to Landmark moving back in network and in the midst of the Blue Cross-Steward negotiations: "Landmark asked the judge to have us pay them instead of the member and was willing to accept the prior contracted rates.... Could force Steward's hand-if [Landmark] agree[s] to the contract, then Steward is likely out." (SDF Ex. 91, ECF No. 210-3.) And it appears that's precisely what happened.
Next, and perhaps most importantly, Steward presents plethora evidence that Blue Cross sacrificed short-term profits for the longer-term benefit of eradicating potential competition from Steward. For example, in June 2012, Blue Cross conducted a "Contract Renewal Risk Analysis & Strategic Assessment," in which it "identif[ied] and weigh[ed] the risks to BCBSRI and [its] members associated with the failure to reach agreement [with] four community hospitals currently in negotiation" including Landmark.
In its internal analysis, Blue Cross calculated exactly how much it would cost to pay the reimbursement rate increases Steward was seeking (i.e., the "[p]osition [v]ariance based on current [negotiation] positions") and compared it to how much it would cost to allow Landmark to go out of network, and likely shut its doors. (Id. at 4-5.) Blue Cross estimated that Landmark going out of network and/or closing would cost Blue Cross $9.8 million. (Id. at 5.) This exceeded by over $4 million the amount Blue Cross estimated it would lose if it accepted the rate increases proposed by Steward for Landmark, which would cost $5.4 million.
In one presentation slide titled "Risk Factors Integrated View," Blue Cross uses a graphic to assess and value the various "risk factors" for each of the four community
This evidence more than suffices to create a trial-worthy issue as to whether Blue Cross sacrificed short-term profits (by letting the Landmark contract lapse) for the long-term benefit of keeping Steward out of Rhode Island. And if more were needed, which it is not, Steward's experts confirm this point. (See SAUF ¶ 182; Expert Report of Professor Leemore Dafny, SAUF Ex. 22 at 13, ECF No. 214-22 ("[T]hese analyses corroborate BCBSRI's contemporary analyses showing that rejecting Steward's offers was costly to BCBSRI.") ).
Steward also presents evidence to suggest that the proposals made and rejected by Blue Cross amounted to a refusal to deal, because Blue Cross negotiated in bad-faith. This evidence is complicated in light of what both parties acknowledge is the "complex and highly differentiated" aspect of hospital services, (see Def.'s Mem. in Supp. of Mot. for Summ. J. ("Def.'s Mem.") 29, ECF No. 157); Pl.'s Resp. in Opp'n to Def.'s Mot. for Summ. J. ("Pls.' Resp.") 32, ECF No. 172-1); but Blue Cross cannot hide behind this complexity to escape the material factual disputes that Steward has effectively uncovered. For present purposes, the Court need not decide the proper methodology to assess appropriate hospital reimbursement rates (indeed, both parties have different takes on this subject, which itself suggests it is a matter for trial). It is sufficient that Steward has sufficiently created a factual dispute as to whether Blue Cross refused to deal with Steward over Landmark by proposing rates below the averages it paid to other Rhode Island hospitals, and rejecting proposals consistent with what it accepted for other hospitals, essentially negotiating in bad faith with Steward.
The evidence Steward sets forth is as follows. It is not disputed that Blue Cross pays a range of reimbursement rates to various hospitals in Rhode Island. In 2010 when Caritas (Steward's predecessor) first attempted to acquire Landmark, an OHIC study titled "Variations in Hospital Payment Rates by Commercial Insurers in Rhode Island" reported that the rates paid to Landmark were twenty-two percent below the average for all Rhode Island hospitals, and even farther below the rates that some Lifespan and CNE-affiliated hospitals received. (SDF Ex. 67 at 16 & Fig. 10, ECF No. 208-11.) Steward argues the highest rate increase it proposed to Blue Cross (in May 2012) was for Landmark to be reimbursed at ninety-five percent of the average Blue Cross paid to all hospitals in Rhode Island, with an option to receive an
Blue Cross argues that "the undisputed evidence shows that the rates Blue Cross offered Steward at Landmark were higher than the rates Blue Cross paid comparable hospitals for comparable services." (Def.'s Mem. 29-30.) At summary judgment this Court need not accept at face value what Blue Cross contends are the appropriate hospital comparators. Indeed, Blue Cross undermines its own position on this point in its brief: after suggesting what the proper hospital-rate comparison should be, i.e., which hospitals Landmark can and cannot be compared to for calculating reimbursement rates, in other parts of its brief it argues that because hospital services are so different, no two hospitals can really be compared for these purposes at all. (See id. ) Then, remarkably, Blue Cross pivots again to argue that the appropriate comparison is actually between Steward and Prime, the entity that ultimately acquired Landmark.
Regardless of what it now asserts for purposes of this motion, Blue Cross's own evidence and analysis supports the premise that Blue Cross had been comparing Landmark to other hospitals-including Lifespan and CNE hospitals that Blue Cross more generously reimbursed-because patients would be leaving Landmark for those hospitals upon Landmark's closure. (See, e.g., SAUF Ex. 71.) The upshot is that, at trial, Steward and Blue Cross will have the opportunity to argue which hospitals Landmark should and should not properly be compared to for rate-increase purposes. While Blue Cross's view of this world of rate setting may ultimately persuade a jury that it was operating in good faith and not refusing to deal, summary judgment is not appropriate.
Although the Court is satisfied that the above discussion explains why Steward's refusal-to-deal claim must advance to trial, Blue Cross has raised several additional arguments to rebut Steward's Section 2 claim. None of these arguments change the outcome.
First, Blue Cross argues that it could not have refused to deal because "it was Steward that walked away from negotiations and refused to deal." (Def.'s Mem. 17.) As a matter of law, it does not matter that Steward "walked away" from the negotiating table, if Blue Cross made an offer that it knew could not be accepted. See MetroNet Servs. Corp. v. Qwest Corp.,
You reiterated your demand that Landmark be included in all BCBSRI products, including those that may have a limited or tiered network. In the event BCBSRI offers products with tiers in the future, the tiers will be determined based on cost and quality. Granting preferred status to providers who otherwise wouldn't qualify would impair the quality of any tiered product, especially when granting such status was made to an organization that refuses to participate in quality improvement initiatives.
(SDF Ex. 182 at 3, ECF No. 212-25.) A jury will have to decide if this was, as Steward contends, bad faith, backward negotiations, or as Blue Cross says, just good business.
Next, Blue Cross argues that in order for Steward's claim to move forward, this Court must "impose on a state-regulated insurer a novel antitrust duty tо purchase hospital services." (Def.'s Mem. 34.) In suggesting that Steward's legal theory is "unprecedented," Blue Cross argues that "Steward asks this Court to find that Blue Cross had an antitrust duty to accept particular reimbursement rates proposed by the acquirer of a failing Rhode Island hospital." (Id. at 35.) This is melodrama, as are Blue Cross's unsubstantiated assertions that to allow Steward's claim to clear summary judgment requires the Court to "assum[e] the role of a regulator of health insurer provider networks," and thus "upset the delicate balance that OHIC and Blue Cross strike when fulfilling their public interest missions." (Id. at 35-36.)
It is simply incorrect to say that to recognize the possibility of a refusal-to-deal by Blue Cross requires the Court to impose a "novel antitrust duty" by requiring that Blue Cross accept the reimbursement rates that Steward proposed. The law does not impose, and this Court may not dictate, the precise terms that Blue Cross must accept; but the law does impose a duty on Blue Cross to compete fairly, and specifically to not forego short term profits for the purpose of blocking competition and maintaining a monopoly. And in order to enforce this duty, the Court-in fact the jury-must consider the parties' conduct in the context of the particular markets at issue. Town of Concord v. Bos. Edison Co.,
In Trinko, the Supreme Court emphasized "[t]he specific nature of what the 1996 [Telecommunications] Act compels," which included "statutory restrictions upon Verizon's entry into the potentially lucrative market for long-distance service."
There is nothing even close to this enforced infrastructure sharing arrangement in the OHIC scheme. The RI OHIC regulatory scheme is essentially a rate setting mechanism, one that ensures that rates will not increase too much in a given year without good reasons and approval.
Further, the "Office of Health Insurance Commissioner" does not regulate health care providers or doctors nor the prices they charge for services; instead, as its name suggests, it regulates health insurers and insurance. (Dep. of former OHIC Commissioner Chris Koller ("Koller Dep.") at 225:22-226:3, SDF Ex. 26 ("Q. If a hospital had requested a waiver, would you have considered it? A. We have no jurisdiction over hospitals.").
So rather than present "a regulatory structure designed to deter and remedy anticompetitive harm," Trinko,
For all the reasons discussed above, Steward's refusal-to-deal claims for unlawful monopolization and monopsonization clear the summary-judgment bar. Blue Cross's motion for summary judgment with respect to these counts will therefore be denied.
1. Conspiracy in Restraint of Trade (Counts IV, VIII, XII, and XVI)
Blue Cross also moves for summary judgment with respect to Steward's conspiracy claims.
Importantly, "at the summary judgment stage a § 1 plaintiff's offer of conspiracy evidence must tend to rule out the possibility that the defendants were acting independently." Twombly,
Courts have identified-and the First Circuit in Evergreen and R.M. Packer Co. сountenanced-a non-exhaustive list of three Section 1 plus factors: "(1) evidence that the defendant had a motive to enter into a[n] [antitrust] conspiracy; (2) evidence that the defendant acted contrary to its interests; and (3) 'evidence implying a traditional conspiracy.' " In re Ins. Brokerage Antitrust Litig.,
Before delving into the evidence, a few other fundamental principles are worth noting. The first concerns "conspiracy." Blue Cross tries hard to raise the bar on Steward, suggesting that an illicit "agreement" requires explicit evidence that minds have met. (See Def.'s Mem. 42-45.) This is not correct. A tacit understanding or a wink and a nod can be sufficient.
Second, and perhaps more important for dealing with Blue Cross's motion, the Supreme Court long ago dispensed with the notion that a court can slice and dice the record in a way that scrutinizes each individual piece of evidence for conspiratorial motive. Rather, the Court must evaluate the evidence based on its aggregate effect, and draw reasonable inferences from the evidence as a whole. Cont'l Ore Co. v. Union Carbide & Carbon Corp.,
With these principles guiding its analysis, the Court finds in the record substantial evidence that, for conspiracy purposes,
First, a reasonable juror could conclude that part of the agreement between Blue Cross, Lifespan, and Thundermist to block Steward from Rhode Island was premised on the treat-and-transfer plan proposed as an alternative to Steward acquiring Landmark. The treat-and-transfer model, which sought to make Landmark "less than a full-service, acute-care hospital," (Wakefield Dep. at 32:1-6, SDF Ex. 30), was conceived in April of 2009 by Maria Montanaro, then-CEO of Thundermist, in a letter to Special Master Savage.
To me, this should not be about the survival of an institution, but rather about how to best deliver the highest quality, most cost-effective care in northern RI. It is possible, that the most sustainable model of high quality, cost effective care would be one that does not include a full service, licensed hospital.
(Id. at 5.)
The evidence also supports the inference that Blue Cross was in on the plan for treat-and-transfer as the alternative to a Caritas/Steward-owned Landmark. In the fall of 2010, Caritas took part in discussions and meetings with Blue Cross over acquiring Landmark. (SDF Ex. 108, ECF No. 210-20; SDF Ex. 109, ECF No. 210-21.) On November 18, 2010, Mark Waggoner of Blue Cross reported to Blue Cross's ELT that then-Blue Cross CEO Jim Purcell wanted Blue Cross to occupy a greater role over Landmark's future. He stated:
Jim Purcell called me earlier this week to chat about Caritas/Landmark. He seems to be leaning more towards to wanting to step off of the sideline and play more of a broker role in a local solution to Landmark. Apparently, he had a conversation earlier in the week with M. Montan[a]ro of Thundermist ... that may have influenced his thinking a bit about the role we might play.
(SDF Ex. 105 at 2, ECF No. 210-17.) Before getting back to Caritas, Purcell touched base with Lifespan and Thundermist to convey his reaction to the Caritas proposal and a plan for Lifespan and Thundermist to meet with Justice Silverstein to discuss treat-and-transfer: "Maria [Montanaro (Thundermist) ] and George [Vecchione (Lifespan) ] know we'll send our letters this Wednesday [the rejection letter to Caritas and the Special Master], and they will ask for a meeting with the Judge." (SDF Ex. 107 at 2, ECF No. 210-19.) Lifespan and Thundermist conferred about how to keep Blue Cross happy and on board: "It is important to BCBSRI to head in this direction [integrated service delivery networks], and would give them further reasons to support our work together on the model we are proposing." (SDF Ex. 111 at 3, ECF No. 210-23.)
Before meeting with the judge, Blue Cross first huddled with Lifespan and Thundermist. (SDF Ex. 113 at 2, ECF No. 210-25.) Notes from that meeting indicate that discussion topics included: (1) undermining Caritas's efforts to acquire Landmark; and (2) underscoring treat and
Peter [Andruszkiewicz] tells me that he believes Steward will fail to acquire here in RI. He has no intention of giving into their demands. He has talked with George [Vecchione], who has told him "with as much certainty as he has ever heard George use" that Lifespan WILL step in and take over the hospital, following the model we developed with them years ago. Peter wants to see Care NE then do the OB piece. He talked with George and his leadership about this yesterday.
(SDF Ex. 118 at 2.) Montanaro concluded her email with a prediction about Landmark: "Peter thinks it will be Lifespan." (Id. ) An internal Lifespan email, sent a few weeks later adds more. Lifespan's new CEO Timothy Babineau (Vecchione's successor) wrote to his leadership team:
Peter [Andruszkiewicz] called me yesterday to update me on a 5 hour meeting he had on Monday with the AG, Steward (Ralph himself!) and George Nee trying to mediate an agreement. At the end of the day, BCBSRI put an offer on the table that Peter described as still being within OHIC's guidelines. He did not elaborate and I did not ask.
They are meeting again next Monday (5 hours scheduled) during which Steward is supposed to react/accept/counter BCBSRI most recent offer.
The real rеason for the phone call was for Peter to let me know that he told the AG that it was his (Peter A's) understanding that Lifespan would be willing/interested to re-engage in discussions with Landmark should Steward pull out. He indicated the AG heard that but seemed (in Peter's words) "underwhelmed". I affirmed that this was still our position but offered no specifics. Question -is it worth a call to the AG to re-affirm our position, or should we remain on the sidelines at this point?
(SDF Ex. 120 at 2, ECF No. 210-32.) Lifespan's CFO clarified, "Peter's saying, you know, there's another alternative; you don't have to come so hard after me." (Wakefield Dep. 181:13-15. SDF Ex. 30.)
The above evidence, when stitched together, makes clear that a reasonable juror could conclude that the treat-and-transfer model for Landmark was one part of an understanding between Blue Cross, Lifespan, and Thundermist aimed at keeping Steward out of Rhode Island.
The next conspiratorial "episode" cited by Steward concerns the link between rate concessions for Blue Cross by Lifespan in exchange for increased patient volume, which presumably would come from Landmark. Steward concedes that Thundermist is not directly implicated in this chapter of the conspiracy saga.
Now, Steward asks, where might Blue Cross come up with more patient volume to satisfy Lifespan? A reasonable juror could conclude that the answer was Landmark. It was no secret that Lifespan would be the primary beneficiary of a weakened or defeated Landmark. (See SAUF Ex. 75 at 9, ECF No. 182-15 (Blue Cross noting subscribers in vicinity of Landmark used Lifespan hospitals, Miriam and RIH); (SAUF Ex. 71 at 6) (evaluating effect of Blue Cross's failure to renew Landmark contract: "Rhode Island and Miriam would see an influx of the majority of medical/surgical and outpatient services"); SAUF Ex. 22 at Fig. 35 (predicting Landmark going "out of network" would cause nearly forty-five percent of previous-Landmark patients to use a Lifespan hospital). Indeed, Lifespan mapped out Landmark's impact on RIH and Miriam, whether it thrived under Steward's ownership or failed if "Steward bails." (SAUF Ex. 69, ECF No. 214-69.) Unsurprisingly, Lifespan predicted a vast financial reward in the event that Landmark went under, and it forecasted a significant financial blow if Steward acquired Landmark. (Id. )
But that's not аll. Steward also cites the June 2012 Blue Cross Contract Analysis in which Blue Cross identified the hefty cost of failing to renew community hospitals like Landmark because patients dispersing to costlier hospitals came with an added financial sting to Blue Cross. In this context, Blue Cross's analysis recommended "[w]ith Lifespan and CNE facilities as a primary recipient of the service migration, we would engage discussions with these systems to establish a longer term plan to develop service capacity at favorable payment levels." (SAUF Ex. 71 at 9 (emphasis added) ). Blue Cross added, "[b]y doing so, we would be in a better position to manage the impact to the network and more strategically leverage options that currently do not exist." (Id. ) In an update to that same July 2012 presentation, Blue Cross added that "in order to address the potential movement of services to other hospitals in the future, we have initiated discussions with Lifespan on opportunities involving additional volume and the impact on payment levels." (SAUF Ex. 76 at 7, ECF No. 215-1.) In August 2012, Blue Cross documented that "Lifespan is willing to consider more substantive reductions to their position only if Blue Cross can provide additional service volume." (SAUF Ex. 78 at 5.)
Seemingly out of the blue, in September 2012, at the same time negotiations with Steward were cratering, Lifespan's rate demands declined to 4.8% for commercial. (SAUF Ex. 79 at 3, ECF No. 215-4) (email summarizing Lifespan's proposal). According to Blue Cross documents, Steward asserts, this pivot saved Blue Cross nearly $12 million, and was in stark contrast to the ordinary course of highly contentious Lifespan-Blue Cross negotiations that preceded it. (Compare SAUF Ex. 80, ECF No. 215-5 (showing total savings (loss) with respect to Lifespan as "$11,862,139"); with SAUF Ex. 81, ECF No. 215-6 (email from Blue Cross CFO Coleman to Andruszkiewicz and Waggoner regarding 2011 Lifespan negotiations) ("BCBSRI
The next chapter of Steward's conspiracy claim colors the alleged role played by Thundermist. Steward contends that Thundermist's decisions to (1) move OB patient referrals from Landmark to Women & Infants Hospital in 2011 and (2) to not sign an MOU to be an affiliated provider with Steward/Landmark were similarly motivated by exclusionary goals.
With respect to Thundermist's shift of OB patients, a reasonable juror could conclude that it was one piece of the larger plan to exclude Steward. First, in November 2011, Jones of Thundermist sought "for Lifespan to commit to support publicly our shared vision of health care in Northern Rhode Island in the face of a threatened or actual Steward departure." (SDF Ex. 125, ECF No. 210-37.) In other words, before pulling the trigger on a shift of patients, Jones needed cover and support from Lifespan:
I remain inclined to move Thundermist's OB service to [Women & Infants hospital, part of Care New England]. I therefore need to take Jon Savage and Steward at their words and prepare to defend my decision against a Steward announcement to abandon Landmark and publicly blame Thundermist for the decision.
In this context it will be important for me to be able to point to Lifespan's interest in developing an appropriate care model for Northern Rhode Island. Given the timeframe involved, I believe a letter to me (or press release if you prefer) describing the model of care Lifespan would be willing to support publicly, with Thundermist, in Northern Rhode Island.
(Id. ) Remarkably, in spite of the fact that Thundermist's patients would be sent to CNE-Lifespan's primary competitor- Lifespan agreed to annually pay Thundermist $150,000, which replaced annual payments from Landmark that would cease upon terminating the Landmark arrangement. (SDF Ex. 125; Jones Dep. at 109:7-110:14, 115:7-18, SDF Ex. 24, ECF No. 206-24 ("Q. Okay. So because the Women and Infants deal wasn't going to include Thundermist being paid for that, you told Lifespan that by moving to Women and Infants, you were going to lose the $135,000 that you were getting from Landmark and you wanted their help in making that up? A. Yes.").
The explanations provided by Thundermist and Lifespan do little to clear the air about this strange payment. In his deposition, Jones suggested that this "[f]inancial support" was "to support development of these more closely integrated networks of care." (SDF Ex. 125.) Lifespan's George Vecchione in turn said: "It wasn't just to fill a loss, a gaping hole, and no prospects for benefit. Frankly, I viewed it as an investment." (Vecchione Dep. 140:4-12, SDF Ex. 29.) And, as noted above, in an email to Jones, Montanaro wrote that Blue Cross's Peter Andruszkiewicz "want[ed] to see Care NE then do the OB piece." (SDF Ex. 118 at 2.) These explanations raise more questions than answers, and at least give the appearance of Blue Cross acting as a puppet-master distributing the spoils. And the payment persisted for six consecutive years. (Wakefield Dep. 172-174, SDF Ex. 30.) In her deposition, CFO Wakefield could not pinpoint another circumstance, with the exception of unions, where Lifespan "supported" an organization to the tune of $150,000. (Id. at 174. But see Vecchione Dep. 139-140, SDF Ex. 29 (recalling
Q. And under this agreement, besides reporting and keeping track of things, what is Thundermist required to do in return under the public health grant agreement?
A. Continue to provide charity care for our community.
Q. Do you do the same things you had to do anyways?
A. Yes.
Q. So there's no new obligations imposed by this?
A. No.
Q. This was just giving you 150,000 and you have to meet certain reporting requirements for legal purposes?
A. Yes.
Q. And was reporting to Lifespan required?
A. No.
Q. And did you do any reporting to Lifespan about what you did with the money?
A. No.
(Jones Dep. at 127:19-128:16, SDF Ex. 24.) And Lifespan CEO George Vecchione testified consistently:
Q. And did she [Montanaro], in fact, put some of the money to that use, to your knowledge?
A. I don't ... recall. What she did with the money, I don't know. It's not that I don't recall, I don't know.
Q. Meaning that you don't think you ever knew?
A. Correct.
Q. Part of the grant process is not some sort of followup by the recipient to say, Gosh, here's the great things we do with your money?
A. Correct. Um-hm.
Q. Can you-I take it you can't point to some particular thing that Thundermist did thanks to the grant money that you were providing, or can you?
A. I can't.
(Vecchione Dep. at 141:3-19, SDF Ex. 29.) Although early on in the Lifespan-Thundermist negotiations, Lifespan's grant had been incorporated into the two entities' Partnership Model, (see SDF Ex. 128, ECF No. 210-40), the funds were later buried in a different "Public Health Grant Agreement," which unlike the former, was never disclosed to the DOH. (Jones Dep. at 129-130, SDF Ex. 24.) Moreover, in the context of anticipating Thundermist's prospective relationship with Steward if it acquired Landmark, Jones detailed how he saw the interplay between OB patients and a Steward presence:
I think if they stay, whether or not we move OB, our relationship with Steward becomes more complicated .... If they stay and we don't want to cooperate with them, I believe they could do some damage or at least make life difficult for us to do anything but cooperate. So although I wouldn't be happy about the scenario where we move OB and Steward decides to stay, I don't think it's that much different from the scenario where we do nothing, and they decide to stay. Either way, Thundermist's ability to make independent decisions in the best interests of our patients could be compromised by a Steward presence. That threat only goes away entirely if we move OB.
(SDF Ex. 126, ECF No. 210-38.)
And what role did Blue Cross play in all of this? In addition to Lifespan, Jones looked to Blue Cross to provide assurances
The final, and perhaps most glaring part of Steward's conspiracy story concerns Thundermist's abrupt rejection of an MOU with Steward. Throughout the time period that treat and transfer and OB patient shifting was being discussed, Thundermist was also in talks with Steward. Jones had been working with Steward on an MOU that considered, among other things, patient referrals and certain areas of exclusivity with Steward/Landmark. (See SDF Ex. 133, ECF No. 210-45; SDF Ex. 134, ECF No. 210-46.) Although Thundermist and Steward traded various MOU proposals, on May 11, 2012, Jones met with Steward and indicated that he was no longer willing to enter any agreement. Perhaps most illuminating, Jones would not even sign the April 30 proposal that he had himself proposed to Steward.
And indeed, the evidence indicates that Jones did not come to this epiphany on his own; behind the scenes, Jones surveyed a wide range of opinions in approaching his talks with Steward. He "talked with Peter A (BCBSRI) and Dennis Keefe (CNE). These conversations, and discussions with just about every other health leader in RI, have helped me clarify a bit." (SDF Ex. 135, ECF No. 210-47.)
But it was Blue Cross that had Jones all eyes and ears. Jones's follow-up notes from the May 11 meeting with Steward recount why he did not sign the MOU: "[y]ou're asking me to give up participation with an organization that has 70% market share?" (SDF Ex. 139, ECF No. 210-51.) Jones's reaction to Blue Cross's apparent pressure is even more peculiar given the few commercially insured patients Thundermist had, and the fact that Thundermist's capacity would not have been affected by either version of the proposed MOU. (See Jones Dep. at 292, SDF Ex. 24 ("Q. [I]s there anything that the agreement would have prevented you from doing with an insurer that you've now done? A. No, I don't think so. I can't think of anything."). Later, Jones erased any doubt about Blue Cross's influence on his approach to an MOU with Steward. (See
Jones's "close partners," namely Blue Cross by way of Montanaro, also played a role in making sure Jones was prepared for his Steward meeting. (SDF Ex. 141 at 3, ECF No. 210-53 (Interoffice Memorandum from Montanaro to Blue Cross executives) ("Chuck Jones continues to seek m[y] advice on issues with Steward Healthcare."). And when Jones offered to pay Montanaro for the "long meeting" in which she helped Jones craft "talking points," she insisted that would not be necessary: "No need to bill you I was on BCBS's dime and spent the time with their full support. They think very highly of you and were happy to contribute me to the cause today." (SAUF Ex. 51 at 2, ECF No. 214-51; see also
Finally, in cases where acts against self-interest are not fully explained, traditional evidence of conspiracy, i.e., conversations, assurances, and swapping value among the alleged conspirators, prove instructive. See R.M. Packer Co.,
2. Conspiracy To Monopolize/Monopsonize (Counts III, VII, XI and XV)
Section 1 of the Sherman Act prohibits conspiring to restrain trade whereas Section 2 forbids conspiring to attain or maintain a monopoly.
C. State-Law Tort Claims (Counts XVII and XVIII)
Much of Blue Cross's argument on Steward's state law claims is built on the proposition that, "[w]here conduct does not violate the antitrust laws, the conduct also is not tortious as a matter of law because 'antitrust law provides the best available barometer-indeed the only available barometer-of whether or not Blue Cross'[s] conduct can be found to be "wrongful" or "illegitimate"-and hence, tortious.' " (See Def.'s Mem. 79 (quoting Ocean State Physicians Health Plan, Inc. v. Blue Cross & Blue Shield of R.I.,
Blue Cross makes several independent and substantial arguments to support its summary judgment motion, all of which fail, but which require some discussion.
1. Causation
Blue Cross suggests that other superseding causes are responsible for Steward's alleged injuries, namely (1) Steward's apparent inability to satisfy the APA conditions unrelated to Blue Cross; and (2) the OHIC regulations that allegedly cabined the rates that Blue Cross could offer Steward.
To prove causation, a Sherman Act plaintiff must demonstrate that its injury was caused "by reason of" the defendant's anticompetitive conduct.
As this Court said at the motion-to-dismiss stage, "[A]ntitrust laws have been interpreted to incorporate common law principles of causation." Steward I,
Steward has presented sufficient evidence to survive summary judgment and to place the causation question before the jury. Specifically, there is a material factual dispute about whether failure to reach a deal with Blue Cross caused Steward to abandon the Landmark negotiations, in the form of (1) testimony of Steward witnesses; (2) conduct of Steward players; and (3) conduct of other key players.
Blue Cross asserts that a "force other than the antitrust violation fully accounts for" Steward's alleged injury because Steward would not waive and could not satisfy three conditions in the APA: (1) the RISH condition (the May 2011 APA encompassed a condition for Landmark's purchase of 100% of RISH); (2) the Thundermist condition (a MOU with Thundermist); and (3) the SNERCC condition (that Landmark attain a majority interest in SNERCC, owned by 21st Century). (Def.'s Mem. 55 (quoting In re Canadian Import Antitrust Litig.,
Just a sample of Steward's evidence makes the point: Steward highlights extensive testimony that reaching a deal with Blue Cross was the only dispositive condition for Steward. (See, e.g., Dep. of Ralph de la Torre ("de la Torre Dep.") at 45-46,
As to the first two conditions (RISH and Thundermist), Steward set forth, for instance, a letter to Justice Silverstein on September 4, 2012, in which Steward informed the court that, "progress on the three conditions has been fleeting" and "as an alternative, [Steward] proposed that if BCBSRI is able to execute a participation agreement with Steward, Steward Health Care will waive conditions (i) [MOU with Thundermist] and (ii) [100% interest in RISH] ...." (SDF Ex. 144 at 3, ECF No. 210-56.) Similarly, Steward sets forth evidence that it was willing to waive the SNERCC condition. (See, e.g., de La Torre Dep. at 122-123, SDF Ex. 1 ("Q. ... [D]id Steward, to your knowledge, ever express to anyone, mediator, attorney general, Jon Savage, Justice Silverstein, anybody, that Steward would waive condition (iii), meaning an agreement with 21st Century where Steward would own 100 percent of SNERCC? A. Absolutely."); id. at 123 ("A. I can unequivocally tell you that I expressed it to Savage, unequivocally. And I'm pretty sure that I said to the judge, 'With the appropriate contract, we could even waive [the SNERCC condition,]' but that's harder to come by.") ).
As to Blue Cross's second causation argument (that OHIC regulations capped what Blue Cross could offer Steward and therefore caused Steward's alleged injury) Steward sets forth sufficient evidence to create a jury question. As discussed supra, the OHIC regulations themselves and communications by OHIC belies Blue Cross's rigid reading of the regulations. Blue Cross reluctantly acknowledges this when it states, "[u]nder certain narrow circumstances, OHIC considered waivers from these regulations from other insurers." (Def.'s Mem. 66.)
It is not dispositive (even if true, which Blue Cross can attempt to show at trial) that Steward "never discussed any such exception with OHIC." (Id. ) Steward advances sufficient evidence to suggest it was Blue Cross-and not Steward-that had the burden to raise such exceptions with OHIC. (See SDF Ex. 43 at 2, ECF No. 206-43 ("Issuers [insurers] are encouraged to file such requests [for exceptions].") ). After all, as discussed abоve, OHIC regulates health insurers-not hospitals and doctors.
Moreover, the facts suggest that Blue Cross never viewed the OHIC regulations as inflexible as it now casts them, (see Def.'s Mem. 66.), and that Steward did in fact raise the issue of approaching OHIC for an exception, in the context of bundling rate increases and quality metrics with Steward's other hospitals in Massachusetts and Landmark. Steward proposed "bundling" reimbursement agreements for Landmark, St. Anne's, and Morton whereby
Moreover, Steward's evidence refutes, or at least creates a factual dispute, with respect to Blue Cross's suggestion that "[t]he other major insurers in Rhode Island-Tufts and United" understood too that "the OHIC regulations were binding." (Def.'s Mem. 66; see also 2011 OHIC Standards 16, SDF Ex. 44 ("Too much prescriptiveness may encourage an excessive focus on compliance and discourage the kind of payment reform and innovation which was intended."); id. (suggesting OHIC approved contracts involving United and Tufts where OHIC conditions were not fully complied with); Dep. of Todd Whitecross at 120, SDF Ex. 31, ECF No. 206-31 (suggesting Tufts offered rate increases above OHIC cap because at that time, it "didn't have a formal relationship with [Prime]") ).
It will be for the jury to decide the extent OHIC regulations entered into the parties' negotiations calculus and whether they or something else caused Steward's alleged injury. This is not simply a question, as Blue Cross suggests, of "interpreting regulatory text in light of government purposes," a matter of law reserved for this Court, (see Def.'s Mem. 66 (quoting Kolbe v. BAC Home Loans Servicing, LP,
2. Harm to Competition
Blue Cross claims summary judgment should also enter because there is no evidence that Blue Cross's alleged conduct harmed competition. It argues: (1) merely swapping out one potential buyer (Steward) for another actual buyer (Prime) is of no inherent consequence under the antitrust laws; and (2) Prime's acquisition of Landmark benefited consumers (and thus competition) because Prime charges lower prices than thоse Steward would have charged. This argument is a silver bullet aimed at the wrong target.
To create a jury question on harm to competition in this circuit, "evidence of actual, present competition is not necessary as long as the evidence shows that the potential for competition exists." Sullivan,
Blue Cross misses this when it declares, "[i]n order to establish harm to competition, a plaintiff must show'a reduction in output and an increase in prices in the relevant market.' " (Def.'s Mem. 69 (quoting Sterling Merch.,
Blue Cross's argument that swapping out one potential hospital buyer for another actual buyer only works if the jury rejects Steward's theory that what it brought to the marketplace was a new competitive health care delivery model that Blue Cross feared and sought to defeat. In other words, there is a difference, Steward contends, in a "Steward Landmark" and a "Prime Landmark," and this affects the legal parameters for assessing harm to competition. Blue Cross's own assessments acknowledge that Steward offered something new and different to Rhode Island. (See, e.g., Andruszkiewicz Dep. at 297:9-13, SAUF Ex. 6 ("The other, which actually is a positive in terms of Steward's acquisition of Landmark, was that we knew that they did bring some innovation, a different kind of model for the way care was delivered, and we thought that was a good thing."); id. at 27:11-27:8, 39:9-39:12 ("[Dr. de la Torre and Steward] have their model and I think it's an advancement over, you know, what's been happening in Massachusetts" "because it's moving away from sort of the siloed sort of approach by providers and the fee for service only, you know, methodology of providers getting paid.") ). The same was true of Thundermist's early assessments of the Steward model. In a September 28, 2011 email to Montanaro, Jones writes:
met with Steward ... [g]enerally impressed with what they are doing, including developing partnerships with tertiary hospitals for specialty care and progress on radiology quality. Showing very good quality and cost results on the MA AQC. With the new Tufts plan offering 15-30% discounts for their community model of care, they are a serious threat to the status quo.
(SAUF Ex. 98 at 2, ECF No. 215-23.) And Montanaro's March 26, 2010 testimony before Justice Silverstein strikes the same chord:
Now that we have health care reform and we understand much more about the direction in which health care is going, a great deal of change is going to be needed among all hospital systems and their relationship to primary care and specialist care. In my preliminary conversations with Ralph de la Torre and his senior leadership team at Caritas, I feel very confident and actually enthusiastic about ... their approach to meeting those opportunities and challenges across their whole system; and particularly ... for the care delivery in northern Rhode Island.
(SAUF Ex. 99 at 61:5-17, ECF No. 215-24.) Blue Cross also recognized the value of the plan Steward offered and acknowledged that Prime was not-and never purported to be-Steward. (See SAUF Ex. 101 at 2, ECF No. 215-26 (email from Blue Cross's Mark Waggoner to Blue Cross employees) (comparing "Prime, vs. a few months ago w Steward" and outlining the logic to explain variances in negotiation rates with Steward versus Prime: "we believed there to be extensive value to engaging with Steward at higher rates given the integrated delivery capabilities they could bring to the market in year 3?"); Jones Dep. 285-286, SAUF Ex. 12 (describing conversation with Dr. Reddy of Prime, who "didn't know what an ACO was" which, among other things, made it "clear to [Jones] that the Prime model does not consider healthcare system efficiency as an overall goal"); id. at 286:18-287:4 ("Q. And [Prime] made improvements in how [Landmark] looks or repair it or make it more modern or anything? A. There's a nice piano in the entrance, and I think they've redone a couple-I took a tour of one of the floors. It looks nicer, yes. Q. Has there been any substantive improvement at Landmark, in your view? A. Not in terms of quality or community partnership, no.") ). Even Prime acknowledged that it had none of Steward's ambitions with respect to bringing a riskbased model or ACOs into Rhode Island. (Charest Dep. at 74:10-17, SAUF Ex. 14 ("Q. [D]oes Prime have any plans to participate in an ACO product in Rhode Island? A. No.... They've not found an ACO product that's been acceptable to them"); id. at 85:15 ("We don't have risk-based contracts.").
What Steward claims it could have introduced into the Rhode Island health care and health insurance markets was potentially beneficial to competition, and blocking it had potential antitrust consequences. See, e.g., Federal Trade Comm'n v. Arch Coal, Inc.,
The evidence that Blue Cross's alleged refusal to deal with Steward harmed competition is plentiful. Steward presents evidence that Blue Cross's "Red Team"
Blue Cross's second argument that Prime's acquisition of Landmark benefited consumers (and thus competition) because Prime charges lower prices than those Steward proposed is saturated with material factual disputes. Even assuming that the calculus is as narrow at Blue Cross suggests, Steward presents evidence that a Steward-owned Landmark would have saved Blue Cross (and therefore consumers) money. (See, e.g., SAUF Ex. 86 at 6, ECF No. 215-11 ("Redirection of care to lower cost, non-network community hospital would have tremendous impact on lowering healthcare costs."); Eisenstadt Rep. ¶ 58, SDF Ex. 39, ECF No. 206-39 ("Steward would not have needed to achieve any volume growth at Landmark relative to 2011 for BCBSRI and its employer accounts to have been financially better off in 2015."). But see Noether Rep. ¶¶ 203-12, SDF Ex. 40, ECF No. 206-40 (Blue Cross's expert concluding Blue Cross saved money with Prime) ). At bottom, whether competition was harmed is a matter of how the jury sees the question and assesses the facts.
Finally, Blue Cross's argument that "the actual evidence, as opposed to speculation about the future effect of Steward's business plans, shows that Steward's acquisition of Landmark would have harmed Rhode Islanders in the form of higher healthcare costs." (Def.'s Mem. 74.) Like the boy who kills his parents and then pleads for mercy as an orphan, Blue Cross's argument is the height of chutzpah. Steward cannot be faulted for having no direct evidence of the competitive benefits that it could have brought to Rhode Island when the barricade was erected by Blue Cross's allegedly exclusionary conduct. The Supreme Court long ago closed the door to this reasoning when it stated, "the most elementary conceptions of justice and public policy require that the wrongdoer shall bear the risk of the uncertainty which his own wrong has created." Coastal Fuels of P.R., Inc. v. Caribbean Petrol. Corp.,
Blue Cross suggests that the Court should exclude Steward's damages model because all but a small portion of its damages could have been mitigated, and that Steward's damages model clashes with Steward's claims because it does not distinguish between damages caused by lawful versus unlawful conduct.
Several overarching principles guide the Court's analysis. First, although antitrust plaintiffs have a duty to mitigate their losses, see, e.g., Golf City, Inc. v. Wilson Sporting Goods, Co.,
It is also significant that, "any model supporting a plaintiff's damages case must be consistent with its liability case, particularly with respect to the alleged anticompetitive effect of the violation." Comcast Corp. v. Behrend,
As to Blue Cross's suggestion that Steward's damages model is based in part on Blue Cross's failure to participate in a
A final point: although damages will be further examined at trial, a plaintiff is not required to quantify damages to sustain a damages award in this context; when an antitrust plaintiff demonstrates it has been damaged, a jury may award nominal damages. See Sciambra v. Graham News,
4. State-Action Doctrine
Finally, Blue Cross avers that the state-action doctrine forecloses Steward's antitrust claims because state regulation compelled the supposedly unreasonable rates that Blue Cross offered. As a matter of law, the Court doubts that the state-action doctrine contemplates these circumstances, and, even if it did, Blue Cross's argument is deficient for many of the reasons outlined above with respect to the OHIC regulations.
The state-action doctrine immunizes from challenge conduct that is the intentional or foreseeable result of state or local government policy. See Parker v. Brown,
In Patrick v. Burget, the Supreme Court set forth that "the active supervision requirement mandates that the State exercise ultimate control over the challenged anticompetitive conduct."
In any event, assuming arguendo that that the doctrine somehow contemplates these circumstances, Steward easily overcomes it. As a matter of disputed fact: (1) OHIC has no authority over hospitals-only health insurers; (2) based on OHIC's own publications, OHIC has previously excepted application of its regulations for certain hospitals, and OHIC regulations are not inflexible in the sense that they would prohibit Blue Cross from ever offering rate increases of a certain amount. Thus, Steward has at least created a material factual dispute regarding the "active supervision" prong. Blue Cross's request for summary judgment on this ground fails.
E. Conclusion
For the reasons outlined above, the Court DENIES Blue Cross's Motion for Summary Judgment (ECF No. 157) on all Counts of Steward's Amended Complaint (ECF No. 90). Accordingly, Counts I-XVIII will proceed to trial.
IT IS SO ORDERED.
Notes
This factual discussion, as well as the facts noted throughout this opinion, are taken from the parties' statements of undisputed and disputed facts, as well as the attached exhibits; where disputed, inferences are drawn in favor of the nonmoving party, Steward.
Thundermist is a "major primary сare provider" with a large group of primary care physicians that serves many patients in the Woonsocket area. (Pls.' Corrected Statement of Disputed Facts ("SDF") ¶ 47, ECF No. 171-1; id. ¶ 83; Dep. of Robert E. Guyon 94:8-9, SDF Ex. 5, ECF No. 206-5 (explaining Thundermist is key source of prospective patients for area hospitals) ). Thundermist provides care to many people who are poor and historically uninsured or underinsured. Few of Thundermist's patients are commercially insured. (See, e.g., SDF Ex. 128, ECF No. 160-29; see also Thundermist Health Center, About Us, http://www.thundermisthealth.org/AboutUs/AboutUsOverview.aspx (last visited Apr. 16, 2018) ("Thundermist Health Center's goal is to bring healthcare to the people who need it most.... Nearly 40% of Thundermist's 42,000 patients in 2013 were uninsured. In 2014, we provided $6.6 million in unreimbursed care."). "Thundermist wanted a future for health care delivery in which it would play a significant role." (Pls.' Statement of Additional Undisputed Facts ("SAUF") ¶ 155, ECF No. 177-1; SAUF Ex. 50, ECF No. 177-51.)
Cerberus Capital Management, LP owns a majority and controlling interest in Steward. (SDF ¶ 9.)
At its inception in 2010, Steward owned six hospitals in Massachusetts; by 2012, it owned eleven hospitals. (SDF ¶ 11.)
Steward's risk-based-contract model also contemplates that Steward would compete to an extent with health insurers "for the same premium dollars and Steward performs some functions traditionally performed by insurers." (SDF ¶ 16.)
Steward's acquisition of Caritas was finalized in November 2010. (SDF ¶ 13.)
The conditions with respect to Thundermist and SNERCC, however, were later omitted from the May 2011 APA and the first seven amendments to the APA. (SDF ¶ 82.)
Such provisions were eventually included in the agreed-upon quality program between Blue Cross and Prime, which eventually acquired Landmark. (SDF ¶ 100.) Additionally, "Blue Cross made changes in its quality program for Prime that it had refused to make for Steward, including measuring certain quality metrics against Landmark's past performance and not against national averages." (Id. ¶ 101.)
This ire was best reflected in a letter sent to Steward by the Attorney General. (SDF Ex. 207, ECF No. 204-10.) This letter was met with a fiery and pointed response from Dr. de la Torre, Steward's CEO, summarizing what Steward viewed as Blue Cross's bad faith tactics and the Attorney General's bias and intimidating behavior. (Def.'s Statement of Undisputed Facts ("SUF") Ex. 102, ECF No. 169-33.)
Although Blue Cross had from time to time filed paperwork to initiate the material-modification process during lagging negotiations with other hospitals, this move was unprecedented: "at no time before the Landmark situation had it ever sent out letters to subscribers and doctors alerting them that any other hospital was about to be out of network." (SAUF ¶ 175.) "Nor had Blue Cross ever before stopped payments to a hospital that was still officially 'in network' and instead directed payments to the subscribers, leaving to the hospital the difficult burden of collecting the monies due from the patients themselves." (Id. ¶ 176.)
With forty-four hospitals and 43,500 employees, in fourteen states, Prime has substantial experience in the business of reviving distressed hospitals. (SDF ¶ 120.)
To the extent that Steward asserts claims under the Rhode Island Antitrust Act, as opposed to the Sherman Act, this Court, like the parties, analyzes the claims together, here and throughout this Opinion (including Steward's conspiracy claims). See R.I. Gen. Laws § 6-36-2(b) ; Stop & Shop Supermarket Co. v. Blue Cross & Blue Shield of R.I.,
Indeed, one recent law review article recounts various descriptions for the standard to discern exclusionary conduct in a manner that this Court can appreciate. See Katharine Kemp, A Unifying Standard for Monopolization: "Objective Anticompetitive Purpose",
Blue Cross's monopoly power-which is "typically proven by defining a relevant market and showing that the defendant has a dominant share of that market"-has been assumed by the parties for purposes of this motion. Diaz Aviation Corp. v. Airport Aviation Servs., Inc.,
The Supreme Court in Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP,
Indeed, at the motion-to-dismiss stage, this Court may well have implied that Steward must meet what the Court described as the "baseline requirements" of a refusal-to-deal claim: the "unilateral abandonment of a voluntary course of dealing, forsaking of short-term profits, refusal to transact business with the plaintiff even if compensated at rates set by the defendant, and concomitant inability to provide a legitimate business rationale ...." Steward I,
A policy reason against requiring the termination of a prior course of dealing is that to do so wоuld be to discourage new, mutually beneficial market arrangements, thereby entrenching the status quo. See Olympia Equip. Leasing Co. v. W. Union Tel. Co.,
Indeed, commentators more-or-less agree that the Supreme Court has chosen not to enunciate an all-encompassing framework for refusal-to-deal liability. See, e.g., James A. Keyte, The Ripple Effects of Trinko: How It Is Affecting Section 2 Analysis, 20 Antitrust 44, 49 (Fall 2005) ("Lower courts ... have not read Trinko as even attempting to construct a generalized predation test or endorsing any particular analysis ...."); Robert A. Skitol, Three Years After Verizon v. Trinko: Broad Dissatisfaction with the Whole Thrust of Refusal to Deal Law, 6 Antitrust Source 1, 1 (2007) ("Today, after more than three years of experience with lower courts' applications of the Court's ruling, Trinko has proven to be among the least satisfactory antitrust opinions of the Supreme Court in the past three decades. It has unsettled more than it has settled; made the law less rather than more predictable; and exacerbated more than resolved the most contentious controversies in monopolization and attempted monopolization cases."); Edward D. Cavanagh, Trinko: A Kinder, Gentler Approach to Dominant Firms Under the Antitrust Laws?,
The D.C. Circuit Court of Appeals endorsed a similar burden-shifting framework in United States v. Microsoft Corp.,
Blue Cross's argument rests primarily upon a theory that it did not, as a matter of law, refuse to deal with Steward in violation of Section 2. Its legal argument is incorrect for the reasons explained.
As with the factual background presented at the outset of the Opinion, this review of Steward's evidence is not intended to be exhaustive. Rather, it simply highlights a sample of Steward's factual presentation, which is sufficient under Rule 56 to raise a genuine and material factual dispute requiring a trial.
Deposition testimony of Blue Cross employees is enlightening. Blue Cross's CFO Michael Hudson testified:
Q. Has it been Blue Cross's experience that when it sends out letters announcing that hospitals are going to be out of network after a certain date, that those letters have no impact on usage of the hospital?
A. I don't have data that indicatе that one way or the other. I would say that the point is, no hospital's ever been out of network.... But in the time I was there, with no hospital that I was aware of, nor any, you know, significant medical group have they ever actually gone nonparticipating.
...
Q. Can you remember any other occasion during your tenure at Blue Cross where, with respect to one of the hospitals in Rhode Island, you sent out letters to people saying, On such-and-such a date, Westerly or South County or whoever it might be, is going to be out of network?
A. Not in the time I worked there.
(Dep. of Michael Hudson ("Hudson Dep.") 146:2-16, 148:4-10, SAUF Ex. 9, ECF No. 214-9.)
And Shawn Donahue, Blue Cross's Director of Government Relations, had a consistent recollection:
Q. So since 2012, has Blue Cross sent out letters to members informing them that a hospital will be removed from its network?
A. ... I don't recall that I'm aware of any such letters.
(Dep. of Shawn Richard Donahue ("Donahue Dep.") at 310:5-9, SAUF Ex. 8, ECF No. 214-8.)
It is of little consequence that Justice Silverstein did not grant the TRO; the important point is that the Special Master perceived this move by Blue Cross as a potentially catastrophic economic event.
Other evidence the jury may have to consider includes the Attorney General's comment to Steward officials at a negotiation session that, Blue Cross "just do[es]n't want you to do business in this state." (SDF ¶ 86 (quoting Dep. of Joseph Maher at 182:21-183:17, SDF Ex. 7, ECF No. 206-7; see also Dep. of Ralph de la Torre at 167:17-23, SDF Ex. 1, ECF No. 206-1 ("The message is Blue Cross is going to do anything to keep you out. They literally cut off funds to a hospital that is going bankrupt, and the Special Master is powerless to change it. The judge, he's kind of there, kind of not. It's another body shouting a clear message that, 'They just don't want you.' ").
The objective of this assessment by Blue Cross was to "provide recommendations taking into account the relevant considerations and how best to strategically proceed." (SAUF Ex. 71 at 3, ECF No. 214-71.)
And, Steward contends there is more. This loss does not include the pre-material modification costs estimated to be $3 million per month, over a period of four to six months. (SAUF ¶ 180; SAUF Ex. 71; Dep. of Mark Waggoner at 184:12-185:3, SAUF Ex. 11, ECF No. 214-11.). Notably, even Blue Cross's estimate that Steward's proposal would cost $5.4 million is disputed. Steward suggests it would have cost $3 million, (see SDF ¶ 97; DSUF Ex. 102, ECF No. 169-33 (de la Torre letter to Attorney General) ), which, if true, would make this loss even greater.
Steward also offered Blue Cross a lower rate increase for Landmark of 7.4% per year for two years, to be offset by significant reductions in Blue Cross's payments to Steward's St. Anne's hospital. (See SDF Ex. 157 at 5, ECF No. 199-12.)
Blue Cross may ultimately be correct that the terms on which it eventually agreed with Prime are relevant for some purpose at trial, but the Court need not decide that question on this motion.
The 2012 Rate Approval Conditions provided,
Upon written request of an issuer, supported by the hospital's written agreement with the issuer's request, the Commissioner may apprоve exceptions to the index limit for those hospital contracts which the issuer demonstrates, to the Commissioner's satisfaction, align significant financial responsibility for the total costs of care for a defined population and set of services in manners generally consistent with the alternative Medicare payment mechanisms proposed under the Affordable Care Act. Issuers are encouraged to file such requests.
(SDF Ex. 43 at 2, ECF No. 206-43.) And former OHIC Commissioner Chris Koller testified: "[W]e would consider and possibly approve exceptions to the index limit and the quality incentives. In other words ... this was a wide-open area if the hospital and the issuer-the insurer-wanted to do something different." (Dep. of Chris Koller ("Koller Dep."), SDF Ex. 26 at 235:16-21, ECF No. 206-26.)
One final point: Steward also points to Blue Cross's conduct toward St. Anne's and Morton-two Steward-owned hospitals in the area of Massachusetts bordering Rhode Island with which Blue Cross had direct, prior dealings-as evidence of its anticompetitive bent toward Steward/Landmark. This too is complicated, but in summary, Blue Cross proposed shifting patients who used St. Anne's and Morton to the "BlueCard" program, which allowed Blue Cross to pay the reimbursement rates negotiated between Blue Cross Blue Shield of Massachusetts ("BCBSMA") and Steward, rather than renegotiating new contracts with new rates with these hospitals. Blue Cross forecasted that this move would annually save it $3.2 million. But it would lose about half of that because the BlueCard Program imposed a hefty administrative fee. (SAUF Ex. 89 at 4; SAUF Ex. 90.) So Steward offered Blue Cross a better deal: a new direct contract with St. Anne's at the same rates paid by BCBSMA, but without the administrative fee. (See SDF ¶ 136.) Steward's proposal offered Blue Cross the added benefit that its Medicare Advantage program subscribers could continue to access these hospitals, whereas under the BlueCard program, they could not. (See SAUF Ex. 89; SAUF ¶ 187.) Blue Cross rejected these entreaties as well, arguably forsaking short term profits for the purpose of further impeding Steward's effort to break into Rhode Island.
Like Steward's refusal-to-deal claim, the Court analyzes Steward's conspiracy counts brought under the Rhode Island Antitrust Act together with Steward's conspiracy counts brought under the Sherman Act. (See supra note 13.)
The law of conspiracy, like refusal-to-deal law, is no model of clarity for trial courts trying to make sense of-and apply-its standards. See, e.g., 1 John J. Miles Health Care and Antitrust Law § 2A:6 (2018) ("The line between permissible inference and impermissible speculation is not clear and never will be."); William H. Page, Tacit Agreement Under Section 1 of the Sherman Act, 81 Antitrust L.J. 593, 594 (2017) ("The outcomes on these motions depend in large part on what the courts think a Section 1 agreement is. Even after 125 years of Section 1 litigation, however, the meaning of that fundamental concept remains uncertain.").
Blue Cross is wrong to suggest that the law forbids only outright confessions of anticompetitive animus. See 3B Areeda & Hovenkamp, supra, ¶ 308. The Seventh Circuit has persuasively addressed this issue:
[N]o single piece of the evidence that we're about to summarize is sufficient in itself to prove a price-fixing conspiracy. But that is not the question. The question is simply whether this evidence, considered as a whole and in combination with the economic evidence, is sufficient to defeat summary judgment.... We tried in Troupe v. May Department Stores Co.,, 736-37 (7th Cir. 1994), to straighten out the confusing (and, as it seems to us, largely if not entirely superfluous) distinction between direct and circumstantial evidence. The former is evidence tantamount to an acknowledgment of guilt; the latter is everything else including ambiguous statements. These are not to be disregarded because of their ambiguity; most cases are constructed out of a tissue of such statements and other circumstantial evidence, since an outright confession will ordinarily obviate the need for a trial. 20 F.3d 734
In re High Fructose Corn Syrup Antitrust Litig.,
At the outset, Steward's monopolization and conspiracy claims are not mutually exclusive. The Court rejects Blue Cross's suggestion that because Steward argues Blue Cross had unilateral, illicit motives to exclude Steward, it necessarily acted "consistent with its unilateral self-interest" and thus could not have illegally conspired against Steward. To be clear, behavior consistent with unilateral self-interest refers to lawful independent conduct that furthers competition. See In re Flat Glass Antitrust Litig.,
It appears undisputed that this plan was conceived prior to Steward coming into the picture. This simple fact does not, however, defeat the powerful inference gleaned from the evidence that the treat-and-transfer model resurfaced with Steward in mind, once it entered the picture.
Although Thundermist is not directly linked to this part of Steward's theory, it does not have to be. See Pinkerton v. United States,
This is a reference to former State Representative and House Finance Committee Chairman, Steven Costantino, then-Secretary of Health and Human Services, with significant involvement in the Rhode Island health care and insurance marketplace. See Ian Donnis, Steven Costantino Appointed To Head Vermont Insurance Program, Rhode Island Public Radio (Feb. 9, 2015), http://ripr.org/post/steven-costantino-appointed-head-vermont-insurance-program. Constantino is now commissioner of the Department of Vermont Health Access. See
For purposes of this motion, the Court need not separately discuss Steward's conspiracy-to-monopolize and conspiracy-to-monopsonize claims, as the relevant analysis is the same.
Incidentally, the Court rejects Blue Cross's spin on Ocean State Physicians. A close reading of that opinion makes clear that, although it may be sufficient, it is not necessary for a plaintiff to lodge a successful antitrust claim in order to prove a claim for tortious interference with contractual relations or interference with prospective contractual relations. Ocean State Physicians,
Although, Blue Cross cannot, as a matter of undisputed fact, satisfy that test either.
The Red Team's motto was "Attack Adapt Advance" and its logo appears to be a hatchet enclosed within the "shield" of Blue Cross's emblem. (See, e.g., SAUF Ex. 29 at 2, ECF No. 214-29.)
Blue Cross has its own assignment of meaning to the Red Team documents, which may ultimately persuade the jury. The Red Team's September 2012 presentation to Blue Cross's ELT included a disclaimer that, "Information included in the presentation is for illustrative purposes only; names and scenarios do not represent real life situations and parties could be interchanged." (SAUF Ex. 31 at 2.) Despite Blue Cross's proviso, how close the Red Team's analysis tracks in time and substance the reality of what Steward was seeking to bring to Rhode Island does more than raise a few eyebrows-it raises a genuine factual dispute over the meaning of the Red Team documents to both Blue Cross and this case. Indeed, the Red Team's cast of characters included those with major influence in real-life negotiations, including Consultant Maria Montanaro. (See
This section cross-references Steward's previously filed Motion in Limine To Exclude Damages Testimony of Keith Ghezzi and Marc Sherman (ECF No. 161).