Recent Development by Catherine L. Cooksey
St. Luke's Surgicenter of the Surgical Care Center of Hammond (St. Luke's), a private for-profit ambulatory surgery center, brought an antitrust action against the hospital service district, North Oaks, and its private management company, Quorum Health Resources, Inc. (Quorum). St. Luke's alleged that the hospital violated the Sherman Act by using anticompetitive and unfair business practices in an effort to augment its share of the outpatient surgery market.
St. Luke's, located approximately one-quarter of a mile from North Oaks, provides outpatient surgical services. North Oaks, the facility for Hospital Service District Number 1 of Tangipahoa Parish, provides acute care services in addition to outpatient and inpatient surgery. The North Oaks hospital service district was created by the Tangipahoa Police Jury and is managed by Quorum, a private hospital management company.
St. Luke's claim alleged that North Oaks, in concert with its private manager, Quorum, engaged in unlawful anticompetitive practices, leveraging its monopolization of inpatient services to garner a competitive advantage in outpatient surgical care. Because North Oaks enjoyed a virtual monopoly in acute care services and inpatient surgery in the relevant market, it allegedly used its leveraging capacity to require managed care plans to sign exclusive contracts with North Oaks for inpatient and outpatient care, consequently stifling competition in the outpatient surgery market. In its contracting with managed health care plans, North Oaks allegedly negotiated exclusive contracts that required managed care plans to use the hospital's outpatient services before allowing the use of the hospital's inpatient facilities. St. Luke's initially sought a temporary restraining order to enjoin North Oaks from negotiating the exclusive contracts that would effectively deprive St. Luke's of those patients financially bound to the facilities covered by their managed care plans. Yet, the United States District Court for the Eastern District of Louisiana denied the request, and subsequently dismissed the case on the grounds that North Oaks was entitled to state action immunity from antitrust liability. A panel of the United States Court of Appeals for the Fifth Circuit affirmed the district court's dismissal and found North Oaks' state action immunity to be grounded in its classification as a political subdivision of the state coupled with state legislation that appeared to contemplate the ability of hospital service districts to engage in anticompetitive behavior violative of antitrust laws. Subsequently, the Fifth Circuit granted St. Luke's motion for rehearing en banc. The Fifth Circuit, sitting en banc, found that the statutory language bestowing powers upon the hospital service district did not reflect the state legislature's intent to allow hospital service districts to operate beyond the reach of the Sherman Act. Hence, the court held that North Oaks and its private manager, Quorum, did not qualify for state action immunity from antitrust liability and reversed the motion to dismiss. Surgical Care Center v. Hospital Service District No. 1, 171 F.3d 231, 232, 236 (5th Cir.) (en banc), cert. dismissed, 120 S. Ct. 37 (1999) (mem.).
About the Author
Catherine L. Cooksey.
Citation
74 Tul. L. Rev. 717 (1999)