Cascade Health Solutions v. Peacehealth

515 F.3d 883 (2008)

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Nature of the Case

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Facts

P and D are the only two providers of hospital care in Lane County, Oregon. P provides primary and secondary care. D offers the same plus tertiary care as well. D operates three hospitals, while P operates one. D has a 90% market share of tertiary neonatal services, a 93% market share of tertiary cardiovascular services, and a roughly 75% market share of primary and secondary care services. There are three major participants in the market for hospital services: hospitals, insurers, and patients. Hospitals provide services to patients and sell services to insurers. Insurers are usually commercial health insurance companies that seek to buy medical services from hospitals on the best terms possible. The insurers, in turn, sell insurance services to patients and employers. Patients buy health insurance from insurers (often through their employers) and sometimes buy services from hospitals. Hospitals negotiate discounts with insurers called reimbursement rates. A 90% reimbursement rate price means that, when the insurer must purchase services from the hospital, the insurer gets a 10% discount off the hospital's regular price, also called the chargemaster or list price. P sued D alleging monopolization and conspiracy to monopolize. P alleged that D engaged in anticompetitive conduct by offering insurers 'bundled' or 'package' discounts. D offered insurers discounts of 35% to 40% on tertiary services if the insurers made D their sole preferred provider for all services--primary, secondary, and tertiary. Before trial, the district court granted summary judgment to D on P's tying claim, concluding that P had not presented any evidence that D 'coerced' insurers into purchasing primary and secondary services from it in order for the insurers to obtain tertiary services. At trial on the remaining claims, P introduced evidence of a few specific instances of D's bundled discounting practices. For example, Regence (insurance company) considered adding P as a preferred provider of primary and secondary services. When Regence's contract with D came up for its annual renewal, under one proposal, D would remain the only preferred provider. Under the other proposal, P would be added as a preferred provider. D offered an 85% reimbursement rate for all services if it remained Regence's sole preferred provider of primary, secondary, and tertiary services, and a 90% reimbursement rate if P was added as a preferred provider of primary and secondary services. Regence declined to include P as a preferred provider. P received admission as a preferred provider of primary and secondary services under the preferred plan offered by Providence. D then increased its reimbursement rate with Providence from 90% to 93%. The evidence showed that insurers who made D their exclusive preferred provider across all services paid lower reimbursement rates than insurers who purchased tertiary services from D, but at least some primary and secondary services from P. The court did not allow the jury to consider relative efficiency in offering bundled services before determining the likelihood of anticompetitive effects. The jury rejected P's claims of monopolization, conspiracy to monopolize, and exclusive dealing in its verdict for D on those issues. the jury found in favor of P on its claims of attempted monopolization, price discrimination, and tortious interference. Both parties appealed.