West Penn Allegheny Health System, Inc.v. Upmc; Highmark, Inc.

Facts

P is Pittsburgh's second-largest hospital system; it has a share of less than 23% of the market. D is Pittsburgh's dominant hospital system. It enjoys a 55% share of the market for hospital services, and its share of the market for tertiary and quaternary care services exceeds 50%. Highmark (D) is the dominant insurer in the market for health insurance floating between 60% and 80% share since 2000. D has been hostile to P since its inception. Highmark (D) has been friendly and loaned them money to merge because, without P, D could own the market and dictate pricing to Highmark (D). Since P's formation, D executives have repeatedly said that they want to destroy P, and they have taken action to further that goal on more than a few occasions. D and Highmark (D) have historically been at opposite ends on many occasions with Highmark (D) trying to make sure D does not get a virtual monopoly in the marketplace. In 1998, D offered a 'truce' to Highmark (D) where each would use its market power to protect the other from competition. In the summer of 2002, Highmark (D) decided to accept D's offer of a truce. D agreed to use its power in the provider market to prevent Highmark (D) competitors from gaining a foothold in the market for health insurance, and Highmark (D) agreed to take steps to strengthen D and to weaken P. D refused to enter into competitive provider agreements with Highmark's (D) rivals. D shrunk the UPMC Health Plan (Highmark's (D) main competitor in the insurance market). It cut the advertising budget and increased its premiums, which led to a sharp drop in enrollment. D refused to sell the Health Plan to insurers interested in buying it, which might have revived it as a Highmark (D) competitor. D acknowledged that it decided to shrink the Health Plan as a result of negotiations with Highmark (D). Highmark (D) agreed to take its Community Blue Plan off the market. Highmark (D) paid UPMC supracompetitive reimbursement rates. Highmark (D) paid UPMC supracompetitive reimbursement rates. To afford UPMC's reimbursements, Highmark (D) increased its insurance premiums and D insulated it from competition. Highmark (D) provided D with $230 million to build a new facility for its children's hospital, $70 million of which was a grant and the remainder of which was a low-interest loan. Highmark (D) vowed not to offer a health plan that did not include D as an in-network provider. Health insurance premiums rose. Highmark (D) publicly supported D's acquisition of Mercy Hospital, which, other than P, was D's only other competitor in the market for tertiary and quaternary care services. Highmark (D) leaked confidential financial information regarding P to D, 'which in turn leaked a distorted version of the information to credit-rating agencies and the business media in an attempt to destroy investor confidence in P.' Highmark (D) cut P off from its financial support by rejecting P's requests to refinance the $125 million loan that was used to fund P's 2000 merger. Highmark (D) maintained P's reimbursement rates at artificially depressed levels and repeatedly refused to increase them. Highmark (D) also waived its $500,000 per health system grant limit it strictly enforced with P and waived it for D funneling $8 million to D. Ds reaped record profits. P's net income rose from $23 million in 2002 to over $618 million in 2007, and Highmark's (D) net income rose from $50 million in 2001 to $398 million in 2006. P struggled during the same time. D has systematically 'raided' key physicians from P. D has pressured community hospitals into entering joint ventures with it for the provision of oncology services. Unless they entered the joint ventures, D would build D satellite facilities next to them, draining their business. D has repeatedly made false statements about P's financial health in order to discourage investors from purchasing P's bonds. P sued Ds for unfair competition, conspiracy, and tortious interference with business relations under state and federal law. Ds moved to dismiss. The court held it must subject pleadings in such cases to heightened scrutiny. The Court dismissed the conspiracy claims on the ground that the complaint fails to allege a conspiracy. According to the Court, the complaint 'is long on innuendo and frequently repeats the buzz word that the defendants 'conspired,'' but ultimately fails to allege 'any facts which evidence a concerted action.' The Court declined to exercise supplemental jurisdiction over the state-law claims. The court dismissed the action. P appealed. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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