RE­GIONAL NEWS:

12-year-old Illi­nois merger faces re­vived law­suit

Modern Healthcare - - FRONT PAGE - Joe Carl­son

Illi­nois an­titrust case is re­vived and other news

Afederal ap­peals court has re­vived the prospects for a class-ac­tion law­suit al­leg­ing anti-com­pet­i­tive price in­creases stem­ming from the much-lit­i­gated 12-year-old hospi­tal merger of Evanston (Ill.) North­west­ern Health­care and High­land Park (Ill.) Hospi­tal in Chicago’s north­ern sub­urbs.

Plain­tiffs in­clud­ing sev­eral pa­tients and a union pen­sion fund say the Jan­uary 2000 hospi­tal merger al­lowed the sys­tem—to­day known as Northshore Univer­sity Healthsys­tem—to il­le­gally in­crease its prices at least 9% higher than they would have oth­er­wise grown. Fed­eral an­titrust au­thor­i­ties in 2005 and 2007 found that the merger led to higher prices.

The class-ac­tion plain­tiffs are ask­ing to be awarded triple dam­ages un­der the Clay­ton Act for the higher prices they paid, plus a per­ma­nent in­junc­tion against fu­ture “un­law­ful ex­er­cise of mo­nop­oly power” by the sys­tem’s two hos­pi­tals on four cam­puses.

Northshore has de­nied the mar­ket-power al­le­ga­tions and said the 2007 law­suit should be blocked by statutes of lim­i­ta­tions, since it came so long af­ter the merger. The sys­tem also says no class should be cer­ti­fied in the law­suit, since pa­tients’ in­di­vid­ual health­care prices de­pend on too many dis­crete fac­tors to be con­sid­ered com­mon to all mem­bers—an ar­gu­ment that was struck down by the 7th U.S. Cir­cuit Court of Ap­peals.

On Jan. 13, U.S. Cir­cuit Judge David Hamil­ton wrote that a group of plain­tiffs does not have to show they sus­tained dam­ages to an iden­ti­cal de­gree in or­der to be cer­ti­fied as a class, but rather only that they can make a co­her­ent ar­gu­ment to a jury that they were all af­fected by the same un­der­ly­ing price dy­nam­ics.

Hamil­ton or­dered the dis­trict court that had de­nied class cer­ti­fi­ca­tion in April 2010 to re-ex­am­ine the ques­tion of whether to al­low the class to ar­gue its price-fix­ing claims be­fore a jury. He noted that although the com­plex mar­ket for health­care ser­vices could re­quire a more complicated anal­y­sis at trial than was pre­sented by a plain­tiffs’ ex­pert in the ini­tial le­gal bat­tle over class cer­ti­fi­ca­tion, that doesn’t de­rail class cer­ti­fi­ca­tion.

“In essence, it is im­por­tant not to let a quest for per­fect ev­i­dence be­come the en­emy of good ev­i­dence,” Hamil­ton wrote, adding later in the 45-page opin­ion that the dis­trict court erred be­cause it “asked not for a show­ing of com­mon ques­tions, but for a show­ing of com­mon an­swers to those ques­tions.”

“We are re­view­ing the rul­ing with coun­sel and have no fur­ther com­ment,” Northshore spokesman Jim An­thony said.

David Hansel­man, a Chicago part­ner with Mcder­mott Will & Emery not in­volved with the case, said the rul­ing in fa­vor of the clas­s­ac­tion plain­tiffs was sur­pris­ing par­tic­u­larly be­cause it came out of the 7th Cir­cuit, which is gen­er­ally con­sid­ered more con­ser­va­tive than other cir­cuit courts.

“The court still held that a plain­tiff seek­ing class cer­ti­fi­ca­tion needs to prove an­titrust im­pact across the class,” he said. “But it held that the method­ol­ogy em­ployed by the plain­tiffs’ ex­pert was po­ten­tially ca­pa­ble of do­ing so.”

The com­plaint—now called Mess­ner v. Northshore Univer­sity Healthsys­tem and in­clud­ing con­sol­i­dated claims from sev­eral law­suits—was filed shortly af­ter the Fed­eral Trade Com­mis­sion and an ad­min­is­tra­tive law judge for the com­mis­sion ruled that ev­i­dence in­clud­ing e-mails from the hospi­tal ex­ec­u­tives showed that price in­creases had not only re­sulted from the merger, but that they had been a mo­ti­vat­ing fac­tor be­hind it.

That long-fought case with the FTC be­came one of the sem­i­nal health­care an­titrust cases in re­cent years af­ter the trade com­mis­sion de­cided in 2007 that even though prices had risen through anti-com­pet­i­tive means, di­vesti­ture was too ex­treme a rem­edy given all the time that had passed.

The sys­tem was in­stead al­lowed to use the un­usual rem­edy of main­tain­ing sep­a­rate bar­gain­ing teams with in­sur­ers as a way to pre­vent the sys­tem’s mar­ket power from un­duly in­flu­enc­ing prices.

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