Reed Smith Client Alerts

The Seventh Circuit, on June 9, 2017, affirmed summary judgment against a hospital’s antitrust claims that it was substantially foreclosed from the market by its rival’s exclusive contracts with payors. The panel concluded that such contracts, which covered more than half of the commercially insured patients in the market, were permissible for the following reasons:

  • Exclusive payor-provider contracts are unlikely to “destroy competition” if they expire every one to three years
  • Legitimate, pro-competitive justifications, such as better rates, may support exclusivity between “must have” hospitals and restricted-provider networks
  • A lack of evidence showing price increases or harm to other industry participants suggests the absence of antitrust injury

Background and Trial Court Decision 

Methodist Health Services Corporation (“Methodist”) brought federal and state antitrust claims in the U.S. District Court for the Central District of Illinois against Saint Francis Health System (“St. Francis”), its chief rival in Peoria, Illinois. St. Francis is the largest of the six hospitals in the Peoria area and provides the most advanced services of any hospital in the area. Methodist, the second largest hospital in Peoria, alleged that it was substantially foreclosed from competing for commercially insured patients as a result of contracts between St. Francis and major commercial payors that prohibited the payors from including Methodist as an in-network provider in certain plans.