CA Court Dismisses Health Care Antitrust Claims Over Out-of-Network “Repricing”
The Superior Court of California for San Francisco County dismissed an antitrust lawsuit on Aug. 9 against a third-party vendor of health care cost-management products and services. This decision could impact other suits filed in the past several months alleging similar antitrust violations.
The defendant, MultiPlan, Inc., offers clients a variety of health care data and analytics services, including “repricing” of out-of-network claims. This service became the subject of the antitrust suit. The Superior Court found, among other things, that the plaintiff’s claims failed because out-of-network reimbursements were not a discrete product or service that could be bought, and the price of which could be fixed, through unlawful agreement.
In VHS Liquidating Trust v. MultiPlan Corporation, et al., the bankruptcy liquidator for a major health system in California alleged that a primary cause of its bankruptcy was an unlawful arrangement between MultiPlan and some of the nation’s largest commercial health insurers to fix out-of-network reimbursement rates at unreasonably low, anticompetitive levels. The plaintiff brought claims against MultiPlan for alleged violations of California’s Cartwright Act and Unfair Competition Law, asserting:
- Horizontal price fixing, including through a “hub-and-spoke” agreement
- Horizontal price tampering
- Horizontal unlawful exchange of competitively sensitive business information
- Vertical unlawful exchange of competitively sensitive business information
- Statutory unfair competition
The VHS court dismissed each of the plaintiff’s claims in full, without leave to amend, for failing to state facts sufficient to constitute a cause of action under California law.
The VHS court’s dismissal followed a motion to dismiss (i.e., a demurrer) filed by MultiPlan whereby it argued that an antitrust claim could not stand in the absence of a discrete product or service that can be bought and the price of which can be fixed through an unlawful agreement. The VHS court agreed and found that out-of-network reimbursement rates were not equivalent to the “price” a consumer might pay for health care services, nor do out-of-network reimbursements constitute a standalone product or service. The court thus concluded that out-of-network reimbursement rates do not constitute a “price” sufficient to maintain a price-fixing or tampering claim.
In concluding that the Cartwright Act claims could not survive, the VHS court relied heavily on federal case law analyzing similar issues under the Sherman Act. In addition to its analysis of the other antitrust claims, the court also rejected the claims for alleged unlawful exchange of competitively sensitive business information. The court noted that the exchange of pricing and business information is not invariably anticompetitive. Because these claims were derivative of the price fixing and tampering allegations, the court dismissed those claims as well.
Since the filing of the VHS complaint, numerous additional cases have been filed around the country asserting similar antitrust arguments against MultiPlan and commercial health insurers, primarily under the Sherman Act. Most of these actions were recently consolidated into a multidistrict litigation (MDL) in the Northern District of Illinois. The VHS court’s thorough discussion of federal antitrust case law analyzing the Sherman Act may provide insight as the MDL proceedings unfold.
Please contact Errol King, Katie Mannino, Craig Caesar, Paul LeBlanc, Taylor Crousillac, Brittany Alexander or any member of Phelps’ Health Care Litigation team if you have questions or need advice or guidance.