Not what you're
looking for? Try an advanced search.
Buy This Entire Record For
HEALTHAMERICA PENNSYLVANIA v. SUSQUEHANNA HEALTH SYSTEM
April 17, 2001
HEALTHAMERICA PENNSYLVANIA, INC., COVENTRY HEALTH AND LIFE INSURANCE COMPANY, AND COVENTRY HEATLHCARE MANAGEMENT CORPORATION, PLAINTIFFS
SUSQUEHANNA HEALTH SYSTEM, THE WILLIAMSPORT HOSPITAL & MEDICAL CENTER, DIVINE PROVIDENCE HOSPITAL, MUNCY VALLEY HOSPITAL, AND SUSQUEHANNA PHYSICIAN SERVICES, DEFENDANTS.
The opinion of the court was delivered by: James M. Munley, U.S. District Judge
As alleged in plaintiffs' complaint,*fn1 the facts are as follows: In
1994, the two dominant hospital systems in Northcentral Pennsylvania
region (Providence Health System and North Central Pennsylvania Health
System) merged to create Defendant Susquehanna Health System (hereinafter
"SHS"). The result of the merger was a single entity with overwhelming
market power in the markets for inpatient and outpatient hospital
Prior to the 1994 merger, two health systems were present in the
Lycoming County/Northcentral, Pennsylvania area. They were Providence
Health System, Inc., which included Divine Providence Hospital and Muncy
Valley Hospital, and the North Central Pennsylvania Health System, which
was comprised of only one hospital, the Williamsport Hospital and Medical
Center. All three of these hospitals are located in Lycoming County. Two
of them (Divine Providence Hospital and Williamsport Hospital and Medical
Center) are located in Williamsport, Pennsylvania and the third, Muncy
Valley Hospital, is found approximately fifteen miles away in Muncy,
Pennsylvania. Because of the merger, all of these hospitals are now part
of SHS. The closest hospital that is not part of SHS is at least thirty
miles away, and thus, too far away to be a reasonable alternative to
patients living in the area.
The merger was allowed by the Attorney General of Pennsylvania in
exchange for the merging parties' agreement to enter into a consent
decree. The decree, required, inter alia, that the merged entity achieve
certain savings from increased efficiency and pass those savings on to
consumers in the form of lower prices in each of the five years following
the merger. The five-year period expired in July 1999. Subsequent to
July 1999, SHS has successfully demanded significant price increases from
the plaintiffs for hospital services and indicated that they intend to
extract similar increases from all other payors in the market as their
contracts are negotiated for renewal.
The physician services and hospital services contracts that the
plaintiffs previously had contained different renewal dates. Therefore,
the plaintiffs did not anticipate renegotiating the contracts at the same
time. However, at the time for renewal of the physician services
contract, SHS terminated the contract for hospital services and informed
the plaintiffs that they would be required to renegotiate the physician
and hospital contracts jointly.
Accordingly, plaintiffs have filed a complaint alleging that the
defendants engaged in an illegal hospital merger and a series of illegal
physician practice acquisitions that have reduced competition and
increased the prices that the local community must pay for health care
services. Plaintiffs' complaint is comprised of three counts. The first
count alleges an illegal hospital merger in violation of the Section 7 of
the Clayton Act, 15 U.S.C. § 18, and Section 1 of the Sherman Act,
15 U.S.C. § 1. The second count involves allegations of illegal
physician acquisitions in violation of the same statutory sections.
Illegal restraint of trade in violation of the Section 1 of the Sherman
Act, 15 U.S.C. § 1 is averred in the complaint's third count. Along
with damages, the plaintiffs seek an injunction to force the defendants
to price their services at competitive levels and prohibit them from
tying the sale of hospital services to physician services.
Defendants have filed a motion to dismiss Count III of the plaintiffs'
complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The
motion has been fully briefed and argued, bringing the matter to its
present posture. For the reasons that follow, the motion to dismiss will
When a 12(b)6 motion is filed, the sufficiency of a complaint's
allegations are tested. The issue is whether the facts alleged in the
complaint, if true, support a claim upon which relief can be granted. In
deciding a 12(b)6 motion, the court must accept as true all factual
allegations in the complaint and give the pleader the benefit of all
reasonable inferences that can fairly be drawn therefrom, and view them
in the ...
Buy This Entire Record For