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LifeWatch Services, Inc. v. Highmark, Inc.

United States District Court, E.D. Pennsylvania

April 3, 2017

LIFEWATCH SERVICES, INC., Plaintiff,
v.
HIGHMARK, INC., et al., Defendants.

          MEMORANDUM

          EDUARDO C. ROBRENO, J.

         This is an antitrust action alleging a nationwide conspiracy amongst Blue Cross and Blue Shield Association and the administrators of several separately owned, locally operated Blue Cross and Blue Shield Plans to deny insurance coverage for certain mobile cardiac outpatient telemetry devices produced by Plaintiff LifeWatch Services, Inc. The defendants have moved collectively to dismiss the currently operative complaint in this case. For the reasons that follow, the Court will grant the motion.

         I. FACTUAL BACKGROUND

         A. Mobile Cardiac Outpatient Telemetry

         A mobile cardiac outpatient telemetry (“MCOT”) device is one of several types of arrhythmia monitoring devices that a physician may prescribe to remotely record a patient's electrocardiograph (“EKG”), which displays a patient's heartbeat patterns to enable physician diagnosis. See Third Amended Compl. ¶¶ 29, 33, ECF No. 90 (hereinafter “TAC”). In general, four different types of arrhythmia monitoring devices may be used for EKG testing: (1) Ambulatory holter electrocardiography devices (also known as Holter monitors), (2) ambulatory event monitors, (3) insertable monitors, and (4) telemetry monitors (also known as MCOT devices). See id.

         According to Plaintiff LifeWatch Services, Inc. (“LifeWatch”), MCOT devices offer several advantages over other types of arrhythmia monitoring devices, including an ability to “record both normal and abnormal heart activity . . . and . . . transmit all of the data promptly, ” “store all of the cardiac data during the time when the patient wears the monitor, resulting in more data collection, ” and “detect certain arrhythmias based on user-definable input formulae.” Id. ¶ 33(a)-(c). Additionally, MCOT devices “do[] not require a patient's intervention to either capture or transmit data on an arrhythmia, ” and thus “the time from recording to transmission and subsequent physician notification and intervention is significantly reduced” as compared to other devices. Id. ¶ 33(d)-(e). These features arguably make telemetry superior to all other types of monitoring, particularly for low-risk patients experiencing infrequent arrhythmias. Id. ¶ 34(c).

         B. The Parties

         LifeWatch, a Delaware corporation headquartered in Rosemont, Illinois, is “one of the two largest sellers of telemetry monitors.” Id. ¶ 11. Their specific product at issue in this case, originally marketed as the “Lifestar Ambulatory Cardiac Telemetry” and later renamed the “LifeWatch MCT 3-Lead, ” is referred to by the parties as “ACT.” Id. LifeWatch has two patient-monitoring facilities for privately insured patients, one in Philadelphia and the other near Chicago, from which “LifeWatch personnel analyze data transmitted from LifeWatch's devices, which are mostly ACT devices.” Id.

         Blue Cross and Blue Shield Association (the “Association”) is a national federation of thirty-six health insurance plans (the “Blue Plans”) that, though each separately owned, are all licensed by the Association to use the Blue Cross name. Id. ¶ 1. The Association is the largest commercial health insurer in the United States. Id. ¶ 3. It provides insurance coverage to approximately 105 million Americans, or roughly fifty percent of all commercially insured individuals in the United States. Id. ¶ 12. In addition to the Association, Defendants in this case include the following parties, all of which are administrators of various Blue Plans: Blue Cross; WellPoint, Inc.; Horizon Blue Cross Blue Shield of New Jersey; Blue Cross Blue Shield of South Carolina; and Blue Cross Blue Shield of Minnesota (collectively with the Association, “Defendants”).[1] Id. ¶¶ 13-16.

         C. Allegations

         The thrust of LifeWatch's complaint is that, despite ample scientific evidence supporting the efficacy of telemetry, Defendants have continuously conspired for years to deny insurance coverage for MCOT devices and services. See Id. ¶¶ 5-8, 46. LifeWatch alleges that “[t]here is a reason why, for more than a decade, almost all Blue Plans have uniformly held, year after year, that for all patients and all conditions, telemetry is never ‘medically necessary, '” despite evidence to the contrary. Id. ¶ 56. This reason, according to LifeWatch, is “a horizontal anticompetitive agreement” they refer to as “the Blue Cross ‘Uniformity Rule.'” Id.

         LifeWatch claims that the “Uniformity Rule” is an illegal agreement amongst Blue Plans to substantially conform to the terms of a model medical policy providing “directions . . . on what claims to deny and what to accept.” Id. ¶ 57. These terms are allegedly set by a “Medical Policy Panel” that meets several times a year and considers votes by each Blue Plan “as to whether a particular service, procedure, or medical device should be covered.” Id. ¶ 59. LifeWatch alleges that “all Blue Plans agree to adopt all or substantially all of the Association's coverage decisions, as expressed in the model ‘medical policy, '” and that, “[t]o enforce the Uniformity Rule, the Association ‘audits' each Blue Plan's medical policies.” Id. ¶ 58. According to LifeWatch, “[i]f an audit finds substantial deviations from the model medical policy, the Blue Plan can be penalized and risks losing the right to use the Blue Cross name.” Id.

         Specifically with regard to MCOT devices, LifeWatch alleges that Defendants “have repeatedly voted on the model medical policy that requires blanket denial of telemetry coverage.” Id. ¶ 60. LifeWatch argues that “this policy is inconsistent with the medical literature; the opinions of the independent experts who specifically rejected [Defendants'] position; and the conclusions of other commercial medical insurers, Medicare, and Medicaid.”[2] Id. ¶ 61. In light of this alleged inconsistency, LifeWatch believes that the Blue Plans have continuously denied coverage for MCOT devices “not because of an independent evaluation of the evidence, but pursuant to their horizontal agreement to make consistent coverage denials and refuse to deal in disfavored products, such as telemetry.” Id.

         LifeWatch claims that, as a direct result of Defendants' “concerted refusal to deal, ” LifeWatch “suffers reduced revenue and profits and sees its incentive to innovate diminished.” Id. ¶ 63. LifeWatch alleges further that Defendant has “distorted the outpatient cardiac-monitoring device market and substantially reduced the demand for and output of telemetry.” Id. ¶ 87. This distortion, LifeWatch argues, causes anticompetitive effects, including reduction in the quality of patients' cardiac monitoring; deprivation of the benefit to patients of quality competition; reduction of the output of MCOT services in the relevant markets; and inhibition of research and development, innovation, and future competition to improve the quality of MCOT services. See Id. ¶¶ 75-80.

         Based on the foregoing facts, LifeWatch brings a single count of conspiracy to restrain trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Id. ¶ 95. LifeWatch seeks a permanent injunction prohibiting Defendants from “entering into, or honoring or enforcing, any agreements that cause them to act in concert in deciding whether to deny or restrict coverage for telemetry” along with treble damages, reasonable costs, and attorneys' fees. Id. ¶ 98.

         II. PROCEDURAL HISTORY

         The motion presently before the Court arrived along a circuitous route. LifeWatch filed its initial complaint in this Court on September 10, 2012. ECF No. 1. It was not until August 6, 2015, that Defendants filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).[3] ECF No. 48. After the parties stipulated to several extensions, LifeWatch filed its response to the motion to dismiss on September 24, 2015, ECF No. 61, and Defendants moved for leave to file a reply brief in further support of their motion to dismiss, ECF No. 64.

         During late 2015 and early 2016, the Court entertained a series of motions regarding a request by Plaintiff's former counsel to withdraw from the case. See ECF Nos. 69-85. These proceedings, which included a hearing held on November 3, 2015, ECF No. 77, ultimately resulted in the substitution of new counsel for Plaintiff, who filed an unopposed motion for leave to file a third amended complaint on February 16, 2016, ECF No. 87. The Court granted LifeWatch leave to file a third amended complaint on February 17, 2016.[4] ECF No. 89.

         LifeWatch filed its third amended complaint on February 25, 2016, ECF No. 90, and it is this complaint that Defendants now seek to dismiss.[5] The Court held a hearing on the motion on December 19, 2016, ECF No. 110, and grants that motion today.

         III. ...


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