Cascade Health Solutions v. PeaceHealth — Sept. 2007 (Summary)

ANTITRUST

Cascade Health Solutions v. PeaceHealth
No. 05-35627 (9th Cir. Sept. 4, 2007)

In this antitrust case between two competing hospitals, the Ninth Circuit Court of Appeals vacated the jury verdict in favor of the plaintiff on claims of attempted monopolization and price discrimination and also vacated the lower court’s summary judgment in favor of the defendant on a tying claim.

The hospitals are the only two providers of hospital care in the county in which they are located. The plaintiff hospital alleged that the defendant hospital engaged in anticompetitive conduct by offering insurers “bundled” or “packaged” discounts, and substantial discounts on tertiary services if the insurers made the defendant its sole preferred provider for all services (primary, secondary and tertiary).

The court concluded that the lower court’s jury instructions contained an error in law. This conclusion was based on the court’s holding that a plaintiff who challenges a package discount as anticompetitive must prove that, when the full amount of the discounts given by the defendant is allocated to the competitive product or products, the resulting price of the competitive product or products is below its average variable price of producing them. The court also found error in the jury instructions regarding the price discrimination claim because the instructions did not require the jury to find that the defendant priced its products below cost.

Lastly, the summary judgment for the defendant on the tying claim was vacated because the court concluded that the defendant’s practice of giving a larger discount to insurers which dealt with it as an exclusive preferred provider may have coerced some insurers to purchase primary and secondary services from the defendant rather than from the plaintiff.