Antitrust Law Daily Anesthesiologist fails to define relevant market for claims against hospital system
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Thursday, January 14, 2021

Anesthesiologist fails to define relevant market for claims against hospital system

By Nicole D. Prysby, J.D.

The anesthesiologist’s proposed market did not encompass all interchangeable substitute products because it did not include all hospitals and non-hospital environments where pediatric anesthesia services are rendered.

A pediatric anesthesiologist’s proposed market for his restraint of trade and monopolization claims against a hospital system was insufficient because it did not encompass all interchangeable substitutes, held the U.S. Court of Appeals in New Orleans in affirming a district court’s grant of summary judgment to the hospital system. The plaintiff alleged that the exclusivity provision of an agreement between Baptist Hospital System (BHS) and an anesthesiology provider precluded the plaintiff from providing pediatric anesthesia services at six BHS facilities. His claims failed because his proposed relevant market did not encompass all interchangeable substitute products—it excluded some hospitals and non-hospital environments where pediatric anesthesia services are rendered, including some where he himself practiced. His claims that the exclusive agreement was a per se illegal tying arrangement also failed, because tying arrangements are only illegal if they force purchases that would not otherwise be made. Every patient undergoing a surgical operation needs the services of an anesthesiologist, therefore no services were "forced" onto any unwilling patients (Shah v. VHS San Antonio Partners, L.L.C., January 13, 2021, Owen, P.).

The plaintiff was a board-certified anesthesiologist, specializing in pediatric anesthesiology. In 2006, he joined STAR Anesthesia and entered into a series of agreements to become the exclusive provider of anesthesia at four hospitals run by BHS. BHS agreed to provide STAR a pediatric income guarantee of $500,000. In 2016, STAR and BHS negotiated to amend their agreement and agreed to eliminate the pediatric income guarantee. In December, as a result of the aftermath of the elimination of the pediatric income guarantee, STAR terminated its relationship with the doctor. The exclusivity provision of the BHS-STAR agreement precluded the plaintiff—no longer affiliated with STAR—from providing pediatric anesthesia services at six BHS facilities.

After losing his wrongful termination suit against STAR, the doctor filed suit against BHS and three of its officers for tortious interference with a business relationship and for violations of the Sherman Act. The federal district court held that the plaintiff failed to define a relevant market and failed to show damage to the relevant market beyond his own injuries. The plaintiff appealed.

The Fifth Circuit found that the plaintiff failed to define a relevant market. He defined the product market as "pediatric anesthesiologists" and the geographic market as "Bexar County and the seven contiguous counties." The BHS parties argued that the plaintiff’s proposed product market failed to encompass all interchangeable substitutes. The court agreed, finding that the plaintiff’s proposed relevant market did not encompass all substitute products because it did not include the non-BHS facilities that the BHS parties contend serve as viable alternatives to BHS facilities. The plaintiff’s proposed market excluded some hospitals and non-hospital environments where pediatric anesthesia services are rendered—including some where the plaintiff himself practiced. His proposed market was therefore insufficient as a matter of law.

The plaintiff also claimed that the exclusive BHS-STAR agreement was a per se illegal tying arrangement. He failed to raise this argument in the lower court, but even if he had, it failed because tying arrangements are only illegal if they force purchases that would not otherwise be made. Because every patient undergoing a surgical operation needs the services of an anesthesiologist, no services were "forced" onto any unwilling patients. The court also held that because the plaintiff’s Sherman Act claims failed, his claim that the BHS parties tortiously interfered with his business relationships also failed.

This case is No. 20-50394.

Attorneys: Lucas C. Wohlford (Barnes & Thornburg, L.L.P.) for Jaydeep Shah. Christopher Allen Rogers (Haynes & Boone, L.L.P.) for VHS San Antonio Partners, L.L.C. d/b/a Baptist Health System d/b/a North Central Baptist Hospital and Tenet Healthcare Corp.

Companies: VHS San Antonio Partners, L.L.C. d/b/a Baptist Health System d/b/a North Central Baptist Hospital; Tenet Healthcare Corp.

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