morning your honor smith please the court my name is richard greenberg and i'm here for methodist medical center of the plaintiff appellant in this case this and i trust case in the central district of illinois involves exclusive dealing health care contracts and there are two key factual aspects to this case one is o s f conceded monopoly power which allows it to both restrict competition and to charge super competitive prices which are not justified by either the quality uniqueness or sophistication of its services how long are these exclusive contract the exclusive contract with caterpillar was nine years although it had a ten year contract before that with humana it was seven years and then it was renewed for a like period in two thousand and fifteen for health alliance it was five years such contracts we were not permitted to be at the bargaining table your honor what does that mean means o s f is its muppets monopoly power to preclude i understand so they have exclusive it does provide certain unique services and the fear i believe which is in the record is that if they did not have o s f in their networks that o s f could charge outrageous prices for its few unique services ninety percent of the services that were offered by o s f were also offered by methodist and in fact in terms of quality methodist was the same or better than o s f however then why didn't these companies sign with with you they were for pediatric care and well why don't you have a unit like that we didn't have a unit like that you know creating of like yes we didn't have a unit like that for two reasons but the main reason is that because of the exclusive contracts that i'm talking to before the exclusive contracts before you have contracts these various services you the testimony in this case by blue cross blue shield is that in all of the state of illinois o s f has the only hospitals with which it has exclusive dealing arrangements and yet it pays higher prices to o s f than it does to hospitals that don't have exclusive feelings so it's kind of caught over a barrel i don't understand what it doesn't have to deal with no seth can deal with you if it deals with us then o s f will charge outrageous prices too for some of its unique services which would make the contract unprofitable for the insurers what unique services like what the unique services was it had a level one trauma center it revenue to grow up in fact in two thousand and nine methodist hired a health care consultant kathleen hall this is in the record and and was discussing the question of whether it would build replacement hospital and possibly with new services and the recommendation of kathleen hall was that methodist could not afford to build a replacement hospital unless it got into the blue cross blue shield p p o network because otherwise it would not generate sufficient revenue so we think that this dominant i mean for purposes of summary judgment o s f has conceded its monopoly power and i think this is one of those cases where you mean by monopoly power they have exclusive contracts the services i think one of the answers is is probably best described by o s s own expert at paragraph one thousand that alan will exert report he says the potential inclusion of methodist in the b c b s i l p p o network had been a subject of ongoing negotiations between b c b s i l and st francis since at least two thousand and five so it was methodist competitor and blue cross blue shield of st francis speak you to it they didn't beat us to it we asked several times if we could discuss potentially discussed being in the contract every time it was up for and we were told on some occasions no we cannot discuss that because a less affluent let us and and in fifteen years we were only allowed to propose rates one time and after w allow methodist then which is consistent with o s s policy it's com it's managed care country actually policy was to get exclusive contracts its c e o ordered the head of managed care contracting never to discuss the question of getting rid of exclusivities with blue cross blue shield it never did and even though blue cross blue shield a many many occasions over the years asked o s f to provide rates for open networks never even showed what those rates would be should you hand and did you complain to the justice department or department the department of health if you're being screwed provide the complaint to the attorney general's office and we did do that no government agency is i think would be normally very interested in a case like this but i'm fortunately the constrained by resources and and personnel and we can't dictate their agenda and what their put their priorities are with a district judge focused they should substantially  exclusively on being foreclosed correct and she went into percentages and i don't mind was the thought that they were only restrained from about twenty percent of the market  at least on some things and the must have an issue with whatever they call themselves or with for the st francis whatever they did frankly had the exclusive everybody doesn't do but some people think you've got to have that there for catastrophic stuff and things like that that it does seem that the district judge went through a pretty thorough examination about the other foreclosure issue and you were not sufficiently harmed by that who want to ruin your honor one of the points on appeal is that the district court judge with all with all due respect use the wrong analysis in analyzing foreclosure for example at the district court determined that a significant percentage should be deducted from our foreclosure because we serve some patients out of network however as this court articulated in  its october thirty one two thousand and sixteen opinion and f t c versus advocate hospital care is sold in in two stages the first stage it is where hospitals compete with each other to get insurers networks and then what those insurers will will charge the second stage which is not price sensitive the first stage is highly price sensitive is is where the hospitals and network may compete against each other on amenities location and so on for patients i think we have established that in that work status here is the critical bridge to competition and the real question is whether it's an alternative just because as a potential alternative i think you have to assess whether it has any practical ability to restrain the power of the monopolist and i think here are the monopolist it's just that they just there they have contracts and those contracts expire you can compete for the contracts i i with all with all due respect besides the thirty million dollars in consumer look at chicago you have northwestern a gigantic sprawling complex of hospitals clinics and this is all very modern very very popular and then you have the university of chicago hospital which is much smaller but still high quality and they have a lot of little emma you have a lot of lesser hospitals all over the place no one is saying break up northwestern because it's the most successful  hospitals in much more expensive locations than peoria o s f has the highest prices twenty percent higher than the next highest teaching hospital even though those other hospitals have more sophisticated as well you think that's high prices is that from a consumer's perspective they are they really only know two things about price they know that if they go in network which they're vies to do by their insurers their employers an ad to seek advocacy groups if they stay in network doesn't matter what hospital they go to the the price is going to be the same and it's not going to be very much they also know that if they go out of network it's going to be higher and personally higher to them so the consumers don't really have a choice which is why we think it is so critical that in network status be be evaluated as and recognize as the critical bridge to the competition in this area serving out of network patients is a little bit like the fact that if for example the microsoft case netscape had access to the full market however it because it couldn't get its software preloaded on on the microsoft's system just department suit nothing happens well it's always tough to to make predictions about what will happen especially about the for the future but still the law is i think that well the point made in that case is still it's still significant i think the case law stablish is that if you're going to look at a potential alternative it can't just be a possible alternative it has to be viable viable in the sense of being practical and feasible as a means to constrain competition you say though that the monopoly that you refer to i assume you mean the things that only st francis can do that that's what i do you only thing you've even identified have a monopoly power because they're the only ones that can do this very sophisticated and you know you say  nato organ transplant maybe a couple of others where you were methodist does not have the skilled people to do that is that what you see as monopoly that is the source of it then focus on that if yes what you're going to do because when you see him in monopoly it's not the case with most everything those of us who are consumers we call them preferred providers in network right and you know you always want to go to the doctor is byford provider and so you know other people are kind of pros now and if they're not a preferred provider and doctors fight with that and but who gets to be so so we have a lot of people who are in the mix the competition not just the hospitals but you have the insurance companies you have the doctors and medical and in the very basic consumer i agree with that your honor however in this case what we have alleged the relevant product markets to be in which the district court agreed with us was the sale to commercial payers of inpatient acute care hospital services and when when the when the district court looks at consumers for example an out of network treatment it's not even evaluating the relevant market and as this court sent an f t c versus addict advocate yes there are although for the whole relevant period up up until today i s f has been able to sustain a very high market share over fifty percent and the reason it's been able to do that is is that  a dominant firm exercising monopoly power in appropriately we believe that strategically arranges exclusive dealing contracts can really squeeze its competitor and in our particular case it really prevented us from effectively competing and from growing in a way that would allow us to compete with that and i think the cases recognized then supply and others that the delayed growth from that sort of from that sort of arrangement because methodist is forced to explore less expect any more expensive and less efficient alternatives is consumer harm and we think we think that in addition we have shown for closure by by virtue of of the thirty million dollars in consumer harm and by other things patients don't have the choice to go to to  methodist they're denied the ability to get higher policy services on the many services are they complaining yes they're complex they have complained they've complained that caterpillar went  to blue cross blue shield and said we really think you'd need to let methodist in your network there have been letters written to blue cross blue shield by by brokers and others saying let methodist in network in fact methodist itself has said but for the exclusivity provision we would have methodists in network in fact blue cross blue shield said that because of the irrational  power in the market they were not able to do it on a contractual basis i mean it was your shot and exclusive contract excuse me you wouldn't sign of an exclusive contract with the customer you method exclusive network or an open network these are the prices you choose and whatever you want that's what we will do and so there's a big difference in the way we approach the market and you know the hammered out why don't you want to have a contract we if we want to be customer friendly we want to serve our customers you go up a network who who who defines the network the insured defines the network the insurer in most cases the insure just because they had best excuse these areas which they're the only ones that do it they can dictate the the i guess the market whatever you want to call it i go back to to start off by making the point that these contracts are available to methodist and methodist meets annually with blue cross blue shield all the witnesses in the case who testified who are involved in contract negotiations steps to fight for unity point and for blue cross blue shield and the other players that they go how to reach the players they know how to they know when the contracts are coming up from for renewal and they know how to put offers in front of the payers so this market is open and with respect to a couple of the contracts in particular that were mentioned on the ha offered the opportunity to methodist to take to be at full risk provider health alliance this is the testimony of health alliance not just the testimony of st francis medical center and the testimony of the hamp witness which is in the record was that the offer was made to methodist that methodist rejected the offer and that it was not just offered once it was offered more than once and it was rejected but the witnesses from methodist testified that they were not ready to do at risk contracts and that was even as of the date of the close of discovery in the razor were to to handle a full risk contract so in the world community what something above the group something they didn't want to do so what would happen in these contracts and i'll just not a realistic example but i'll give you an example the parties might agree that if there's a t provided for and the actual costs of the services so in that case the hospital takes all that restaurant themselves in those cases they the providers routinely s this is the testimony of both parties in the case as well as health alliance or hamp routinely seek a closed or very narrow network product this is because the hospitals want to manage the risk the best that they can so they want to manage the entire continuum of care for the patients it's very typical in health care particularly with the health care reform it's been you know it was a very different and unique contract in their brief methodist claims that they made a that they agreed to do a risk contract it's in the record if you look at the contract that they refer to when you see a risk on day three that if the what they cite for that is is a draft contract that only has a risk provision it's not full risk and it deals only with caterpillar which is yes a lot of lives but the ham product is much broader than just  know the other thing that i'm curious about is that the government payer so which i do soon is mostly medicaid medicare it is and actually it's not a good deal for the well actually i believe st francis medical center has over fifty percent of its revenues generated through government payers we actually believe the government payers should be in the market but the district court rejected that argument  the vast majority of the pediatric patients that saint francis cares for are government paid patients maybe can it yes you know and also it's probably better to have a medicaid honor yes when you have these fixed cross the additional funds from the government payers actually very appealing the documents in the record reflect that the parties competed very hard for those government patients and another interesting point  order of nuns and they're very strict about those sorts of things and they don't let the hospital turn away patients who don't live the hospitals are not permitted to turn a page are not allowed to write i mean i think there are obviously if it's an emergency a hospital has an obligation to treat those patients but in st francis's case they don't they have a policy in general they don't turn away patients in the methodist maybe you don't  s the other point i wanted to make was with respect to this argument that there is no evidence there is actually no evidence in the record that methodist was on able to invest  grow to develop whatever programs it wanted to develop in fact the report to which mr greenberg referred which i believe a spec often hall said only that in order to keep a certain bond rating they needed to have five percent margins well it turns out that they actually did have five percent margins almost the entire time period issue here and they and and yet they didn't invest they had one hundred seventy four million dollars that was set aside for size of caterpillar have on the contradiction so first i just want to point out that caterpillar did in two thousand and nine establish an h m o product it which methodist was exclusive we were not within that point so for the entire time period that's at issue the whole point period in this case methodist had a caterpillar arrangement the p p o contract the preferred provider organization contract opened in two thousand and ten and in two thousand and ten caterpillar added methodist to what had been an exclusive st francis medical center actually i should say exclusive because there was another area hospital procter which was also in network with caterpillar  methodist in unity point what percentage of the patients for your hospital methodist you know are employees of caterpillar employees well  thousand and nine anyway i don't know what is the problem anderson represented twelve percent of the total available commercially insured patients or you or your patients total for everybody for the other thing i wanted to address although i actually don't think it is necessary for the for upholding the summary judgment ruling but there is nothing in the  reflects that st francis medical center coerced anybody into anything if you review the documents that are in the record there are occasional internal e mails particularly from blue cross blue shield where they expressed irritation at us for or caterpillar but that is because st francis medical center does drive a hard bargain i mean it's not that they hold a gun to someone's head and it certainly isn't that they've refused to provide services but they are a tough negotiator and that is reflected in the communications the very witness mr greenberg referred to the word ransom the very witness who used the word ransom in an e mail in an internal e mail testified that he never remembers i s f threatening him and he also testified that if they had threatened him he would have remembered that i mean he's not the only blue cross witness to testify that he wasn't threatened and in fact not a single blue cross witness testified that they were threatened so i the record is devoid of any material fact on the question of coercion we do have certain unique services but if you do you can see in the record there were many many many products that included only methodist and did not include st francis and before i mention some of those i also want to note that same francis medical center had a special contract with health alliance for hamp and also with coventry during the time period that those prayers were exclusively with methodist we entered into a separate agreement with them to allow them to access our  actor most intensive cardiac patients all of those would be with in that dream and if it was our goal and if we were trying to use our market power alleged market power to prevent methodists from getting any contracts then insurance it's the right and yet have you called inability to pay that may be an employer who owns a business or something that could have a very high charge that most people don't  also for some of these them self funded employer plans most of them have stopgap insurance or stop loss insurance in order to protect them from the  or you know terrible noro science surgery problem or so there are methods that these employer plans use to try to mitigate the risk of the massive you know the situation where there very large charge for something that wasn't covered there's a quality of medical services it seems to me you're trying to relate that to a survey of satisfaction what's the  so these surveys are out there and they're well we care difficult to interpret and they don't measure a lot of the most important factors and honestly it's in the record that same francis medical center wasn't really good about sort of collecting that kind of information it didn't really think of it as being that important it has since changed its view and i have decided that it is important for even these external superficial measures to is the hospital services i also wanted just to know that if you read the contract it makes very plain that the rates that were greek to are dependent on the network but if blue cross blue shield wants to change the network mid term they are free to come to us and say to us look we want to add methodist and because we're going to do that we need to sit down and read a go she ate the rates now i'm not saying they want to do that and i'm not saying would that we would you know give them the same services for the same rates we would obviously raise our rates because we would get lower volume but the contract itself doesn't even preclude blue cross from coming  funded employers all have access to blue cross blue shield and at the time there were at least three that have taken the option and i i don't want to talk about what's going on today but it's still a viable option  additionally the contract permitted and cross blue shield to to develop other products with other providers having them in a separate network that wasn't necessarily in the network with children's hospital and the other things that st francis medical center had adopted was completely except acceptable those were not prohibited by the contract the only thing the contract prohibited without coming back and renegotiating rates was they couldn't create an exact same well the same benefits so couldn't look just like our product the product that where and it was the only thing and if they did that it couldn't be at better rates than our rates could be at the every methodist witness every payer who testified and everybody from st francis medical center who testified said very plainly it's a question of exchanging volume with rates if you if you can give us a lot of volume then we're going to give you the best rates we can and i think i should just address that i know what will come back in response to my statement in the front so the plaintiff's claim that we don't offer these people better rates but they are better rates and the evidence shows that when the caterpillar network opened there was a thirty eight percent increase using the documents upon which they rely there is a thirty eight percent increase on our a difficult problem but a brave attempt so it's a difficult not to crack and a difficult thing to to to deal with this issue that everybody has different preferences and there is an affidavit in the record which was not objected to in the district court which reflected the fact that in the middle of the contract health alliance decided to add methodist to an exclusive contract and what we ended up doing was renegotiating rates and there's a so there was a seven point five increase in our rates to health alliance so there clearly isn't an advantage to the payer to agree to an exclusive agreement with us they don't all do it that way methodist had many exclusives during th time period it had unity it had united it had come in tree for a time it had at no for a time it had health alliance it's now back in health alliance it's now back in atlanta and it's now back in the united actually never left united i should  say and then it has its own product which it sells directly to self funded employers called methodist first choice which is very successful at selling and none of those products include st francis medical center so it's pretty obvious just from what actually happened in the marketplace during this time period that while st francis is desirable and patients do like to come to st francis it is not a must have hospital  convenient for people and may be nice to have close by but it's not absolutely a must you've got lots of hospitals in chicago too that provide these similar services although not as good  so with that i just wanted to make one other point which is the reason that the judge didn't really address the an interest injury point is that below plaintiff did not argue that the a percentage of decides and chooses you there could be less choice that's true in any exclusive contract case but there is choice at the time of choosing the the payer but at down below there was never an prices to blue cross in peoria are twenty percent higher than they charge north western here in chicago and in terms of getting better deals for exclusivity it's just not the case when the cat opened the price increase according to the cat people in a later data document than the one council referred to said that their price increase overall was three point four percent now that is a lesser price increase th f charge to blue cross and and humana at the same time even though it had exclusive dealings with them you want to look you like their charity and hurry high prices to their customers because that makes it easier for you to lure these customers away not when the competition is at the insurer level again insurers of the most relevant buyers and patients think i can't go i have no choice i can't go out of network otherwise it'll cost me more money that's with that that's what they're told and that's what that's what they believe and even at caterpillar after the network opened with the insurers aren't indifferent to prices that blue cross considered it to be a must have hospital i think the case law supports the fact that just because you make the best deal possible doesn't mean that what you're agreeing to is not in a competitive it's in a must have hospital house no it's a must have hospital because it has certain unique services has one certain unique services right sounds better ok well thank you very much to thank you ron