In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 16-3791

METHODIST HEALTH SERVICES CORP.,

Plaintiff-Appellant,

v.

OSF HEALTHCARE SYSTEM d/b/a SAINT FRANCIS MEDICAL

 CENTER,

Defendant-Appellee.

____________________

Appeal from the United States District Court for the

Central District of Illinois.

No. 1:13-cv-01054-SLD-JEH — Sara L. Darrow, Judge.

____________________

ARGUED APRIL 13, 2017 — DECIDED JUNE 9, 2017

____________________

Before POSNER, MANION, and KANNE, Circuit Judges.

POSNER, Circuit Judge. Methodist and Saint Francis are the 

two largest hospitals in Peoria, Illinois; Saint Francis is considerably larger and more profitable than Methodist. On 

February 5, 2013, Methodist filed suit against Saint Francis in 

the federal district court in central Illinois, charging Saint 

Francis with violating the Sherman Act to the detriment of 

Methodist, a competitor. The district judge granted sum-
2 No. 16-3791

mary judgment in favor of Saint Francis. Methodist had 

pleaded state-law claims as well, which the district judge also rejected; we have nothing to add to the judge’s discussion 

of those claims, beyond noting that they largely duplicated 

the Sherman Act claims.

Methodist’s antitrust case is quite simple. Its essence is 

that because Saint Francis is the dominant hospital in the 

markets served by both hospitals (the markets consisting of 

acute-care inpatient services and outpatient surgical services 

sold to commercial health insurers in an area in central Illinois comprising Peoria, Tazewell, and Woodford Counties, 

known as the “tri-county area”), it was able to persuade insurance companies to enter into exclusive contracts with it; 

and being exclusive, those contracts prevented the companies from contracting with Methodist, to the latter’s detriment. The contracts involve health insurance plans that use 

restricted-provider networks, meaning that each plan has a 

network of hospitals and other health-care providers that 

have agreed to charge the plan’s members specified rates. 

Each plan encourages its members to use its in-network 

hospitals, with “encouragement” taking the form either of

charging the members higher prices for treatment at out-ofnetwork hospitals or by not covering treatment at such hospitals at all.

The exclusive contracts between Saint Francis and the 

insurance companies required that for specified health insurance plans Saint Francis would be an in-network hospital 

and Methodist an out-of-network one. The major plan was 

the Blue Cross Blue Shield PPO (“PPO” stands for Preferred 

Provider Organization), whose members constituted a third

of all the commercially-insured patients in the area. Saint 
No. 16-3791 3

Francis’s exclusive contracts covered more than half of all 

commercially-insured patients in the area, and Methodist 

contends that as a result it couldn’t obtain a sufficiently high 

volume of patients to enable it to invest in quality-improving 

projects it otherwise would have undertaken.

One reason for this disparity is that health insurers regard Saint Francis as a “must have” hospital, that is, a hospital with which the insurer must have a contract to provide 

hospital services, because it provides certain inpatient services that the other hospitals in the tri-county area do not 

provide, such as solid-organ transplants, neonatal intensive 

care and other sophisticated pediatric care, and, probably 

most important, a Level 1 trauma center, certified by the 

state to “provide optimal care to trauma patients, [including] 

all essential services in-house, 24 hours per day.” Illinois 

Department of Public Health, “Trauma Program,” 

www.dph.illinois.gov/topics-services/emergency-prepared

ness-response/ems/trauma-program (visited June 8, 2017).

Given the more extensive services offered by Saint Francis (further illustrated by its large number of beds—616 to

Methodist’s 330), it’s no surprise that it attracts more commercial health insurance companies than Methodist does—

and patients covered by commercial insurance are more 

profitable for hospitals than patients covered by government 

insurance. It’s also no surprise that Saint Francis should not 

want to share the health-care insurers that have contracted 

to use its services thereby making Saint Francis part of their 

hospital network.

But what is more common than exclusive dealing? It is illustrated by requirements contracts, which are common, and 

legal, and obligate a buyer to purchase all, or a substantial 
4 No. 16-3791

portion of, its requirements of specific goods or services 

from one supplier. Saint Francis’s deals with the health insurance companies are a form of requirements contract, for 

the deals require the companies to limit the network of providers from which they obtain the health care that their insurance contracts obligate them to obtain for their insureds.

And an insurance company may get better rates from a hospital in exchange for agreeing to an exclusive contract, as exclusivity will drive a higher volume of business to the hospital. The contracts made by Saint Francis are of fixed rather 

than indefinite, let alone perpetual, duration; and when they 

terminate, the insurance companies are free to strike deals 

with other hospitals—with Methodist, for example.

It’s true that some exclusive-dealing arrangements run 

afoul of the Sherman Act, see Roland Machinery Co. v. Dresser 

Industries, Inc., 749 F.2d 380, 394 (7th Cir. 1984); if Saint Francis had signed long-term exclusive contracts with all the 

health insurance companies serving the tri-county market, 

the destruction of competition in health services might result 

in sky-high prices for such services and the bankruptcy of 

the other hospitals in the market, such as Methodist. But 

there is no evidence of such dire consequences of Saint Francis’s exclusive contracts with insurance companies—no evidence for example that Methodist could not duplicate the 

special services, such as Level 1 trauma care, that makes 

Saint Francis so special; apparently it has been able to raise 

hundreds of millions of dollars for new investments. Also no 

evidence that Saint Francis’s exclusive contracts have a significant exclusionary effect, since most of the contracts expire every year or two, giving other hospitals, such as Methodist, a shot at obtaining the next contract by outbidding 

Saint Francis. The Blue Cross Blue Shield PPO contract alone 
No. 16-3791 5

accounts for more than half of all patients covered by a Saint 

Francis exclusive contract—and it has expired every two or 

three years during the period that Methodist alleges it was 

excluded from the market. If Methodist can’t outbid Saint 

Francis—if a health insurance company prefers to contract 

with Saint Francis, the logical inference is that Saint Francis 

offered the health insurer a better deal, doubtless based on 

its offering a broader and deeper range of services than 

Methodist does. Methodist has made its own exclusive contracts with insurance companies, although they cover fewer 

patients than Saint Francis’s exclusive contracts do. As we’ve 

said before, “competition-for-the-contract is a form of competition that antitrust laws protect rather than proscribe, and 

it is common.” Paddock Publications, Inc. v. Chicago Tribune 

Co., 103 F.3d 42, 45 (7th Cir. 1996).

A curious feature of the case is Methodist’s isolation.

Methodist devotes much of its brief to listing the commercial 

insurers that have allegedly been hurt by Saint Francis’s exclusive dealing, but none of those companies is a plaintiff; it 

doesn’t discuss any other hospitals, other than mentioning 

that there are four other (smaller) hospitals in the tri-county 

area. So far as appears, the overall effect of Saint Francis’s 

exclusive contracts in the tri-county area may be slight; indeed Methodist may be the only victim. Methodist had sent 

a copy of its complaint to the Department of Justice, but it 

declined to file a case of its own. Methodist could have tried 

to persuade the four other hospitals in the tri-county area to 

join its suit as additional plaintiffs, but there is no indication 

that it did.

Methodist argues that Saint Francis’s exclusive contracts 

“forced insurers and ultimately consumers to pay nearly $30 
6 No. 16-3791

million more than they would have paid in a competitive 

market.” But Methodist is not the representative of any insurer or of any consumer; it’s simply an unsuccessful competitor with a hospital that offers patients insured by health 

insurance companies more health care than it does. And 

Methodist doesn’t have any theory of how Saint Francis’s 

exclusive contracts could have caused prices to rise.

As the district judge concluded and we now conclude, 

Methodist failed to make a case. The grant of summary 

judgment in favor of Saint Francis is therefore

AFFIRMED.