Court Opinion

ID: 3024568
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:31:47.694832+00
Date Added: 2024-06-11T11:47:41.908422
License: Public Domain

United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                       ___________

                                       No. 98-2677
                                       ___________

Minnesota Association of Nurse              *
Anesthetists, et al.,                       *
                                            *
       Plaintiffs - Appellants,             * Appeal from the United States
                                            * District Court for the
       v.                                   * District of Minnesota.
                                            *
Unity Hospital, et al.,                     *
                                            *
       Defendants - Appellees.              *
                                       ___________

                                  Submitted: October 18, 1999

                                      Filed: April 3, 2000
                                       ___________

Before WOLLMAN, Chief Judge, LAY and LOKEN, Circuit Judges.
                             ___________

LOKEN, Circuit Judge.

        Both physician anesthesiologists and nurse anesthetists are licensed in Minnesota
to administer anesthesia during surgeries. Though they typically work as a team during
an individual surgery, anesthesiologists and nurse anesthetists compete for the
contractual right to provide anesthesia services at hospitals and other surgical facilities.
In this antitrust case, twelve nurse anesthetists and the Minnesota Association of Nurse
Anesthetists appeal the district court’s1 grant of summary judgment dismissing their
claims attacking exclusive dealing arrangements between three Minnesota hospitals and
two groups of anesthesiologists. Concluding that these contracts are not properly
analyzed as boycotts, and that plaintiffs have totally failed to demonstrate either market
power or “actual, sustained adverse effects on competition,” FTC v. Indiana Fed’n of
Dentists, 476 U.S. 447, 461 (1986), we affirm.

                                            I.

       Nurse anesthetists work under the direction of a physician. Anesthesiologists
are physicians who may administer anesthesia themselves or supervise one or more
nurse anesthetists as they provide anesthesia services during surgeries. Historically in
Minnesota, many hospitals employed nurse anesthetists and included the charges for
their services in hospital bills, whereas anesthesiologists, like other physicians, billed
patients directly. The rise of managed health care plans and the accompanying focus
on health-care cost containment have put financial and competitive pressures on this
dual-billing marketplace. To illustrate, we briefly summarize recent changes in
Medicare reimbursement policies that played a significant role in triggering the
contracts at issue in this lawsuit.

       For many years, hospitals submitted non-itemized bills to Medicare that included
all anesthesia services related to a surgery, including the services of nurse anesthetists
employed by the hospital. Indeed, Medicare did not permit nurse anesthetists to bill
directly.2 If an anesthesiologist also attended a surgery, he or she would separately bill
Medicare, and that bill did not necessarily indicate whether the anesthesiologist had

      1
        The HONORABLE ANN D. MONTGOMERY, United States District Judge
for the District of Minnesota.
      2
       In 1989, Congress gave nurse anesthetists the authority to bill Medicare
separately for their services. See 42 U.S.C. 1395l(l)(5).

                                           -2-
administered anesthesia or simply supervised a nurse anesthetist. Therefore, accidental
or intentional “double billing” was a real possibility. In response, the Secretary of
Health and Human Services amended the Medicare regulations to allow
anesthesiologists different rates of reimbursement depending upon whether they
personally administered the anesthesia, “directed” up to four concurrent procedures,
or “supervised” more than four procedures. See 42 U.S.C. § 1395xx; 42 C.F.R. §
415.110. These changes posed problems for hospitals that included nurse anesthetist
services in their billings. For example:

       -- The new regulations prohibited reimbursement of both an anesthesiologist and
a nurse anesthetist when the anesthesiologist was attending only one procedure, even
if the nurse anesthetist had assisted. The anesthesiologist was deemed to have
personally performed the single procedure. Absent documentation establishing the
medical necessity for two anesthesia providers, if the anesthesiologist submitted a
separate bill, Medicare would not pay the hospital for the nurse anesthetist’s services.3

       -- The combined fees for a supervising anesthesiologist and a nurse anesthetist
would frequently exceed the fee of an anesthesiologist working alone. In 1993, to
address this problem, Congress capped anesthesia team payments at 120 percent of a
solo anesthesiologist’s fee (decreasing to 100 percent in 1998), the total fee to be split
equally between the anesthesiologist and the nurse anesthetist. See 42 U.S.C. §
1395w-4(a)(4); § 1395l(l)(4)(B)(iii).

       Some Minnesota hospitals (the record fails to reveal how many) responded to
these and other market changes by deciding to “sole-source” their anesthesia services.
These hospitals terminated their nurse anesthetist employees and entered into exclusive

      3
       In 1998, the regulations were amended to allow for 50-50 reimbursement of the
anesthesiologist and the nurse anesthetist in these situations. See 42 C.F.R.
§ 414.46(d)(iii).

                                           -3-
contracts with groups of practicing anesthesiologists for the provision of all anesthesia
services. The anesthesiologists agreed to provide all the hospital’s requirements for
nurse anesthetist services, either by directly employing nurse anesthetists (usually those
previously employed by the hospital), or by subcontracting with organizations formed
to provide nurse anesthetist services at rates separately negotiated with third-party
payors of health care benefits such as insurance companies.

       Defendants Unity Hospital and Mercy Hospital are Twin Cities suburban
hospitals owned by defendant Allina Health System Corporation. Unity and Mercy
implemented these changes in March 1994, after a year of planning. Unity and Mercy
terminated their nurse anesthetist employees and entered into an exclusive contract with
defendant Midwest Anesthesia, P.A. Many of the terminated nurse anesthetists then
formed Nurse Anesthesia Services, P.A., which contracted with Midwest to provide
nurse anesthetist services at Unity and Mercy. Similarly, in November 1994, defendant
St. Cloud Hospital terminated its nurse anesthetists and entered into an exclusive
contract with defendant Anesthesia Associates of St. Cloud. The terminated nurse
anesthetists were offered employment with Anesthesia Associates. Some accepted and
continued providing anesthesia services at St. Cloud Hospital.

      In this action, plaintiffs assert that the sole-source contracts were part of a “grand
conspiracy” by Minnesota anesthesiologists to eliminate nurse anesthetists as a class
of lower-cost, equally competent competitors. The hospital defendants claim they
independently decided to enter into these sole-source contracts to eliminate billing
confusion and uncertainty, to significantly reduce costs, and to provide anesthesia
services more efficiently. The anesthesiologist defendants deny conspiring to boycott
nurse anesthetists or to eliminate them from a marketplace in which they continue to
provide the same services as before. After substantial discovery, the district court
granted summary judgment dismissing plaintiffs’ multiple claims under Section 1 and

                                            -4-
Section 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2.4 We review the grant of summary
judgment de novo, reviewing the record in the light most favorable to the non-moving
party. See Bathke v. Casey’s Gen. Stores, Inc., 64 F.3d 340, 343 (8th Cir. 1995).

                                           II.

        Section 1 of the Sherman Act prohibits contracts and conspiracies “in restraint
of trade.” 15 U.S.C. § 1. Most agreements are evaluated under the “rule of reason,”
a standard that asks whether the contract unreasonably restrains trade in a relevant
product or geographic market. Certain kinds of agreements are unlawful per se
because they “will so often prove so harmful to competition and so rarely prove
justified that the antitrust laws do not require proof that an agreement of that kind is,
in fact, anticompetitive in the particular circumstances.” NYNEX Corp. v. Discon,
Inc., 525 U.S. 128, 133 (1998). On appeal, plaintiffs misapply this basic Section 1
analysis by trying to fit defendants’ conduct and agreements under antitrust precedents
that simply do not apply. Ironically, plaintiffs do not even mention the most relevant
Section 1 precedents, cases dealing with the legality of exclusive dealing contracts.

       Plaintiffs’ primary theory on appeal is that the sole-source contracts are per se
unlawful group boycotts because they prevent nurse anesthetists from performing
anesthesia services at the defendant hospitals. This theory is without merit, both legally
and factually. Legally, “group boycott” is a narrow category of per se violation,
“limited to cases in which firms with market power boycott suppliers or customers in
order to discourage them from doing business with a competitor.” Indiana Dentists,
476 U.S. at 458; see also Northwest Wholesale Stationers, Inc. v. Pacific Stationery
& Printing Co., 472 U.S. 284, 296 (1985). It is not an antitrust “boycott” when one
supplier enters into an exclusive supply agreement with one customer, even though the

      4
        Plaintiffs’ complaint also alleged numerous causes of action under state law, but
this appeal concerns only their federal antitrust claims.

                                           -5-
supplier’s competitors are “foreclosed” from that customer for the life of the contract.
As the Supreme Court recently stated, “no boycott-related per se rule applies” to the
decision “by a buyer to purchase goods or services from one supplier rather than
another.” NYNEX, 525 U.S. at 135. Moreover, as a factual matter, neither party to the
exclusive dealing contracts in this case stopped dealing with nurse anesthetists. Both
the hospitals and the anesthesiologists continued to seek out and use nurse anesthetist
services, albeit on different contractual terms. Thus, we reject plaintiffs’ theory that
the sole-source contracts are per se unlawful boycotts as totally without merit. See
Flegel v. Christian Hosp., 4 F.3d 682, 686-87 (8th Cir. 1993); see also Levine v.
Central Fla. Med. Affiliates, Inc., 72 F.3d 1538, 1549-51 (11th Cir.), cert. denied, 519
U.S. 820 (1996); BCB Anesthesia Care, Ltd. v. Passavant Mem’l Area Hosp. Ass’n,
36 F.3d 664, 667-69 (7th Cir. 1994); Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1411-
12 (9th Cir.), cert. denied, 502 U.S. 994 (1991).

       Next, plaintiffs argue that joint efforts by anesthesiologists to obtain sole-source
contracts from hospitals were an unlawful boycott of nurse anesthetists. Plaintiffs label
an October 1992 letter from counsel for the Minnesota Society of Anesthesiologists
advising the Society’s members as “a blueprint for eliminating [nurse anesthetists] as
competitors under the pretext of quality of care concerns.” Again, the theory is
factually unsound: there is no evidence Minnesota anesthesiologists refused to do
business with nurse anesthetists, or coerced hospitals to do so by threatening to
withhold anesthesiological services. To be sure, as Indiana Dentists and other cases
make clear, a society of professionals will run afoul of the antitrust laws when its rules
or policies result in a horizontal agreement among members that achieves an
anticompetitive objective. But we see nothing wrong with a society of medical
professionals counseling its members as to what form of contractual relationships with
hospitals might be in their self-interest, absent evidence that the society’s members then
collectively and coercively used market power to accomplish their objectives.

                                           -6-
       Next, plaintiffs suggest the defendant hospitals “conspired” with each other to
boycott nurse anesthetists, based upon evidence that, after the Allina hospitals publicly
announced their decision to sole-source their anesthesia services, St. Cloud Hospital
administrators discussed this decision with Allina hospital administrators. But
plaintiffs’ own market analysis places the St. Cloud Hospital in a different geographic
market than the Allina hospitals. Non-competing hospitals have no logical motive to
“conspire” with each other concerning the way each organizes the anesthesia
component of its surgery services. Thus, we agree with the district court that plaintiffs
failed to present sufficient evidence of conspiracy, that is, evidence that “tends to
exclude the possibility that the alleged conspirators acted independently.” Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986). Moreover, even if
these non-competing hospital administrators did “agree” that sole-sourcing was the
most desirable way to structure their surgeries, we see no evidence such an agreement
restrained trade at all, much less unreasonably. Exchanges of information of this type
tend to be, if anything, pro-competitive. From the hospitals’ perspective, sole-sourcing
did not eliminate their use of nurse anesthetists. It did eliminate the hospitals’ problems
when billing for nurse anesthetist but not anesthesiologist services, and sole-sourcing
held out the promise that anesthesia services would be delivered more efficiently and
cost effectively.

      Putting aside plaintiffs’ misguided boycott theories, we must nonetheless
examine whether the sole-source contracts between the hospital defendants and the
anesthesiologist defendants violate Section 1 of the Sherman Act. Exclusive dealing
contracts are analyzed under the rule of reason. See Tampa Elec. Co. v. Nashville Coal
Co., 365 U.S. 320, 333-35 (1961). Though plaintiffs give us no help in this regard, the
analysis is made easier by the Supreme Court’s decision in Jefferson Parish Hosp. Dist.
No. 2 v. Hyde, 466 U.S. 2 (1984).

      Jefferson Parish involved an exclusive contract between a New Orleans hospital
and a group of anesthesiologists to provide anesthesia services at the hospital. The

                                           -7-
agreement was challenged by an excluded anesthesiologist. The court of appeals ruled
for the plaintiff, concluding the hospital had illegally “tied” anesthesia services to its
other surgery services. The Supreme Court reversed. The Court’s lead opinion applied
its tying precedents and concluded, “there has been no showing that the market as a
whole has been affected at all by the contract.” 466 U.S. at 31. But the four
concurring Justices concluded the tying precedents were inapplicable and analyzed
whether this exclusive dealing contract was an unreasonable restraint on trade:

      Exclusive dealing is an unreasonable restraint on trade only when a
      significant fraction of buyers and sellers are frozen out of a market by the
      exclusive deal. When the sellers of services are numerous and mobile,
      and the number of buyers is large, exclusive-dealing arrangements of
      narrow scope pose no threat of adverse economic consequences. To the
      contrary, they may be substantially procompetitive by ensuring stable
      markets and encouraging long-term, mutually advantageous business
      relationships.

             At issue here is an exclusive-dealing arrangement between a firm
      of four anesthesiologists and one relatively small hospital. There is no
      suggestion that East Jefferson Hospital is likely to create a “bottleneck”
      in the availability of anesthesiologists that might deprive other hospitals
      of access to needed anesthesiological services, or that the [favored
      anesthesiologists] have unreasonably narrowed the range of choices
      available to other anesthesiologists in search of a hospital or patients that
      will buy their services. . . . Even without engaging in a detailed analysis
      of the size of the relevant markets we may readily conclude that there is
      no likelihood that the exclusive-dealing arrangement challenged here will
      either unreasonably enhance the hospital’s market position relative to
      other hospitals, or unreasonably permit [the favored anesthesiologists] to
      acquire power relative to other anesthesiologists. Accordingly, this
      exclusive-dealing arrangement must be sustained under the rule of reason.
466 U.S. at 45-46 (O’Connor, J., concurring) (citations omitted). The parallel between
this case and Jefferson Parish is both obvious and compelling. Although the excluded

                                           -8-
plaintiffs here are nurse anesthetists, rather than competing anesthesiologists, plaintiffs
present no evidence why that should affect the rule of reason analysis. Indeed, the
exclusion in this case is less complete, because the favored anesthesiologists continued
to use the services of nurse anesthetists previously employed by the hospitals.

       Applying the rule of reason analysis from Jefferson Parish and other exclusive
dealing cases, plaintiffs have proved neither that the defendants possess market power,
nor that their acts have caused actual detrimental effects on competition in a relevant
market. Plaintiffs’ claim that the labor market for nurse anesthetist services has been
injured because they have been forced to seek employment elsewhere. But as plaintiffs
concede, given the mobility of these health care professionals, the proper geographic
bounds of that market are nationwide. There is no assertion defendants have national
market power, or that their acts have driven plaintiffs out of the nationwide market.
Indeed, plaintiffs have made no showing that defendants have market power in the
local labor market for anesthesia services. Midwest Anesthesia’s membership includes
less than eight percent of the Twin Cities anesthesiologists. Nurse anesthetists continue
to provide anesthesia services at the defendant hospitals, and there is evidence those
remaining earn more than they did as hospital employees. That plaintiffs have chosen
to work elsewhere is not an antitrust injury, for at most it reflects only harm to
individual competitors, not to competition. In essence, plaintiffs claim a right under the
antitrust laws to access all hospital surgeries as independent, direct-billing
professionals. That claim is without merit.

       Plaintiffs also assert that patients (and their third-party insurers) have been
deprived of a lower-cost alternative provider of anesthesia services. Jefferson Parish
recognized a distinct product market for anesthesia services, in which patients are the
purchasers. But plaintiffs have failed to prove actual adverse effects on competition
in that market, such as increased prices for anesthesia services, or a decline in either
the quality or quantity of such services available to surgery patients. Absent concrete
evidence of this nature, plaintiffs must prove market power in a relevant geographic

                                           -9-
market. They have utterly failed to do so. To be probative, geographic market
evidence “must address where consumers could practicably go, not on where they
actually go.” FTC v. Tenet Health Care Corp., 186 F.3d 1045, 1052 (8th Cir. 1999).
Plaintiffs’ market share analysis focused on each hospital’s trade area, but a seller’s
trade area is not necessarily the relevant geographic market for purposes of antitrust
analysis. See Bathke, 64 F.3d at 346. Defendants’ analysis allocated to each
defendant hospital a local market share comparable to that of the defendant hospital in
Jefferson Parish, which was held not to confer market power. Plaintiffs’ expert
assigned somewhat larger market shares, but nowhere near the dominant 84% share
that justified the jury verdict for a nurse anesthetist plaintiff in Oltz v. St. Peter’s
Community Hosp., 861 F.2d 1440, 1442 (9th Cir. 1988).

       On this record, we conclude that defendants’ exclusive sole-source contracts for
providing anesthesia services at the Allina and St. Cloud hospitals are entitled to “the
frequently expressed judicial approval of exclusive contracts for medical services.”
Balaklaw v. Lovell, 14 F.3d 793, 802 (2d Cir. 1994). Therefore, the district court
properly granted summary judgment dismissing plaintiffs’ Section 1 claims. As in
Jefferson Parish and Midwest Radio Co. v. Forum Pub. Co., 942 F.2d 1294, 1297 (8th
Cir. 1991), plaintiffs’ failure to prove market power, or a dangerous probability that
defendants will acquire market power, defeats their other antitrust claims of tying,
essential facilities, and Section 2 violations, claims they virtually abandon on appeal.
Accordingly, the judgment of the district court is affirmed.

      A true copy.

             Attest:

                CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

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