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Seventh Circuit Reverses Dismissal Of Monopolization Claim, Holding That Plaintiff Adequately Pled A Relevant Geographic Healthcare Market Under The “Hypothetical Monopolist” Test
07/20/2022On July 8, 2022, the United States Court of Appeals for the Seventh Circuit reversed the district court’s dismissal of a monopolization claim against an integrated healthcare provider, concluding that plaintiff had pled facts sufficient to support a plausible geographic market as required to establish a claim under section 2 of the Sherman Act and section 7 of the Clayton Act. Vasquez v. Indiana Univ. Health, Inc., No. 21-3109, 2022 WL 2582368 (7th Cir. July 8, 2022).
In June 2021, plaintiff, an independent vascular surgeon, brought an action alleging defendant, a vertically-integrated healthcare and hospital system, had illegally monopolized the vascular surgery market in Bloomington, Indiana, including through the acquisition of the major independent physician group in the area and by a “systematic and targeted scheme” to ruin his reputation and practice in violation of the Clayton Act and the Sherman Act. The district court dismissed the suit on the grounds that the complaint failed to establish a plausible geographic market and that the Clayton Act claim was time barred. On appeal, the Seventh Circuit reversed, holding that plaintiff’s “allegations passed muster for the pleading stage,” and finding that, under the facts alleged, a rational jury could find that the Bloomington market was a relevant geographic market and that the issue of compliance with the statute of limitations raised a factual question that could not be resolved on a motion to dismiss.
As to geographic market, the Court began by noting that Seventh Circuit precedent endorsed the use of the “hypothetical monopolist test” to analyze geographic healthcare markets. The hypothetical monopolist test asks, “what would happen if a single firm became the only seller in a candidate geographic region.… If that hypothetical monopolist could profitably raise prices above competitive levels, the region is a relevant geographic market.… But if, instead, customers would defeat the attempted price increase by buying from outside the region, it is not a relevant market; the test should be rerun using a larger candidate region.” Plaintiff argued that Bloomington was a relevant geographic market because its vascular‐surgery market is “inherently local” in that patients require ongoing care, potentially for the duration of their lives and do not want to travel an hour or more to Indianapolis to obtain it. The complaint also alleged defendant controlled the Bloomington hospital with the most advanced equipment, all of the vascular surgeons except plaintiff, and 97% of the primary care physicians in Bloomington. Based on the pleaded facts, the Seventh Circuit accepted as plausible plaintiff’s theory that “a hypothetical monopolist over vascular surgery in Bloomington would be able to abuse its market power considerably by jacking up payor prices and freezing out potential competitors.”
The Seventh Circuit also discussed the importance of referrals from primary care physicians for competition in specialty practices. Because vascular surgeons rely upon primary care physicians for referrals, plaintiff contended that defendant’s alleged monopoly position in primary care physicians provided it with monopoly power over vascular surgery. The Seventh Circuit found that this theory was also sufficient to plead a plausible market at the pleading stage: “The idea is that while Bloomington residents may be willing to travel to Indianapolis for some categories of specialist care, they will not be willing to drive an hour or more for routine primary care.… Thus, a hypothetical monopolist over primary-care services in Bloomington would control not only that market but also the flow of patients to vascular surgeons.” The Court emphasized that the pleading stage only requires plaintiff to plead one plausible geographic market and that a rational jury could find such a geographic market here under either theory advanced by plaintiff.
As to the statute of limitations, defendant contended, and the district court agreed that the four-year statute of limitations barred plaintiff’s Clayton Act claim for damages based on defendant healthcare system’s acquisition of the major independent physician group in Bloomington because that acquisition took place four years and a month before plaintiff filed suit. Again, the Seventh Circuit disagreed, finding based on the allegations of the complaint that both the occurrence of injury and the discovery of injury may have occurred after the consummation of the acquisition and within the four-year limitations period and that discovery was necessary to resolve this issue. “What matters,” the Court held, “is that the complaint presents a plausible account under which his suit is timely.”
