Supreme Court Denies Certiorari In State Hospital System Antitrust Immunity Case
12/21/2021On December 6, 2021, the U.S. Supreme Court declined to hear an appeal from a Fourth Circuit ruling that Charlotte-Mecklenburg Hospital Authority, a North Carolina hospital system doing business as Atrium Health, counted as an arm of the local government. The Fourth Circuit’s decision meant that Atrium was immune from antitrust liability, and the Supreme Court’s decision leaves a potential circuit split on the status of dominant quasi-public hospital systems unresolved.
The case had originally been brought as a class action by Raymond Benitez, a patient who alleged that Atrium Health had overcharged him and others through policies that prevented insurers from steering patients towards lower cost providers. Those restrictions, which Atrium was able to impose because of its dominant status in the region, required insurers to use Atrium Health's networks even when cheaper but comparable alternatives were available, according to the complaint.
Atrium Health agreed to a settlement with the Department of Justice and North Carolina’s Attorney General in 2018, which required it to stop using the anti-steering restrictions at issue in the case. The proposed class continued to pursue money damages however, arguing that “common sense” showed that the multistate health system was not a local government immune from private antitrust claims because its operations were not confined to North Carolina and it otherwise lacked distinguishing features traditionally associated with local government, such as the power to tax, or immunity from tort liability. U.S. District Court Judge Robert J. Conrad Jr. found that the Atrium Health did in fact have immunity under the Local Government Antitrust Act of 1984 (“LGAA”) because of its status as a public hospital authority created under Chapter 131E of the North Carolina General Statutes. The Fourth Circuit affirmed the lower court ruling earlier this year, finding that the hospital system essentially functioned as an extension of the local government, even while it agreed that the putative class’ argument that it should not be treated as such had “some common-sense appeal,” given Atrium Health operates in 47 different locations across North and South Carolina and plans to operate in Georgia. It nevertheless qualified as a “special function governmental unit” because the text of the LGAA does not limit the definition according to Benitez’ criteria.
In his Supreme Court petition, Benitez again pressed the “common sense” point. The petition described Atrium Heath as “the second largest public health system in the United States, with a current presence in three states,” and argued that “companies that operate across any recognizable municipal or state lines at their own choosing cannot possibly be 'local governments' under any intelligible meaning of that term.” The petition also alleged that the Fourth Circuit’s holding was in direct conflict with a Tenth Circuit holding that a comparable Oklahoma health care entity that shares “all the relevant features of respondent’s operation” is not a local government shielded by antitrust immunity under the LGAA. Atrium Health responded saying that the petition did not adequately address the state laws that establish and supervise it and failed to cite any case or statutory authority for its claims. Atrium argued that the supposed circuit split was “driven by the difference between the laws of Oklahoma and North Carolina addressing different hospital structures, not by a doctrinally different approach between the circuits.”
In trying to persuade the Supreme Court to review the case, the petition said that the issue was important because a large number of states have similar quasi-public dominant hospital systems with market power that continue to use anti-steering rules to “keep health care costs and premiums high, and prevent the competitive market from working.” Nevertheless, the Supreme Court’s denial spells the end of the road for this particular challenge to such alleged practices.