Kissing Camels Surgery Center, LLC v. Centura Health Corp.
Docket: Civil Action No. 12-cv-3012-WJM-NYW
Court: District Court, D. Colorado; June 16, 2015; Federal District Court
Order denying the defendants' motions to dismiss an antitrust action brought by four ambulatory surgery centers (ASCs) alleging violations of the Sherman Act and the Colorado Antitrust Act. The defendants include Anthem Blue Cross and Blue Shield of Colorado, UnitedHealthcare of Colorado, Aetna, and the Colorado Ambulatory Surgery Center Association (CASCA). The court evaluated the motions under Federal Rule of Civil Procedure 12(b)(6), requiring it to assume the truth of the plaintiffs' well-pleaded allegations and to assess whether the complaint included sufficient facts to support a plausible claim.
The plaintiffs operate ASCs in Colorado, competing with Centura Health Corporation, which owns hospitals and surgery centers in the same areas. CASCA, a trade association supported financially by Centura and HCA, is implicated in a conspiracy with the Colorado Association of Health Plans, which includes executives from the insurer defendants, to undermine the plaintiffs' business. The court's ruling highlights the stringent standards for dismissing claims, emphasizing that a complaint can proceed even if the likelihood of success appears low.
Plaintiffs claim that Centura and HCA conspired to limit competition in ambulatory surgery services by excluding Plaintiffs from business opportunities and coercing physicians and insurers to avoid collaborating with them. CASCA allegedly joined this conspiracy, holding strategy meetings and coordinating with CAHP and various insurers against Plaintiffs, while secretly excluding Plaintiffs from these discussions. Plaintiffs, despite being CASCA members, were not invited to meetings that addressed the conspiracy's objectives.
A non-hospital ambulatory surgery center (ASC) requires transfer agreements with hospitals for emergency patient care, but HCA and Centura have declined to sign such agreements with Plaintiffs, despite potential benefits for the hospitals. Specific incidents include a Centura hospital canceling a transfer agreement with Plaintiff Kissing Camels in December 2010 and a HCA hospital refusing to sign with Cherry Creek in February 2012.
Plaintiffs reference emails and meeting notes as evidence of the defendants' coordinated efforts to undermine their competitive position. A significant conference call on May 18, 2012, attended by representatives from major insurers and CASCA Board members, discussed actions against Plaintiffs. A follow-up meeting on August 29, 2012, aimed to include key insurer personnel and reached an agreement to halt financial support from insurers to Plaintiffs.
Further communications between CASCA and CAHP indicated plans for indirect actions against Plaintiffs through government agencies and insurer strategies against referring physicians. At the behest of Centura and HCA, CASCA's Executive Director sent a letter to the Colorado Department of Regulatory Agencies (DORA), alleging that Plaintiffs violated laws regarding insurance copayments. DORA did not pursue action against Plaintiffs, noting a lack of complaints regarding unlawful billing practices. Plaintiffs argue that these allegations were a pretext for conspiratorial conduct. Additionally, since 2010, Centura and Audubon allegedly pressured insurers to penalize physicians referring patients to Plaintiffs, leveraging their importance in the insurers' provider networks. The insurers' actions against Plaintiffs were reaffirmed following the agreements from the May and August 2012 meetings.
In 2010, Mr. Ashby of Audubon alerted United about concerns regarding Kissing Camels' billing practices. An investigation by United concluded these concerns were unfounded, affirming that its contracts allowed out-of-network referrals to Kissing Camels, yet United still took action against physicians making such referrals. In 2011, United threatened to terminate Dr. Steven Topper for referring patients to Kissing Camels and subsequently terminated his contract on December 16, 2011. On August 31, 2012, United also terminated Metro Denver Pain Management for its referrals to Plaintiff Arapahoe.
United's actions included threatening primary care physicians with network termination for referrals to specialists using Plaintiffs' facilities, which the Plaintiffs claim were targeted efforts against those referring patients to Kissing Camels. Starting in October 2011, Anthem began contacting physicians using Plaintiffs' facilities, sending letters threatening termination for inappropriate referrals. Anthem's employees coordinated with CASCA and HCA on strategies against Plaintiffs. Following a CASCA/CAHP meeting, Anthem sent threatening letters to Colorado Orthopaedic Consultants and others regarding their referrals to Plaintiffs.
Beginning in May 2012, Aetna also threatened physicians with termination based on their referrals to Plaintiffs, warning that such referrals would increase patient costs. Aetna sent termination letters shortly after the August 29, 2012 CASCA/CAHP meeting. Plaintiffs assert that the insurers’ stated justifications for their actions were pretexts for anti-competitive practices aimed at eliminating Plaintiffs from the market, noting that similar billing practices were employed by Audubon and other ASCs. On November 15, 2012, Plaintiffs filed a Complaint against HCA, Centura, CASCA, and Kaiser Foundation Health Plan of Colorado under the Sherman Act and the Colorado Antitrust Act, later amending the complaint to include Arapahoe, Anthem, United, and Aetna, while dismissing claims against Kaiser and HCA.
On February 13, 2014, the Court granted Motions to Dismiss from CASCA, Aetna, Anthem, United, and Audubon due to the Plaintiffs' insufficient pleading of facts to support their conspiracy claims (ECF No. 177). The Plaintiffs subsequently sought to amend their complaint, which the Court allowed (ECF Nos. 179, 212, 242), and the Second Amended Complaint (SAC) was accepted (ECF No. 213). On September 30, 2014, Centura filed a pending Motion for Summary Judgment (ECF No. 228). New Motions to Dismiss were filed by the Defendants on December 17, 2014 (ECF Nos. 259, 260, 261, 264, 266), and the Plaintiffs responded with an Omnibus Response (ECF No. 283), followed by Replies from several Defendants (ECF Nos. 284, 285, 287, 288). Audubon was later dismissed from the case by stipulation, making its Motion to Dismiss moot (ECF No. 290). The remaining motions are fully briefed.
The motions from CASCA and the Insurers challenge the Plaintiffs’ claims under § 1 of the Sherman Act (Count I) and the corresponding state law claim under Colorado Revised Statutes § 6-4-104 (Count IV) (ECF Nos. 259, 260, 261, 264). The Court will evaluate these claims together as federal antitrust principles govern both. The Plaintiffs allege that the Defendants conspired to eliminate them from the market for ambulatory surgery services in Denver and Colorado Springs, constituting an unreasonable restraint of trade (SAC. 134-38, 149-53). Section 1 of the Sherman Act prohibits contracts or conspiracies that restrain trade, requiring evidence of a concerted action rather than independent decisions. The pivotal issue is whether the alleged anticompetitive conduct arises from an agreement. To establish a § 1 claim at the pleading stage, the complaint must present sufficient factual matter to suggest an agreement and raise a reasonable expectation for discovery to reveal evidence of such an agreement, as clarified in Twombly and Monsanto precedents. Allegations of parallel conduct alone are insufficient unless they are contextualized to indicate a preceding agreement.
CASCA's Motion contends that Plaintiffs have not sufficiently established that it was part of a conspiracy aimed at harming their business. CASCA asserts that its petition to DORA is protected under the First Amendment and the Noerr-Pennington doctrine, which safeguards efforts to influence government actions, and that its alleged coordination of negative press constitutes protected commercial speech. The Dismissal Order indicated that the Plaintiffs’ claims did not demonstrate CASCA's active participation in the conspiracy, describing CASCA as providing passive facilitation rather than being a co-conspirator. The Court reinforced that, based on precedent, petitioning government officials does not incur Sherman Act liability, regardless of intent. While CASCA reiterated its First Amendment and Noerr-Pennington arguments, the Plaintiffs did not address these defenses in their response.
However, the Plaintiffs’ Second Amended Complaint (SAC) includes new allegations claiming CASCA is a co-conspirator rather than merely a tool of the conspiracy. They assert that Centura and HCA, through their influence on CASCA's Board, manipulate CASCA to act against the Plaintiffs' interests. The SAC alleges collaboration between CASCA and CAHP to orchestrate a strategy against the Plaintiffs, supported by communications from HCA executives urging increased pressure on insurers to restrict funding to the Plaintiffs. Notably, a specific email exchange among HCA executives discussed tactics to undermine the Plaintiffs' financial viability. The Court finds these latest allegations sufficient to plausibly assert CASCA’s involvement in the alleged conspiracy.
CASCA's involvement in HCA's efforts to engage the Insurers against Plaintiffs is supported by allegations indicating that CASCA organized meetings on HCA's behalf to incite action from the Insurers. Plaintiffs claim that CASCA was an active participant in a conspiracy, motivated by competition fears from its Board members, and that it concealed its actions from Plaintiffs without seeking to address Plaintiffs' alleged unlawful conduct directly. CASCA's Motion argues that the allegations could be interpreted innocently; however, the Court determines that the Second Amended Complaint (SAC) presents sufficient factual matter to suggest a conspiracy and raise reasonable expectations for discovery. Consequently, CASCA's Motion is denied.
In contrast, the Insurer Defendants (Aetna, Anthem, and United) argue that Plaintiffs have not established a conspiracy agreement against them. The Court previously ruled that the First Amended Complaint (FAC) lacked sufficient allegations to demonstrate an agreement among the Insurers, despite detailed claims of their actions against physicians using Plaintiffs' facilities. While the FAC implied a conspiracy through requests from Centura and HCA, it failed to directly allege an agreement or provide facts evidencing such an agreement. The Court highlighted that mere parallel conduct does not suffice to establish a § 1 claim without evidence of a preceding agreement or a clear assertion of pretext. Thus, the allegations of parallel conduct by the Insurers were deemed insufficient to suggest a conspiratorial agreement rather than independent motivations.
Plaintiffs contend that the Insurers, influenced by powerful hospitals and facing allegations of state law violations, terminated physicians' network contracts not due to breaches related to out-of-network referrals but as part of a conspiracy with hospitals to eliminate Plaintiffs' business. The Court found that, while such an inference is possible, the initial complaint (FAC) lacked sufficient allegations of a prior agreement or a common scheme among the Insurers to achieve an unlawful objective, leading to the dismissal of Plaintiffs’ claims. The Insurers argued that the second amended complaint (SAC) did not rectify these deficiencies. However, the SAC now contains explicit allegations of agreement among the Insurers and evidence supporting these claims, particularly regarding a significant meeting on October 29, 2012, where a strategy to undermine Plaintiffs was allegedly established. The actions taken by the Insurers shortly after this meeting suggest coordinated behavior rather than independent actions. As a result, the Court found the allegations in the SAC sufficient to support a claim of conspiracy, rejecting the Insurers' arguments that their actions could be interpreted as mere parallel conduct. Consequently, the Court recognized the plausibility of Plaintiffs' claims and reinstated their conspiracy allegations against the Insurers.
Arguments presented may be compelling for a jury but cannot preemptively defeat a plaintiff's well-pleaded allegations of anticompetitive agreements during a motion to dismiss, as all allegations are assumed true at this stage. Consequently, the motions to dismiss filed by the Insurers are denied. United's argument claiming that an antitrust claim cannot exist against a party without a rational motive to join an unlawful boycott is rejected. The plaintiffs allege that the Insurers conspired at the direction of Centura and HCA due to their significant market power and importance to the Insurers' networks. Specifically, it is alleged that Centura threatened to terminate its contract with United, which, despite finding no breaches by the plaintiffs, still acted against them. The Court determines that the Insurers had a plausible motive to participate in the conspiracy. Therefore, all motions to dismiss by the Insurers are denied, and the motion by Audubon Ambulatory Surgery Center is denied as moot since the plaintiffs have stipulated to dismiss Audubon as a defendant. Aetna's argument regarding two emails is noted, but the Court finds that these emails do not undermine the plausibility of the plaintiffs' claims, indicating a factual dispute better suited for a jury's examination.
