Opinion
SA-17-CA-1122-FB (HJB)
07-14-2022
ACADEMY OF ALLERGY & ASTHMA IN PRIMARY CARE and UNITED BIOLOGICS, LLC D/B/A UNITED ALLERGY SERVICES, Plaintiffs, v. SUPERIOR HEALTHPLAN, INC. and CENTENE CORPORATION, Defendants.
REPORT AND RECOMMENDATIONORDER OF UNITED STATES MAGISTRATE JUDGE
Henry J. Bemporad, United States Magistrate Judge
To the Honorable Fred Biery, United States District Judge:
This Report and Recommendation concerns the following motions pending in this case:
This is a corrected, unsealed version of a Report and Recommendation previously issued as a sealed document in this case. (Docket Entry 457.) Non-substantive, typographical changes have been made to the document, and it has been unsealed after consultation with the parties. (See Docket Entries 459 and 460.)
• The Motion for Summary Judgment filed by Defendant Superior HealthPlan, Inc. (“Superior”) (Docket Entry 408);
• The [Redacted] Motion for Summary Judgment fled by Defendant Centene Corp. (“Centene”) (Docket Entry 410);
• Plaintiffs' Motion for Partial Summary Judgment (Docket Entry 414);
• Defendants' Motion to Strike or, Alternatively, Objection to Plaintiffs' Evidence in Support of Motion for Partial Summary Judgment (Docket Entry 420);
• Plaintiffs' [Redacted] Objections to and Motion to Strike Certain Evidence on Defendants' Motions for Summary Judgment (Docket Entry 426); and
• Defendants' Motion for Reconsideration (Docket Entry 389).
This case was referred to the undersigned for consideration of pretrial matters. (Docket Entry 13.)
For the reasons set out below, I recommend that Defendants' motions for summary judgment (Docket Entries 408 and 410) be DENIED; that Plaintiffs' motion for partial summary judgment (Docket Entry 414) be DENIED IN PART, DENIED AS MOOT IN PART, and DENIED WITHOUT PREJUDICE IN PART; and that Defendants' Motion to Strike (Docket Entry 420), Plaintiffs' Motion to Strike (Docket Entry 426), and Defendants' Motion for Reconsideration (Docket Entry 389) be DENIED WITHOUT PREJUDICE.
I. Jurisdiction.
Plaintiffs bring suit under the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202, the Sherman Act, 15 U.S.C. § 1, and the Texas Free Enterprise and Antitrust Act, TEX. BUS. & COMM. CODE ANN. § 15.05 (West 2019). (Docket Entry 145, at 3.) The Court has original subject matter jurisdiction over Plaintiffs' federal claims pursuant to 28 U.S.C. §§ 1331 and 2202, and it exercises supplemental jurisdiction over Plaintiff's state claims pursuant to 28 U.S.C. § 1367. I have authority to issue this Report and Recommendation pursuant to 28 U.S.C. § 636(b).
II. Factual Background.
Plaintiffs in this case are the Academy of Allergy & Asthma in Primary Care (“AAAPC”) and United Biologics, LLC d/b/a United Allergy Services (“UAS”). AAAPC is a trade association of primary care physicians (“PCPs”) interested in providing patients with allergy testing and immunotherapy. (Docket Entry 145, at 4.) UAS is a corporation that, in 2009, began supplying doctors, including primary care physicians (“PCPs”), with the tools to perform allergy testing and immunotherapy services. (Id. at 5.) Defendant Superior HealthPlan, Inc. (“Superior”) is a managed care organization (“MCO”); along with other, competing MCOs, it provides managed care services throughout Texas, including care under subsidized programs like Medicaid, STAR, and CHIP. Superior is a wholly-owned subsidiary of Defendant Centene Corporation (“Centene”). (Docket Entry 215, at 3.) The managed care services for which Defendants provide reimbursement included allergy testing and immunotherapy.
Plaintiffs allege that Superior entered into an illegal agreement with Parkland Community Health Plan (“Parkland”) and other Texas MCOs, including El Paso First Health Plans (“El Paso First”) and Community Health Choice (“CHC”), to institute a credentialing policy to deny reimbursement to PCPs who contracted with UAS to administer allergy testing and immunotherapy. (Docket Entry 145.) Defendants deny Plaintiffs' claims; they also deny that either Plaintiff has standing to bring this suit and assert a variety of affirmative defenses. (Docket Entries 148 and 215.)
This section first discusses the facts relevant to the motions before the Court, and then sets out the relevant procedural history.
The undersigned issued a previous Report and Recommendation reviewing in greater detail the background of the MCO payment system, the American allergy market, and UAS's business model. (Docket Entry 135.) To the extent that facts have developed since the motion to dismiss stage, the undersigned includes a summary of the relevant facts in this Report and Recommendation. To the extent any of the facts cited are subject to evidentiary objections by any party, such objections are overruled, without prejudice to the parties' ability to make further objection at trial.
A. The Facts Relevant to the Pending Motions.
1. Formation of the Allegedly Illegal Credentialing Policy.
UAS alleges that the MCOs' conspiracy to impose an illegal credentialling policy began to form between Superior and CHC in early 2013, before expanding to Parkland and El Paso First. (Docket Entry 145, at 1.) In February of 2013, Superior's CEO, Dr. David Harmon requested data regarding PCP billing for allergy testing and immunotherapy services. (Docket Entry 393-11.) On April 3, 2013, Dr. Harmon initially brought up to Superior's credentialing committee the idea of instating some kind of official credentialing policy addressing allergy testing and immunotherapy. (Docket Entry 393-12, at 5; Docket Entry 394-13, at 5.)
Later in April 2013, while attending a meeting in Austin of medical directors of all Texas MCOs, Dr. Harmon spoke with Dr. Fred Buckwold, a senior executive of CHC, a competing MCO. (Docket Entry 392-51, at 78-86.) At the meeting, Dr. Harmon spoke generally about the issue of allergy testing and immunotherapy; during a break, Dr. Buckwold privately approached Dr. Harmon to discuss a credentialing policy on this issue that CHC had developed. (Docket Entry 392-51, at 79-80.) Dr. Buckwold offered to send a copy of this credentialing policy over to Superior. (Docket Entry 392-51, at 79-80.)
The following day, Dr. Harmon emailed Dr. Buckwold to request a copy of CHC's credentialing policy. (Docket Entry 391-103.) When Dr. Buckwold did not respond, Dr. Harmon reached out six days later, again seeking the policy. (Docket Entry 391-13, at 2.) Dr. Buckwold then sent Dr. Harmon a copy of the policy and asked that Dr. Harmon to “[l]et me know if you see ways to improve on this.” (Docket Entry 391-13, at 2.) CHC's credentialing policy stated as follows: “Allergy skin testing, assessment of test results, and decision-making regarding therapy is considered to be a specialty area. Commonly accepted specialists considered trained in this area include: Allergy and Immunology: and Otolaryngology (Ears, Nose and Throat)....a provider must be credentialed for this by the Medical Care Management Committee.” (Docket Entry 39113, at 3.) Dr. Harmon forwarded the policy to Susan Mills, Superior's Vice President of Credentialing, directing her to adopt a similar policy. (Docket Entry 391-13, at 2.) Mills took the policy, changed the name of the MCO from CHC to Superior, and circulated it to other Superior personnel. (Docket Entry 391-105, at 8-10.)
Superior's credentialing committee considered the policy at its May 1, 2013, committee meeting. (Docket Entry 393-13, at 3; Docket Entry 394-14, at 3.) The issue was tabled until the credentialing committee's June 5, 2013, meeting. (Docket Entry 393-13, at 3; Docket Entry 39414, at 3.) At the June 5, 2013, meeting, Mills informed the credentialing committee of the steps that would follow its approval: “upon review and approval of The Allergy Skin Testing and Allergy Therapy Policy the document will then be sent to Superior's Medical Management Department for review. After the Medical Management Department has given their final approval the policy can then be implemented.” (Docket Entry 393-4, at 3; Docket Entry 394-5, at 3.) The Committee approved the policy after amending the last sentence to provide that, “[i]f a member has had immunotherapy initiated by an appropriate specialist, continued immunotherapy may be transitioned to, and in agreement with, a non-specialist (such as the Primary Care Provider) at the discretion of the specialist.” (Docket Entry 393-4, at 3; Docket Entry 394-5, at 3.)
Around the same time, other Texas MCOs were considering the same credentialing policy. One of these MCOs was El Paso First. On June 18, 2013, El Paso First's Medical Director, Dr. David Palafox, received a copy of the CHC credentialing policy that Dr. Buckwold had sent to Dr. Harmon. (Docket Entry 392-68.) According to Dr. Palafox, other MCOs were involved in discussions about the issue of allergy testing and immunotherapy; these other MCOs “took the lead in giving [him] direction on how to proceed to make this benefit appropriate for [El Paso First's] provider network.” (Docket Entry 391-75, at 8; Docket Entry 392-68.)
On June 24, 2013, during a monthly conference call of the Texas Association of Health Plans, an association of Texas MCOs, CHC, El Paso First, Parkland, and Superior discussed a credentialing policy for blood-allergy testing. (Docket Entry 392-74, at 5; Docket Entry 392-75, at 2-3.)
On July 8, 2013, all Texas MCOs attended an annual meeting in Austin, Texas. (Docket Entry 391-14, at 2.) Included among the attendees were Dr. Fred Buckwold of CHC, Dr. David Palafox of El Paso First, Dr. Barry Lachman of Parkland, and Dr. Robert Griffin, the head of Superior's credentialing committee. (Id.) Another attendee at the meeting was Health and Human Services Commission (“HHSC”) representative Dr. William Brendle Glomb; at the time, while still an employee of HHSC, Dr. Glomb had already begun negotiations to transition into employment with Superior. At this meeting, the MCOs had an open discussion about allergyshot immunotherapy treatments, in which the “various managed care organizations expressed concern about seeing [the practice of PCP and home immunotherapy] and whether or not [others] were seeing this in their review of claims.” (Docket Entry 392-57, at 24.)
About six months later, in November of 2013, Dr. Glomb became a Senior Medical Director for Superior. (Docket Entry 392-57, at 10, 28.)
In August of 2013, Superior announced its Credentialing Policy via a provider news alert:
Effective 10/01/13, all allergen immunotherapy services must be authorized through Superior, unless services are provided by an allergist, immunologist, or otolaryngologist. Requests should be submitted 5 business days prior to start of services. Up to (3) three months of treatment may be requested and authorized, when determined medically necessary and the medical prognosis is clinically supported. ....
Primary care providers may perform screening blood tests to help determine if a condition has an allergic origin. If such testing is positive, the member must be referred to an appropriate specialist for definitive testing and management. ....
In order to provide allergy testing and treatment to [Superior] members, a provider must be credentialed for this by the Credentials Committee (CC). Specialists considered trained in this area include Adult and Pediatric Allergy and Immunology; and Adult and Pediatric Otolaryngology (Ears, Nose, and Throat). If a provider outside these specialties desires such credentialing, the provider must submit:
• Attestation form that states they have appropriate equipment and personnel to provide allergy and immunotherapy safely;
• Evidence of comprehensive training in the field of allergy which is comparable to that received in a full training program of one of the specialties noted above.
If a member has had immunotherapy initiated by an appropriate specialist, continued immunotherapy may be transitioned to a non-specialist (such as the Primary Care Provider) at the discretion of the specialist. This must be transmitted to Superior Health Plan as a prior authorization request. The requesting provider should submit a copy of the immunotherapy administration documentation (treatment regimen) which includes:
• A full, clear, and detailed documentation of the patient's immunotherapy schedule must accompany the patient when he or she transfers from one physician to another.
• A record of previous responses to and compliance with the program should be communicated to the new physician.
• A detailed record of the results of the patient's specific- IgE antibody tests (immediate-type skin tests or in vitro tests) should be provided.
• Attestation form that states they have appropriate equipment and personnel to provide allergy and immunotherapy safely.(Docket Entry 391-21.)
2. Implementation of the Credentialing Policy.
Although announced to take effect on October 1, 2013, Superior's Credentialing Policy was not implemented at that time. Instead, the implementation was delayed at the direction of the HHSC. (Docket Entry 391-4; Docket Entry 391-109.) HHSC expressed concern that Superior's policy would cause patients to have to travel “well in excess of 75 miles to see a specialist.” (Docket Entry 391-4.) Its initial review of Superior's geographic access maps revealed coverage issues based on the average distance a member would have to travel to receive allergy care. (Docket Entry 391-109.) Superior disputed the distances patients would need to travel, and it continued communication with HHSC about eventually being allowed to go forward with its policy. (Docket Entries 391-4, 391-2, 391-5, and 391-20.) HHSC agreed to allow Superior to move forward with the Policy on March 7, 2014. (Docket Entry 391-7.)
Although Superior's credentialing policy was put on hold by HHSC, other MCOs moved forward with implementation of their own policies. On October 1, 2013, the date Superior's plan was set to go into effect, Parkland sent the following letters to PCPs:
It has come to our attention that you are performing allergy skin testing and immunotherapy in your primary care office. The American Academy of Allergy, Asthma and Immunology has developed standards for immunotherapy and skin testing. AAAAI states that physicians should have specialized training before providing these services. [Parkland] has mechanisms for PCP's to be jointly certified as specialists. Since you have never applied as a specialist qualified to do skin testing or immunotherapy, skin testing and primary immunotherapy are considered by [Parkland] as outside the scope of your [primary] care practice. Further, the volume of skin testing and hyposensitization indicates likely use of these modalities outside the accepted standard of practice because skin testing and immunotherapy are for patients with moderate to severe disease resistant to other care as delineated in the AAAAI standards, NAEPP for asthma and other professionally accepted guidelines. AAAAI indicates that the physician who determines the makeup of the allergy solution needs specific specialized knowledge that are beyond the scope of knowledge of a PCP.
We are also aware that you are using [UAS] to provide some or all of these services. [UAS] is not a credentialed and contracted provider for [Parkland]. Your contract with [Parkland] indicates that those you contract with or refer services to must be participating providers with [Parkland]. Using this provider puts you in violation of your contract, which could subject you to termination of your contract with [Parkland].(Docket Entry 391-32, at 2.) The letter informed the PCP that, effective October 4, 2013, Parkland would no longer be reimbursing for allergy testing or immunotherapy services. (Docket Entry 391-32, at 2.) It further instructed PCPs to submit a corrective action plan that confirms “that you will no longer provide the services described in this letter or use non-credentialed subcontractors for your [Parkland] patients. . . and the steps that you have taken or will take to repair the contractual violations cited.” (Docket Entry 391-32, at 3.)
El Paso First, for its part, sought recoupment of payments made to PCPs for past services provided in conjunction with UAS, including $20,618.50 from Dr. Hassan Salloum and $6,024.50 from Dr. Jorge Ortiz. (Docket Entry 392-86, at 3; Docket Entry 392-65, at 2-3.) On November 14, 2013, Parkland's Dr. Barry Lachman emailed El Paso First's Dr. David Palafox, attaching the same letters and corrective action plan that Parkland had sent to PCPs who used UAS's services; Dr. Lachman informed Dr. Palafox that El Paso First would “need to change the contract references and prior authorization language to match El Paso First, of course.” (Docket Entry 392-77, at 2.)
Meanwhile, Dr. Harmon sent an email on November 19, 2013, to Superior employee Denise Herrera, regarding an investigation by Herrera and Dr. Gilbert Handal of UAS's services in El Paso:
[T]his is a list of physicians whose claims have been denied for certain allergy services. I would like you to select a couple of El Paso physicians from this list and go out with Dr. Handal to visit and learn more about the process is followed for these allergy services. Any physician on this list uses a technician from [UAS] in their practice. I want to know how they got started with [UAS], what type of training they receive, and how do they identify patients to refer to the technician. Beyond that, I would like to know what the technicians role is and how it is determined to start a patient on immunotherapy. Once the decision is made, how is the immunotherapy ordered, who mixes it, and then how is it administered and where is it administered. What emergency protocols do they have in place for adverse reactions. I would like this to happen as soon as possible. Thanks.(Docket Entry 393-51.)
By December 2, 2013, Dr. Handal reported back to Superior that he had visited with Dr. Hassan Salloum, a physician who had been denied claims both by Superior and El Paso First, and that Dr. Salloum “will drop from the program altogether.” (Docket Entry 392-61, at 19; Docket Entries 393-34 & 394-35.) Dr. Handal also stated his plan to discuss the matter with Dr. Joseph Segapeli of El Paso Pediatric Associates as soon as he got an appointment. (Docket Entry 392-61, at 19; Docket Entries 393-34 and 394-35.) Dr. Handal also visited Dr. Helena Liptakova; he explained to her that, while it was an individual PCP's decision whether or not to contract with UAS, it did not meet approved standards of care and Superior would not reimburse for it. (Docket Entry 392-61, at 16-17.) Dr. Handal later testified that he believed Dr. Liptakova inferred from “what I told her that it was good to abandon the practice” of utilizing UAS's services. (Docket Entry 392-61, at 16-17.)
On January 15, 2014, Superior's outside counsel informed it that UAS had filed an antitrust lawsuit in which other MCOs were mentioned but not identified as defendants. (Docket Entry 391-15.) Dr. Harmon forwarded this email CHC's Dr. Buckwold, El Paso First's Dr. Palafox, and Texas Children's Dr. Giardino. (Docket Entry 391-15.) Dr. Harmon informed the other directors that “[a]ll your plans are mentioned in this lawsuit, but only [Dr. Lachman has] the dubious distinction of being named specifically.” (Docket Entry 391-15.) Dr. Palafox replied to all the parties: “Dr. [Lachman], CONGRATULATIONS!!” and included clip art of a skeleton giving a thumbs-up. (Docket Entry 391-15.) Dr. Lachman responded to the group stating: “This email track is discoverable. Therefore, I will not comment except to say that the information in the letter about [Parkland] is distorted and inaccurate.” (Docket Entry 392-2.) In a separate reply to just Superior's Dr. Harmon, Dr. Palafox responded: “Thanks for the info as I did not know. I guess we are doing something right.” (Docket Entry 392-3.)
After the filing of this lawsuit, El Paso First paused its plan to implement its own credentialing policy. (Docket Entry 392-4, at 8.) At a meeting of El Paso First's credentialing committee on February 12, 2014, the committee noted the “[p]roposed policy for Allergy & Immune Therapy has be[en] place[d] on hold due to [UAS's lawsuit]. [El Paso First] is not part of the lawsuit but could be a witness to the lawsuit so [El Paso First] cannot proceed in proposing any policies.” (Docket Entry 392-4, at 15.)
By contrast, Superior did not change plans to implement its credentialing policy in response to this suit. It issued another news alert in May 2014 entitled “Allergy and Immunology Therapy Credentialing Required for Medicaid Providers.” (Docket Entry 392-5.) The alert stated that, effective August 1, 2014, the credentialing policy would go into effect, requiring PCPs who wished to continue offering allergy and immunotherapy services to be credentialed by Superior's credentialing committee. (Docket Entry 392-5.) Centene adopted a similar policy in 2016, limiting allergy testing and immunotherapy treatments to be carried out by “licensed practitioner[s] acting within their scope of practice to perform allergy and immunology services.” (Docket Entry 392-6, at 2.)
Superior's and Centene's policies remain in effect today. (See Docket Entry 391-10.)
3. The Effect on Access to Care.
As noted above, when Superior first announced its credentialing policy, HHSC requested information from Superior on its plan requirements and what effect the policy would have on its network's access to allergy testing and immunotherapy. (Docket Entry 391-4.) In response, Superior provided documentation on patient's access to specialist care in the counties within the West Medical Rural Service Area (“MRSA”). (Docket Entry 392-55.) The documentation showed that “a significant percentage, 64 of the total counties in the MRSA West area,” did not have allergy immunology specialists” because “none of those counties have a provider of that specialty available for contracting.” (Docket Entry 392-55, at 2.) Superior additionally noted that, even when there were specialists available, there was “low participation” because a number of providers were not “willing to contract with Medicaid managed care organizations since their practice is already at capacity with patients through commercial based insurance programs.” (Id. at 3.) Superior stated that it was continuing to recruit available providers, and added that, in some locations, it would authorize the patient to see a non-contracted specialist if the specialist agreed; alternatively, the patient would have to travel in excess of 75 miles to another county to seek treatment. (Id. at 3, 11-22.)
B. Procedural Background.
Plaintiffs and a number of PCPs filed this suit in state court against Superior and Parkland on September 29, 2017. (Docket Entry 1.) Defendant Superior removed the case to this Court on November 3, 2017. (Docket Entry 1.) Superior moved to compel arbitration. (Docket Entry 9.) The undersigned issued a Report and Recommendation that recommended compelling the PCPs, but not AAAPC or UAS, to engage in arbitration; that recommendation was adopted by the District Court. (Docket Entry 74; Docket Entry 87.) The case was then stayed pending the outcome of the arbitration. (Docket Entries 73 and 88.) Plaintiffs subsequently settled with Defendant Parkland and all claims against it were dismissed with prejudice. (Docket Entry 96.)
Plaintiffs then filed an amended complaint, adding Centene as a defendant, on September 25, 2019. (Docket Entry 106.) Superior and Centene moved to dismiss the suit (Docket Entries 116 & 146); the undersigned recommended that both motions be denied (Docket Entries 135 and 180), and these recommendations were likewise adopted by the District Court (Docket Entries 140 and 198).
The parties subsequently filed cross motions for summary judgment, as well as objections and motions to strike to the summary judgment evidence offered by the opposing side. (Docket Entries 302, 304, 306, 330 and 331.) The motions and numerous exhibits were sealed. Based on a recent decision by the Fifth Circuit, the undersigned ordered the parties to file joint sealed and unsealed appendixes detailing the summary judgment evidence. (Docket Entry 379.) The parties filed their appendixes and the undersigned ordered refiling of all pending motions in the case with citations to the updated appendixes. (Docket Entry 405.) The parties refiled their motions (Docket Entries 408, 410, 414, 420, and 426), and the stay was lifted (Docket Entry 440). The undersigned held a hearing on all pending motions on May 5, 2022, and took them under advisement.
Binh Hoa Le v. Exeter Fin. Corp., 990 F.3d 410 (5th Cir. 2021).
III. Applicable Legal Standards.
A. Summary Judgment.
A party is entitled to summary judgment under Federal Rule of Civil Procedure 56 if the record shows no genuine issue as to any material fact exists and the movant is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). A party against whom summary judgment is sought may not rest on the allegations or denials in his pleadings, but instead must come forward with sufficient evidence to demonstrate a “genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute concerning a material fact is “genuine,” and therefore sufficient to overcome a summary judgment motion, “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. The moving party “always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting FED. R. CIV. P. 56).
“When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts ....Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial.'” Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (citations omitted). “Although the evidence is viewed in the light most favorable to the nonmoving party, a nonmovant may not rely on ‘conclusory allegations, unsubstantiated assertions, or only a scintilla of evidence' to create a genuine issue of material fact sufficient to survive summary judgment.” Barrera v. MTC, Inc., No. SA-10-CV-665-XR, 2012 WL 1202296, at *2 (W.D. Tex. Apr. 10, 2012) (quoting Freeman v. Tex. Dep't of Crim. Just., 369 F.3d 854, 860 (5th Cir. 2004)).
B. Objections and Motions to Strike.
A district court has “great discretion” in admitting evidence that has any tendency to make any material fact more or less probable. See Woods ex rel. Woods v. Int'l Harvester Co., Inc., 697 F.2d 635, 639 (5th Cir. 1983); FED. R. EVID. 401. A district court's ruling on an evidentiary matter is reviewed for abuse of discretion and will not be reversed unless the challenged ruling affects a substantial right of the party. Weinhoffer v. Davie Shoring, Inc., 23 F.4th 579 (5th Cir. 2022).
IV. Analysis.
As noted above, there are three summary judgment motions pending before the Court. Defendants have moved for summary judgment on various grounds, including lack of standing, failure to raise a genuine dispute on the merits of the antitrust claims, and limitations. (Docket Entries 408 and 410.) For their part, Plaintiffs have moved for partial summary judgment as to whether the case should be analyzed under a per se theory or the rule of reason, Defendants' asserted affirmative defenses, and also on their own claim under the Declaratory Judgment Act. (Docket Entry 414.)
This Report and Recommendation will address the disputed issues in the following order: (a) standing; (b) antitrust conspiracy; (c) the limitations defenses; (d) Defendants' various other affirmative defenses; and (e) Plaintiff's claim under the Declaratory Judgment Act. As explained below, this Report and Recommendation recommends denial of summary judgment on all of these issues, though it recommends denial without prejudice as to certain issue that may be presented by way of an appropriate trial motion. It also recommends denial without prejudice of the parties' evidentiary motions.
A. Standing.
Defendants contend that neither UAS nor AAAPC have properly asserted evidence of standing: Superior claims that UAS does not have antitrust standing, and Centene argues that AAAPC lacks associational standing. (Docket Entry 408, at 15-22; Docket Entry 410, at 21-23.) Each claim is discussed below.
1. UAS's Standing.
Section 4 of the Clayton Act provides that “any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue . . . .” 15 U.S.C. § 15(a). To establish standing in an antitrust case, a plaintiff must show (1) injury-in-fact, i.e., an injury to the plaintiff proximately caused by the defendants' conduct; (2) antitrust injury; and (3) proper plaintiff status. Pulse Network, L.L.C. v. Visa, Inc., 30 F.4th 480, 488 (5th Cir. 2022) (citing Doctor's Hosp. of Jefferson, Inc. v. Se.Med. All., Inc., 123 F.3d 301, 305 (5th Cir. 1997)). Superior argues that UAS has not satisfied any of these three elements. (Docket Entry 408, at 15-22.) This Report and Recommendation will first address whether UAS's evidence is sufficient on the injury elements of antitrust standing before turning to the question of whether UAS is a proper plaintiff to bring this suit.
a. Injury-in-fact and antitrust injury.
As to the injury elements of antitrust standing, Superior argues that UAS has not presented either proper expert evidence that it has actually suffered injury, or direct rather than circumstantial evidence of the injury. (Docket Entry 408, at 18-22.) Contrary to Superior's arguments, neither expert nor direct evidence is absolutely required to withstand summary judgment on standing in an antitrust case.
In contending that direct and expert evidence is necessary, Superior relies primarily on the Fifth Circuit's unpublished decision in El Aguila Food Prod., Inc. v. Gruma Corp., 131 Fed.Appx. 450, 453-54 (5th Cir. 2005). El Aguila Food Prod. does not support Superior's view. In that case, the district court rejected the plaintiffs' proffered experts because it found their damages model “wholly unreliable insofar as it attributed all of the measured lost profits to the alleged antitrust injury and irrelevant insofar as it was not in any respect anchored to the specific agreements or marketing practices challenged by plaintiffs.” Id. at 453. The Fifth Circuit held that the district court did not abuse its discretion in excluding the expert evidence. Id. at 454. As the Court explained, this left plaintiffs with only circumstantial evidence, which on the facts of the case was overcome both by other explanations for the cause of the plaintiffs' damages and by plaintiffs' failure to mitigate. Id. at 454-55.
El Aguila Food Prod. does not stand for the proposition that either expert or direct evidence is needed to prove causation to establish standing in every antitrust case. As the Fifth Circuit made clear, it may be “in some instances permissible” for a jury to find antitrust injury based solely on circumstantial, non-expert evidence, so long as the “required causal link . . . is proved with a fair degree of certainty.” 131 Fed.Appx. at 454-55 (citing Alabama v. Blue Bird Body Co., 573 F.2d 309, 317 (5th Cir. 1978)). For the reasons that follow, the totality of UAS's submitted evidence raises a genuine dispute as to the injury requirements of antitrust standing.
A plaintiff successfully shows injury-in-fact by introducing evidence of a decline in sales because of the defendant's conduct. Sec. Data Supply, LLC v. Nortek Sec. & Control LLC, No. 3:18-CV-1399-S, 2019 WL 3305628, at *4 (N.D. Tex. July 22, 2019). In the instant case, UAS offers as evidence the testimony of its former CEO, Nicolas Hollis, who details the decline in UAS's sales that followed Superior's decision not to reimburse PCP for allergy testing and immunotherapy services. (Docket Entry 392-43, at 7.) Additionally, UAS relies on the testimony of Dr. Gilbert Handal, a member of Superior's credentialing committee and paid consultant for Superior. (Docket Entry 392-61, at 16-17.) Superior CEO Dr. Harmon sent Dr. Handal to speak with PCPs about their use of UAS's services; Dr. Handal explained to these PCPs that, while he could not specifically require them to stop using UAS's services, using the services was not medical best practice and the PCPs would no longer be reimbursed for doing so. (Docket Entry 392-61, at 16-17.) Subsequently, those PCPs no longer contracted with UAS. (Docket Entry 392-61, at 16-17.) This evidence would support a jury finding that UAS's loss of sales was specifically related to Superior's conduct.
UAS has also presented expert evidence related to injury-in-fact via report of its expert Jonathon Orzag. (Docket Entry 423, at 33-34.) The undersigned has previously addressed Orzag's testimony, finding that the econometric model of damages he proposed was sufficiently based on facts and data, sufficiently reliable in its principals and methods, and sufficiently reliable in the application of the principals and methods to the facts to be admissible under Federal Rule of Evidence 702. (Docket Entry 280, at 2.) As to UAS's decline in revenues, Orzag opines that his econometric model “control[ed] for all plausible alternative explanations,” and that explanations other than the MCO's conspiracy did not account for the decline. (Docket Entry 39471, at 4-5.) While the undersigned precluded Orzag from testifying that his econometric model presents direct proof of causation, it certainly provides circumstantial evidence of causation. (Docket Entry 285, at 150-52; 160-61.) And as El Aguila Food. Prod. suggests, this type of circumstantial evidence may be sufficient to create a fact issue as to whether a defendant's conduct proximately caused a plaintiff's injuries. 131 Fed.Appx. at 454-55. The reason for this is straightforward: a model that eliminates other plausible causes of sales declines supports the inference that UAS's injury was the result of conduct by Superior and other members of the alleged conspiracy. This inference, coupled with Hollis's declaration and Dr. Handal's testimony, creates a genuine issue as to the injury-in-fact requirement.
For the purposes of this standing analysis only, the Court should assume that the conduct in question constitutes an antitrust violation. As the Fifth Circuit has explained, a “[s]tanding analysis can be most helpful in the atypical antitrust case if the court assumes an antitrust violation has occurred and then determines whether the plaintiff has suffered injury-in-fact, is a proper plaintiff, and has experienced ‘antitrust injury' from the violation.” Doctor's Hosp. of Jefferson, 123 F.3d at 306.
The question of whether the claimed injury is an antitrust injury needs little further discussion here. Hollis claims in his declaration that “numerous of the providers who received threatening letters and visits from [Defendants] decided to stop all testing and immunotherapy in their offices and ultimately terminated their agreement for all patients. As a result, even patients whose insurance company would otherwise pay for these services would no longer be seen.” (Docket Entry 392-43, at 7.) This evidence supports a reasonable inference that UAS had been excluded from the testing and immunotherapy markets. The exclusion of a competitor from the market is certainly the kind of injury that the antitrust laws were intended to prevent. A competitor who has been excluded from the market “suffers a distinct injury” considered “[irrespective of consumer injury,” and “has clear standing to challenge . . . conduct . . . that . . . tends to exclude competitors from the market.” AndrxPharm., Inc. v. Biovail Corp. Int'l, 256 F.3d 799, 816 (D.C. Cir. 2001); see also Academy of Allergy & Asthma in Primary Care, et al., v. Allergy & Asthma Network, et al., SA-14-CA-35-OLG, Order at 27-28 (W.D. Tex. Sept. 29, 2017) (same). This is true even though the antitrust-injury requirement derives from the basic idea that “antitrust laws were enacted for the protection of competition, not competitors.” Atlantic Richfield v. USA Petroleum, Co., 495 U.S. 328, 338 (1990) (quotation marks omitted).
b. Proper plaintiff status.
Superior also claims that UAS is not the proper plaintiff to bring this suit. Proper plaintiff status assures that no other party is better situated to bring suit for the particular injury at hand. See Doctor 'sHosp., 123 F.3d at 305. In the Fifth Circuit, a proper plaintiff inquiry includes three factors: “(1) whether the plaintiff's injuries or their causal link to the defendant are speculative; (2) whether other parties have been more directly harmed; and (3) whether allowing this plaintiff to sue would risk multiple lawsuits, duplicative recoveries, or complex damage apportionment.” Pulse Network, L.L.C., 30 F.4th at 493 (internal quotations and citations omitted). The proper plaintiff inquiry is not a “precise test,” but rather a set of “factors that circumscribe and guide the exercise of judgment in deciding whether the law affords a remedy in specific circumstances.” Associated Gen. Contractors of Cal. Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 53637 (1983).
As discussed above, UAS has introduced non-speculative evidence sufficient to withstand summary judgment as to the injury its suffered, and to eliminate other plausible explanations for its damages. The remaining issues are whether other parties have been more directly harmed and whether allowing suit would risk duplicative recoveries and a complex damages apportionment. The analysis of these issues is informed by the Supreme Court's decision in Ill. Brick Co. v. Illinois, 431 U.S. 720 (1977), and its progeny.
In their answers, Defendants assert Illinois Brick among their defenses (Docket Entry 148, at 26; Docket Entry 215, at 24), and Plaintiffs address this defense as part of their motion for summary judgment on Defendants' affirmative defenses (Docket Entry 414, at 22-27). However, at the hearing on the motions, both parties acknowledged that Illinois Brick is not an independent affirmative defense, but rather a line of cases relevant to a proper plaintiff analysis.
The facts in Illinois Brick were as follows: the Illinois Brick Company manufactured and distributed concrete blocks. It sold these blocks to contractors, who in turn submitted construction bids to the State of Illinois; those bids included the costs of building materials like the blocks. 431 U.S. at 726. The State of Illinois alleged that the company had engaged in a price-fixing conspiracy to increase the price of concrete blocks, which was absorbed by the contractors and passed on to the state in the form of higher bids. Id. at 726-27. The Supreme Court held that this pass-on theory of overcharge to an indirect purchaser was insufficient to confer standing in a federal antitrust action. Id. at 735-36. The Court listed three reasons for barring indirect-purchaser suits: (1) facilitating more effective enforcement of antitrust laws; (2) avoiding complicated damages calculations; and (3) eliminating duplicative damages against antitrust defendants. Id. at 738-39; see also Apple Inc. v. Pepper, 139 S.Ct. 1514, 1524 (2019) (discussing Illinois Brick). As recently discussed by the Supreme Court, the bright-line rule articulated in Illinois Brick is that “indirect purchasers who are two or more steps removed from the antitrust violator in a distribution chain may not sue,” but “direct purchasers-that is, those who are ‘the immediate buyers from the alleged antitrust violators'-may sue.” Apple Inc., 139 S.Ct. at 1521 (citing Kan. v. UtiliCorp United Inc., 497 U.S. 199, 207 (1990)).
Superior argues that the Illinois Brick doctrine is applicable because (1) UAS is only indirectly injured here, through the PCPs' relationships with Superior and (2) allowing UAS's case to go forward would create a risk of duplicative recovery. (Docket Entry 417, at 6.) Neither argument supports summary judgment.
As to the issue of whether UAS suffered an insufficiently direct injury, the Supreme Court's decision in Associated Gen. Contractors is instructive. In that case, a contractors union alleged that the defendants were targeting it by coercing third parties to contract with nonunion workers instead of union members. 459 U.S. at 521. The Court held that the union was not a proper plaintiff to bring suit, in part because its position was too attenuated from the actual anticompetitive activity. Id. at 545. As the Court explained, the union was a number of steps removed from being boycotted directly; it was a bargaining representative for individual subcontractors who were being boycotted by “certain landowners and other contracting parties” at the request of the defendants. Id. at 540.
The circumstances here are different. In this case, UAS finds itself standing in shoes like those of the union contractors in Associated General Contractors. It contracts directly with physician clinics and individual PCPs-Superior created a situation in which those entities and individuals could no longer provide the services upon which UAS's contracts were based. As UAS stands in the position of the subcontractors in Associated General Contractors whose services were boycotted, its damages are not the sort of indirect injury for which recovery is unavailable under the Sherman Act. See 459 U.S. at 540-41; Ill. Brick Co., 431 U.S. at 735-36; Apple, Inc., 139 S.Ct. at 1521.
As to the issue of duplicativeness, it is important to distinguish improper duplicative recovery under the Sherman Act from proper liability to multiple parties. As Apple, Inc., explains, the Illinois Brick doctrine does not bar multiple liability: “Basic antitrust law tells us that the mere fact that an antitrust violation produces two different classes of victims hardly entails that their injuries are duplicative of one another.” 139 S.Ct. at 1525 (internal quotations and citations omitted). Seen is this light, Superior is wrong to claim a risk of duplicative recovery between UAS and the PCPs, simply because both are downstream market participants. (Docket Entry 417, at 8.) The injuries alleged by PCPs are for denial of reimbursement for allergy services they performed; the injury UAS asserts is lost revenues when PCPs were coerced into terminating contracts. (Docket Entry 19.) Contrary to the circumstances in Illinois Brick, evidence in this case is not that PCPs were passing an overcharge to UAS, but instead that, because of the alleged conspirators' actions, PCPs were no longer employing UAS's services. (Docket Entry 362-61, at 15-17.) This distinguishes both Illinois Brick and Associated General Contractors.
In arguing the issue of standing, the parties point to two other UAS cases filed in courts outside this district: United Biologics, LLC d/b/a United Allergy Services v. Amerigroup Tennessee, Inc., et al., No. 3:19-cv-180 (E.D. Tenn. January 27, 2022), and Acad. of Allergy & Asthma in Primary Care v. Louisiana Health Serv. & Indem. Co., No. CV 18-399, 2021 WL 5029418 (E.D. La. May 14, 2021). Those two decisions came to opposite conclusions, but neither supports Superior's standing argument here. In Louisiana Health Serv., the district court, reconsidering its earlier decision, relied on Associated Gen. Contractors to decide that UAS was indeed a proper plaintiff to bring suit. Louisiana Health Serv., 2021 WL 5029418, at *1-2. In Amerigroup Tennessee, the court found that UAS was not a proper plaintiff to bring suit, but its analysis was tied to the “inextricably intertwined” doctrine of antitrust standing under Sixth Circuit precedent. No. 3:19-cv-180, Docket Entry 447-1,Order at 15-18 (No. 177 E.D. Tenn. Jan. 27, 2022). This reasoning appears inapposite here, as none of the parties argues that the “inextricably intertwined” doctrine controls this Court's analysis. In any event, the Amerigroup Tennessee court has certified its ruling for interlocutory appeal to the Sixth Circuit, noting in its certification order that case law could be interpreted to support UAS's standing to sue. No. 3:19-cv-180, Docket Entry 448-1, Order at *4-5 (E.D. Tenn. April 27, 2022).
As the Fifth Circuit has explained, “another way to explain the standing inquiry is that it ensures that the plaintiff's demand for relief ultimately serves the purposes of antitrust law to increase consumer choice, lower prices and assist competition.” Doctor's Hosp. of Jefferson, Inc., 123 F.3d at 306. Given these purposes it is usually the better path generally to determine summary judgment on the merits, rather than standing. Id. That is what the Court should do in this case. Superior's motion for summary judgment should be denied on UAS's standing to bring suit.
Standing, the Fifth Circuit has counseled, should not become like “the tail wagging the dog” when a plaintiff has presented evidence that the case is of the type that is typically addressed by antitrust law. Doctor's Hosp. of Jefferson., 123 F.3d at 306.
2. Associational Standing.
Defendant Centene raises a different standing issue: it alleges that AAAPC lacks standing as an association to bring suit. (Docket Entry 410, at 29-31.) “[A]n association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Ass'n of Am. Physicians & Surgeons, Inc. v. Texas Med. Bd., 627 F.3d 547, 550 (5th Cir. 2010) (quoting Hunt v. Washington State Apple Advert. Comm'n, 432 U.S. 333, 343 (1977)). Centene contends that AAAPC has not satisfied the first or third of these elements. (Docket Entry 410, at 29-31.)
As to the first element, AAAPC provides a roster of its members, identifying several physician members who would have individual standing. (Docket Entry 394-70.) It specifically points to Dr. Joseph Segapelli, who, after meeting a representative from Superior, terminated his relationship with UAS. (Docket Entry 424, at 46; Docket Entry 392-100.) This evidence is sufficient to defeat Centene's summary judgment argument as to this element.
As to the third element, Centene argues AAAPC cannot show that the case can go forward without participation of its members, because those members might be bound by arbitration agreements, as other PCP Plaintiffs in this suit were bound. (Docket Entry 410, at 47; Docket Entries 74, 87.) However, Centene has not provided evidence of arbitration agreements with any of the physicians identified by AAAPC in its response that have not already been subject to arbitration in this case. (Docket Entry 432, at 15-16.) Absent additional evidence that arbitration agreements might actually be at issue with other AAAPC members who have standing, Centene's motion for summary judgment should be denied as to this ground.
B. Antitrust Conspiracy.
Superior and Centene also seek summary judgment on the merits Plaintiffs' antitrust conspiracy claims. Under Section 1 of the Sherman Act, “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.” 15 U.S.C. § 1. “Although § 1 could be read to outlaw all contracts, it has long been interpreted to only proscribe unreasonable restraints.” Golden Bridge Tech., Inc. v. Motorola, Inc., 547 F.3d 266, 271 (5th Cir. 2008). Only a concerted refusal to deal is illegal; a manufacturer “generally has a right to deal, or refuse to deal, with whomever it likes, as long as it does so independently.” Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984).
The Texas Antitrust Act is interpreted in harmony with federal interpretation of the Sherman Act. See Caller-Times Publ'g Co. v. Triad Commc'ns, Inc., 826 S.W.2d 576, 580 (Tex. 1992).
To establish liability under § 1, a plaintiff must show that the defendants (1) engaged in a conspiracy (2) that restrained trade (3) in a particular market. Spectators' Commc'n Network Inc. v. Colonial Country Club, 253 F.3d 215, 220 (5th Cir. 2001). Each of these elements is discussed below.
1. Unlawful Agreement.
To withstand summary judgment UAS must present sufficient evidence that a reasonable jury could conclude that an illegal agreement was made. The facts must demonstrate the conspirators had a “conscious commitment to a common scheme designed to achieve an unlawful objective.” Golden Bridge Tech., Inc., 547 F.3d at 271.
UAS may prove this agreement by either direct or circumstantial evidence. Golden Bridge Tech., Inc., 547 F.3d at 271. In the antitrust conspiracy context, “[d]irect evidence explicitly refers to an understanding between the alleged conspirators, while circumstantial evidence requires additional inferences . . . to support a conspiracy claim.” Id. (citing Tunica Web Advert. v. Tunica Casino Operators Ass'n, Inc., 496 F.3d 403, 409 (5th Cir. 2007)). Direct evidence is unambiguous; it does not require any inference on the part of the factfinder. In re Pool Prod. Distrib. Mkt. AntitrustLitig., 158 F.Supp.3d 544, 550-52 (E.D. La. 2016).
An antitrust plaintiff may also rely on circumstantial evidence for proof of an agreement. Viazis v. Am. Ass'n of Orthodontists, 314 F.3d 758, 763 (5th Cir. 2002). Such circumstantial evidence must be strong, however, because “antitrust law limits the range of permissible inferences from ambiguous evidence in a § 1 case.” Matsushita Elec. Indus. Co., 475 U.S. at 588. Circumstantial evidence must tend to rule out the possibility that the alleged conspirators were acting independently. See Golden Bridge Tech., Inc., 547 F.3d at 270-71. Independent parallel conduct, “or even conduct among competitors that is consciously parallel,” cannot on its own establish the requisite illegal agreement. Id. at 271 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 553-54 (2007))). Neither will conduct that is “consistent with other, equally plausible explanations.” Stewart Glass & Mirror, Inc. v. U.S. Auto Glass Disc. Ctrs., Inc., 200 F.3d 307, 315 (5th Cir. 2000) (quoting Matsushita Elec. Indus. Co, 475 U.S. at 587)).
Accordingly, in considering whether even consciously parallel conduct is evidence of concerted antitrust conspiracy, the factfinder must consider certain “plus factors.” See Royal Drug Co., Inc. v. Grp. Life & Health Ins. Co., 737 F.2d 1433, 1437 (5th Cir. 1984) (citation omitted). There is no exhaustive list of “plus factors” in the Fifth Circuit, but courts have considered factors including (1) actions that would be against the defendants' self-interest if the defendants were acting independently, but consistent with their self-interest if they were acting in concert; (2) a motive to conspire; (3) opportunities to conspire; (4) market concentration and structure conducive to collusion; (5) pretextual explanations for anticompetitive conduct; (6) sharing of pricing information; (7) signaling among competitors; (8) and other traditional facts suggestive of conspiracy. See JSW Steel (USA) Inc. v. Nucor Corp., No. 4:21-CV-01842, 2022 WL 489321, at *7 (S.D. Tex. Feb. 17, 2022) (discussing factors); see generally ABA SECTION OF ANTITRUST LAW, Proof of Conspiracy Under Federal Antitrust Laws 69-91 (2010). In reviewing the evidence, it is important to remember that, while a plaintiff must show that the defendant joined an illegal agreement, it does not need to prove that the defendant was an instigator or a ringleader. MM Steel, L.P. v. JSW Steel (USA) Inc., 806 F.3d 835, 844 (5th Cir. 2015).
In this case, UAS argues that it has presented direct evidence of an agreement between Superior and other MCOs to establish an anticompetitive credentialing policy for reimbursement of allergy testing and immunotherapy (Docket Entry 423, at 18-21.) Specifically, it cites to a private conversation between Dr. Harmon of Superior and Dr. Buckwold of CHC on April 8, 2013. (Docket Entry 423, at 21; Docket Entry 392-51, at 78-86.) This conversation took place at a quarterly HHSC conference; after hearing discussion about immunotherapy from Dr. Harmon during the conference, Dr. Buckwold approached him privately to discuss CHC's approach to allergy and immunotherapy credentialing. (Docket Entry 392-51, at 79-80.) Dr. Buckwold offered to give Superior CHC's credentialing policy; Superior was interested in the policy because it was looking for one “could use as the basis for [its own].” (Docket Entry 392-51, at 82-83.)
Dr. Buckwold later sent Dr. Harmon a copy of the policy and requested that Dr. Harmon “[l]et me know if you see ways to improve on this.” (Docket Entry 391-13, at 2.) Dr. Harmon forwarded the policy internally within Superior. (Docket Entry 391-13, at 2.) Changing the names, Superior ended up implementing a policy nearly identical to this credentialing policy CHC was circulating. (Docket Entry 392-51, at 83.) Meanwhile, Dr. Buckwold “took the lead in giving [direction] on how to proceed with” implementing this credentialing policy, sending CHC's policy to other MCOs, including El Paso First. (Docket Entry 391-75, at 8.)
The parties present conflicting evidence as to whether these credentialing policies were publicly available during this time period. (Compare Docket Entry 394-87, at 2 with Docket Entry 391-56, at 10.) At the summary judgment stage, such conflicts in evidence are construed against the movant.
In addition to Superior's April 2013 conversations about and subsequent implementation of the credentialing policy, UAS submits corroborating evidence to bolster its position that there was an agreement between Superior and other MCOs. It includes evidence of two meetings between representatives of CHC, El Paso First, Parkland, and Superior. (Docket Entry 423, at 12.) The first of these meetings was a conference call which took place on June 24, 2013 (Docket Entry 392-74, at 5; Docket Entry 392-75, at 2-3); the second was a face-to-face meeting that took place on July 8, 2013 (Docket Entry 391-14, at 2).
Superior correctly argues that there is no evidence that Dr. Harmon specifically attended this second meeting. (Docket Entry 429, at 9; Docket Entry 391-74, at 13.) However, the record indicates that it was attended by Dr. Robert Griffin, the head of Superior's credentialing committee, as well as Dr. Glomb, whom Superior would later employ in connection with allergy and immunotherapy credentialing. (Docket Entry 392-57, at 32, 37.)
At the same time, other MCOs were also acting to curtail use of UAS's services: Parkland sent letters to PCPs informing them that it would no longer be reimbursing for allergy and immunotherapy services, and that “[u]sing this provider [UAS] puts you in violation of your contract, which could subject you to termination of your contract with [Parkland].” (See, e.g., Docket Entry 391-32, at 2.) El Paso First, for its part, sought recoupment for PCPs for services provided in conjunction with UAS. (Docket Entry 392-86, at 3; Docket Entry 392-65, at 2-3.) On November 14, 2013, Parkland emailed El Paso First, attaching letters that Parkland had sent to PCPs following up on their use of UAS's services, and suggesting that that El Paso First use the same letters. (Docket Entry 392-77, at 2.) Finally, as further evidence of the conspiracy, UAS introduces evidence that representatives of various conspiring MCOs communicated when Superior learned that UAS had filed a related lawsuit in which members of the conspiracy were mentioned. (Docket Entry 391-15.) These communications support a plausible inference that the MCOs were acting in concert. As El Paso First's Dr. Palafox wrote to Superior's Dr. Harmon about UAS's complaint, “I guess we are doing something right.” (Docket Entry 392-3.)
The parties also dispute the admissibility of an additional piece of corroborating evidence: testimony from UAS CEO Hollis about a conference call among the MCOs about getting all MCOs to implement the credentialing policy. In his declaration, Hollis offers testimony that, on October 28, 2013, he had a meeting with Frank Dominguez, CEO of El Paso First; Hollis testifies that Dominguez told him that, on a call with other MCOs, Superior was “stressing that all of the health plans should get on board with Superior's policy of only paying allergists.” (Docket Entry 392-43, at 4-5.) Dominguez denies making such a statement. (Docket Entry 391-73, at 7.) This testimony was the subject of a previous ruling by the undersigned, which Superior has asked the undersigned to reconsider. (Docket Entry 389.) Superior argues that testimony consists of a hearsay statement within a hearsay statement; the undersigned found the internal statement to be admissible as a non-hearsay statement in furtherance of a conspiracy pursuant to Federal Rule of Evidence 801(d)(2)(E), and the second layer potentially admissible through Rule 613(b) as extrinsic evidence of a prior inconsistent statement. (See Docket Entry 378.) There is disagreement about what role this testimony may play during the course of summary judgment as opposed to trial. (Docket Entries 389 and 400.) At this stage, the undersigned need not consider the admissibility of the testimony, as the evidence already discussed is sufficient to survive a motion for summary judgment as to the existence of an agreement between the parties. Therefore, Superior's request for reconsideration should be denied without prejudice to reurging either in the form of a motion in limine or an objection at trial.
Superior argues that none of this proof constitutes direct evidence, because it does not reference an express agreement among the MCOs to institute the policy. (Docket Entry 408, at 11; Docket Entry 29, at 8-9.) Superior's view of what constitutes “direct” evidence is unduly narrow; evidence may directly support an antitrust conspiracy even if it does not precisely lay out all the details of the agreement. See Tunica Web Advert. 496 F.3d at 410. Nevertheless, even if UAS's proof constitutes circumstantial rather than direct evidence, UAS has presented sufficient evidence to tend to exclude the possibility that these MCOs were acting independently.
UAS has also presented internal emails in early 2014 between Superior and Centene discussing PCP complaints which tend to show another “plus” factor: that implementing its credentialling policy unilaterally was against its economic self-interest. (See Docket Entries 39347 & 394-48.) In one of these emails, a representative from Centene observed:
Dr. Hernandez (if it's same S/A one) is a long time advocate and supporter of [Superior] from SAPA, our single largest PCP group in Bexar. Also, Dr. Ortiz and Dr. Segapeli (again, hoping I get names right here) in El Paso also have been very vocal as of late about Superior's ongoing “red tape” and difficulty to deal with...the [El Paso] market in general we our losing market share (not just membership) due to what is perceived as EP 1st being much easier to work with - them righting [sic] big checks for basic work isn't hurting of course. This is definitely one of our changes that appears more obviously appropriate from a clinical perspective, even to a prudent layperson, but it also unfortunately could be pereceived [sic] as straw on camel's back.
Reason I bring up is no doubt major issues with [UAS] but these providers have historically been good I think...if it would be helpful, maybe we could find out what is their specific concerns...my guess is [UAS] has definitely slanted this somewhat. Wonder if they even still fill this way once the clinical story was provided. That is something we could have our PR folks and CNL's outreach on to this select group if anyone sees value there.(Docket Entry 393-47, at 2.)
In response, another representative noted that there was “informal discussion around deferring implementation until the STAR HEALTH RFP was complete. Seems we should all get together on the timing so we are all on the same page in the event there is provider noise.” (Docket Entry 393-47, at 2.) These emails create a fact issue as to whether it would be against Superior's self-interest to enact its credentialing policy independently, but in its interest to act in concert with other MCOs, especially El Paso First. UAS has introduced evidence that, if Superior had acted independently, PCPs would switch to El Paso First and Superior would lose business; however, if El Paso First also denied reimbursement for use of UAS's services, then PCPs would not switch. Cf. In re Elec. Books Antitrust Litig., 859 F.Supp.2d 671, 683-84 (S.D.N.Y. 2012) The responsive email notes the possibility of acting in concert to avoid “provider noise,” which is indicative of another plus factor. See JSW Steel (USA) Inc., 2022 WL 489321, at *7.
UAS has also introduced some evidence that Superior's potentially asserted justifications are pretextual, another of the plus factors. On December 10, 2013, Dr. Glomb wrote to Dr. Harmon as follows:
I have done an exhaustive search of the internet, Pub Med, Hayes, and Cochrane, as well as called my two allergist contacts\experts [.] Although, we certainly believe that patient safety and quality of care issues will most assuredly suffer at the hands of these neo-allergists and that opportunities for and incidences of waste, fraud, and abuse will continue to skyrocket as the ka-ching of cash registers is heard throughout the state, the literature is not our friend. Certainly, it is the position of all of the allergists' professional organizations that the previous status quo should stand. . . .
Attached is a document quoting various supporting sources regarding several aspects of this issue. I have some ideas about which way to go but am dubious that we will be able to withstand any legal challenge.(Docket Entry 391-115, at 2.) This email tends to show that the purported explanations from the credentialling policy were bogus. Further, in another e-mail discussing a draft of the credentialing policy, Dr. Glomb wrote that the policy was “[w]ritten to look more daunting than it actually is enforceable.” (Docket Entry 391-118, at 2.) Such evidence creates a fact issue as to the plausibility of the rationales that Superior asserts for the credentialing policy.
In sum, the evidence described above indicates frequent, direct communication between the MCOs regarding the contents and implementation of a credentialing policy to prevent PCPs from utilizing UAS's services, along with a motive to act in concert with other MCOs and statements that indicate that it would be against Superior's interest to act independently and lose PCPs to a competitor MCO. Such evidence is sufficient to defeat Defendants' summary judgment motions.
Superior claims that there is countervailing direct evidence that it implemented this policy independently. (Docket Entry 429, at 8.) Specifically, it presents evidence that Dr. Harmon sought CHC's policy because “we were already thinking about doing something related to credentialing, and so when [Dr. Buckwold] said [CHC] already had a policy, in place . . . I look out publicly to see if anyone has already created something that we could use.” (Docket Entry 39251, at 83.) Superior argues that this evidence demonstrates that it had already decided independently to implement such a policy. (Docket Entry 429, at 8.) Contrary to this view, it would be entirely reasonable for a jury to consider Dr. Harmon's testimony in light of the other evidence in the record and conclude that, while Superior was indeed considering such a policy, it was the assurance of an agreement with CHC and other MCOs that provided the deciding factor in going forward with implementation. But even if Superior's view is correct this evidence does not require granting summary judgment; at most, it shows that there is a fact issue for the jury to decide.
Based on the facts discussed above and the totality of the evidence in the record, a reasonable jury could conclude that Superior entered an agreement with other MCOs to implement the same credentialing policy to prevent PCPs from utilizing UAS's services. As Chief U.S. District Judge Orlando L. Garcia held in a previous related case, “[t]his is not a case in which Plaintiffs contend that an antitrust conspiracy should be inferred from the bare facts of parallel behavior. Rather, Plaintiffs have produced evidence that tends to exclude the possibility of independent action and provides a ‘context' sufficient to show the existence of a Section 1 conspiracy . . . by the coordinated effort of Defendants to drive UAS from the market....” Academy of Allergy & Asthma in Primary Care, et al., v. Allergy & Asthma Network, et al., SA-14-CA-35-OLG, Order at 36 (W.D. Tex. Sept. 29, 2017). Because the evidence is sufficient to create a fact issue as to whether the alleged conspirators had a “conscious commitment to a common scheme designed to achieve an unlawful objective,” Golden Bridge Tech., Inc., 547 F.3d at 271, summary judgment should be denied on the issue of an antitrust agreement.
2. Restraint on Trade.
The next issue is whether this challenged agreement caused a restraint on trade. To resolve this issue, the Court must first determine whether any restraint on trade should be analyzed under a per se theory or a “rule of reason” analysis. See Spectators' Commc'n Network Inc., 253 F.3d 215 at 222-23 (citing Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co., 472 U.S. 284, 289 (1985)) The decision to analyze an antitrust conspiracy case under either a per se or rule of reason theory of liability is a question of law. MM Steel, L.P., 806 F.3d at 848.
This Report and Recommendation first considers whether per se treatment is appropriate at the summary judgment stage, before turning to the broader rule of reason analysis.
a. The applicability of per se treatment.
Most agreements are analyzed under the rule of reason analysis. MM Steel, 806 F.3d at 848. Under this analysis, a court takes a “variety of factors” into account in deciding whether the questioned practice imposes an unreasonable restraint on competition, “including specific information about the relevant business, its condition before and after the restraint was imposed, and the restraint's history, nature, and effect.” State Oil Co. v. Khan, 522 U.S. 3, 10 (1997). However, there are some agreements that, “because of their pernicious effect on competition and lack of any redeeming virtue[,] are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.” United States v. Gen. Motors Corp., 384 U.S. 127, 146 (1966) (citation omitted). These are considered to be a per se restraint on competition. MM Steel, 806 F.3d at 848.
One category of agreements that often merit per se treatment is “group boycotts.” Gen. Motors Corp., 384 U.S. at 146. While the exact contours of what constitutes a group boycott are imprecise, the Supreme Court has generally applied per se treatment to cases that involved joint efforts by firms to “disadvantage competitors by either directly denying or persuading or coercing suppliers or customers to deny relationships the competitors need in the competitive struggle.” Nw. Wholesale Stationers, Inc., 472 U.S. at 294 (internal quotations and citations omitted). These types of boycotts often “cut off access to a supply, facility, or market necessary to enable the boycotted firm to compete.” Id.
A group boycott subject to per se treatment typically has several common features. The agreement must be “horizontal, or between firms that ordinarily compete at the same level of the market;” the boycotting parties should have a dominant market position; the boycotting parties must control access to an element necessary for the boycotting parties to compete in the market; and the possibility of plausible, procompetitive justifications for the boycott must be remote. Tunica Web Advert., 496 F.3d at 412, 414-15; Spectators' Commc'n Network Inc., 253 F.3d at 223-24. Although inquiry must be made as to each element, “[a] concerted refusal to deal need not necessarily possess all of these traits to merit per se treatment.” Tunica Web Advert., 496 F.3d at 414 (quoting Nw. Wholesale Stationers, 472 U.S. at 295).
Horizontal agreement. The Fifth Circuit has held that the conspirators' boycotting agreement is “horizontal” so long as they occupy the same level of the market, even if the boycotters are not on the same level of the market as the intended victim of the boycott. See Tunica Web Advert, 496 F.3d at 414 (“[A]lthough direct competition with the victim will frequently exist in cases of per se unlawful boycotts, nothing in Nw. Wholesale Stationers indicates that it is an absolute prerequisite to a finding of per se illegality if the agreement in question is marked by any of the other traits identified in that case.”); Spectators' Commc'n Network Inc., 253 F.3d at 221, 224 (“[C]onspirators who are not competitors of the victim may have no interest in curtailing competition in a market in which they do not compete; nevertheless, when they have been enticed or coerced to share in an anticompetitive scheme, there is still a combination within the meaning of the Sherman Act.”).
Superior argues that there is no horizontal agreement because, in the relevant geographical areas, the alleged conspirators are not direct competitors. (Docket Entry 408, at 34-35.) However, as explained in Tunica, what is required for per se treatment is an agreement between “firms that ordinarily compete at the same level of the market.” 496 F.3d at 412 (emphasis added). As Plaintiffs argued at the hearing, even if the alleged coconspirator MCOs do not overlap in in the Medicare/CHIP market in the relevant geographic areas, they all operate at the same level of the market. Therefore, evidence of an agreement would constitute a horizontal agreement for purposes of a per se analysis.
Market dominance. There is little guiding precedent to determine the precise amount of market power the alleged conspirators would need to exert to merit per se treatment. The members of the conspiracy must exercise enough market control to be able to “cut off access to a supply, facility, or market” that would be necessary to enable the intended victim to reasonably enter and compete in the market. Nw. Wholesale Stationers, Inc., 472 U.S. at 294. Accordingly, to be subject to per se treatment, Superior and the other MCOs would have to be able to exert enough dominance over the allergy/immunotherapy markets that their economic impact would be “immediately obvious.” FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 458-59 (1986). Based on the available evidence in the record, it does not appear that Superior and the other alleged conspirators are sufficiently dominant entities to satisfy this factor.
A more complete analysis of Superior's arguments as to the relevant market follows in Part B.2.b.2, infra.
Control of access to the market. Superior argues that it lacks “control over all allergy patients that UAS contracted physicians sought to treat.” (Docket Entry 408, at 35.) However, the access point to the market for UAS in this case is not through allergy patients, but through PCPs. In this regard, this case is distinguishable from the related case of United Biologics, LLC v. Allergy & Asthma Network/Mothers of Asthmatics, Inc., No. CV 5:14-35, 2019 WL 830967 (W.D. Tex. Feb. 21, 2019), aff'd on other grounds sub nom. United Biologics, L.L.C. v. Allergy & Asthma Network/Mothers of Asthmatics, Inc., 819 Fed.Appx. 204 (5th Cir. 2020). As Senior U.S. District Judge Royce C. Lamberth noted in that case, the defendant trade association did not control access to PCPs, which was a necessary element for UAS to compete in the market; “[Defendant] and its allies do not control who, when, or how an insurer audits primary care physicians.” 2019 WL 830967, at *4. In this case, however, the alleged conspirators are the insurers with control over which PCPs they choose to audit and which claims they choose to reimburse. UAS cannot enter the market without first contracting with physicians, and, as Judge Lamberth acknowledged, MCOs like Superior exert control over whether PCPs choose to contract with UAS. Therefore, this Tunica factor is satisfied.
Procompetitive justifications. There is conflicting case law regarding what justifications for an agreement may be viewed as “procompetitive.” Superior relies on Judge Lamberth's ruling that disseminating “truthful information” about UAS, lowering patient costs by reducing the number of UAS-administered shots that were covered by insurance, and increasing UAS's technician-training requirements were all procompetitive justifications. See United Biologics, LLC, 2019 WL 830967, at *4. And in another related case, Chief Judge Garcia observed that “procompetitive or competitive neutral” motivations and effects could include “increasing patient safety and discouraging a treatment model that is wasteful” and “costly.” Academy of Allergy & Asthma in Primary Care, et al., v. Allergy & Asthma Network, et al., SA-14-CA-355-OLG, Order at 25 (W.D. Tex. Sept. 29, 2017). Plaintiffs, on the other hand, cite precedent from other circuits indicating that “procompetitive” justifications are simply those which would increase the amount of competition for products and services in a given market. See, e.g., Arapahoe Surgery Ctr., LLC v. Cigna Healthcare, Inc., 80 F.Supp.3d 1257, 1267 (D. Colo. 2015) (“While ensuring compliance with legal and contractual requirements are legitimate aims that may serve to justify Cigna's actions, Cigna has failed to explain any benefits to competition resulting from such actions.” (emphasis added)). Given the conflicting case law, it is prudent at this stage for the Court to decline to find that this Tunica factor has been met.
In light of the factors discussed above, the Court should decline to apply that per se analysis at the summary judgment stage. As both the Supreme Court and Fifth Circuit have noted, categories like “per se” and “rule of reason” are less fixed than they tend to appear. Cal. Dental Ass'n v. FTC, 526 U.S. 756, 779 (1999); Consol. Metal, 846 F.2d at 291 n.17. And as the Supreme Court has cautioned, “the category of restraints classed as group boycotts is not to be expanded indiscriminately.” Ind. Fed'n of Dentists, 476 U.S. at 458. Given the ambiguity regarding whether the Tunica factors have been satisfied, it seems imprudent at this stage to determine that a per se analysis applies-especially since, as shown below, Defendants' summary judgment motions fail even under the rule of reason analysis.
b. Rule of reason analysis.
Superior argues that UAS has not proved harm to competition under the rule of reason. (Docket Entry 408, at 36-42.) Under this analysis, UAS must provide evidence that the conspiracy caused harm to competition in the relevant market. Doctor's Hosp., Inc. 123 F.3d at 307. To determine whether a plaintiff has made the requite showing, courts examine the effect of the alleged restraint on competition, considering all the circumstances, “including the facts peculiar to the business and the history of, reasons for, and market impact of the restraint . . . .” Royal Drug Co., 737 F.2d at 1436 (quotations omitted). Courts must balance the “anticompetitive evils of a restrictive practice . . . against any procompetitive benefits or justifications within the confines of the relevant market.” Doctor's Hosp., Inc., 123 F.3d at 307.
This Report and Recommendation first considers the relevant market, and then turns to proof of harm to competition. !
1. The relevant market.
A “relevant market” is an essential element to a Sherman Act claim: it is the pool a court must assess to determine the ripple effect on competition of any purported antitrust conduct. See Ginzburg v. Mem'l Healthcare Sys., Inc., 993 F.Supp. 998, 1011 (S.D. Tex. 1997) (“The relevant market is ‘the . . . area that is affected by the questioned activity or operation, and it is in that market where the affect upon competition must be assessed.'”). “The ‘market' which one must study” for antitrust purposes “is composed of products that have reasonable interchangeability for the purposes for which they are produced-price, use and qualities considered.” United States v. E. I. du Pont de Nemours & Co., 351 U.S. 377, 404 (1956). For antitrust purposes, a “relevant market” has two components: a product market and a geographic market. Id. Both must be defined not just in terms of where the purportedly excluded competitor operates, but also where consumers are affected by anticompetitive conduct and where they may turn for alternatives. See Doctor's Hosp. of Jefferson, Inc. 123 F.3d at 311 (“[E]vidence must be offered demonstrating not just where consumers currently purchase the product, but where consumers could turn for alternative products or sources of the product if a competitor raises prices.”); Apani Sw., Inc. v. Coca-Cola Enters., Inc., 300 F.3d 620, 626 (5th Cir. 2002) (“The area of effective competition . . . must be charted by careful selection of the market area in which the seller operates and to which buyers can practicably turn for supplies.”)
The undersigned issued a previous Report and Recommendation addressing the issue of a relevant geographic market, but not the relevant product market. (See Docket Entry 135, at 2830.)
The Supreme Court has held that courts need not define the relevant market or markets as precisely in cases dealing with horizontal agreements as in cases dealing with vertical ones. Ohio v. Am. Express Co., 138 S.Ct. 2274, 2285 n.7 (2018). It noted that, while vertical restraints “often pose no risk to competition unless the entity imposing them has market power,” horizontal agreements are inherently more anticompetitive because they are between firms who ordinarily compete. See id. (citing Indiana Fed'n of Dentists, 476 U.S. at 460-61, and Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 648-49 (1980) (per curiam)).
Superior argues that UAS has failed to introduce evidence that properly defines a product market or a geographic market. (Docket Entry 408, at 36-40; see also Docket Entry 446 (letter brief).) It relies on an order recently issued by Judge Lamberth in yet another related antitrust case, in which the judge found that allergy testing and immunotherapy services are complementary rather than interchangeable goods, and so do not constitute a relevant product market. Acad. of Allergy & Asthma in Primary Care v. Quest Diagnostics, Inc., No. 5:17-CV-1295-RCL, 2022 WL 980791, at *6 (W.D. Tex. Mar. 31, 2022). Instead, the judge found that “plaintiffs have alleged two relevant markets in this case: (1) allergy testing and (2) allergen immunotherapy.” Id. UAS acknowledges Judge Lamberth's ruling, conceding that it has alleged two product markets. (See Docket Entry 448, at 3-4 (letter brief).) That UAS has alleged two complementary markets does not necessitate that Defendants are entitled to summary judgment on either; rather, the Court must determine that UAS has offered evidence that trade has been restrained in each market.
The question of proof was an equally important part of Judge Lamberth's ruling against UAS in his recent decision. See 2022 WL 980791, at *4-6 (“This ill-defined market, in reality, describes two separate markets for two complementary services. But that is not the only problem. Plaintiffs must allege that this conspiracy restrained trade. They offer conclusory allegations and unreasonable inferences to support this claim.”).
Superior claims that UAS cannot offer evidence as to a relevant market because of deficiencies in the opinion of UAS's market expert, Dr. Donald R. House, Sr. (Docket Entry 408, at 36-40.) Because these arguments fail to justify exclusion of Dr. House's testimony, they do not provide grounds for granting summary judgment.
Dr. House's testimony has been the subject of extensive litigation in this case and a previous case before Chief Judge Garcia. When Superior moved to strike Dr. House's testimony (Docket Entry 212), the undersigned ordered the parties to submit supplemental briefing on Chief Judge Garcia's rulings. See Academy of Allergy & Asthma in Primary Care, et al. v. Allergy and Asthma Network/Mothers of Asthmatics, Inc., et al., SA-14-CA-35-OLG, Order (W.D. Tex. Mar. 16, 2017). The parties submitted the required briefing and the undersigned held a hearing on the matter. (Docket Entry 280.) Subsequently, Dr. House issued further opinions in response to Superior's motion for summary judgment (Docket Entry 394-79), which Superior also moved to strike (Docket Entry 345).The undersigned held a hearing on this motion as well, resolving some of the issues raised and deferring some to consideration in conjunction with these motions for summary judgment. (Docket Entry 378.) Superior incorporates its prior briefing by reference into its motion for summary judgment (Docket Entry 408, at 36), and the undersigned has considered the underlying briefing and responses as to the admissibility of Dr. House's testimony in resolution of Superior's motion for summary judgment. Superior also reurges its motion to strike the declaration of Dr. House as untimely. (Docket Entry 429, at 22.) The undersigned declines to strike this testimony on this ground, given that it merely summarizes his previous reports in the case. (Compare Docket Entry 394-80, with Docket Entry 394-78.)
Superior complains that, although Dr. House based his analysis on the Texas Medicaid/CHIP submarket, he extrapolated this analysis to the broader market for all allergy/immunotherapy patients. (Docket Entry 408, at 36-37.) It argues that Medicaid/CHIP patients account for only 17% of the Texas population, and that, because these patients cannot freely move to other insurance programs, Dr. House was wrong to analogize this submarket to the Texas allergy/immunotherapy market as a whole. (Id. at 37-38.) Superior further argues that Dr. House improperly aggregated all the different forms of government-funded healthcare programs, even though not all patients are eligible for enrollment in all programs. (Id. at 38-39.) UAS responds that “Defendants' boycott of UAS restrains competition across all markets in Texas because the failure of MCOs to reimburse for allergy services causes physicians to exit the market, harming both UAS and competition, including consumers regardless of what insurance product they choose,” or the program in which they are enrolled. (Docket Entry 228, at 14.) It points to Dr. House's testimony that, regardless of the particular type of insurance under which a conspirator refuses to reimburse for allergy/immunotherapy services, the end result is the same: “the eventual exit from the market of primary care physicians and UAS.” (Docket Entry 394-80, at 37.) As this reasoning would apply equally to both allergy testing services and immunotherapy, Dr. House's expert opinion provides a sufficient basis upon which to deny summary judgment on the issue of the relevant product markets.
Superior also reurges arguments that Dr. House premised his geographical market on irrelevant data. (Docket Entry 408, at 39-39; see also Docket Entry 212, at 14-15 & Docket Entry 264, at 17-19.) Dr. House describes the relevant geographical market as “communities, both large and small, that form a . . . core-based statistical area [CBSA].” (Docket Entry 394-80, at 18-19.) He explains that “consumers of ambulatory services, such as allergy testing and immunotherapy, are willing to travel locally to obtain service. Specifically, such consumers are likely to travel within the bounds of a [CBSA] as defined by the Office of Budget and Management, but are unlikely to shop outside the bounds of this defined geography.” (Docket Entry 394-80, at 19.)
Superior argues that Dr. House's calculation of CBSAs in Texas is incorrect because it is based on a study of CBSA's for dental services, rather than allergy and immunotherapy services. (Docket Entry 212, at 15.) However, Dr. House used dental services as a reference for ambulatory services similar to allergy testing and immunotherapy-services for which patients are willing to travel locally. (Docket Entry 394-80, at 18-19.) Further, as Dr. House explained, he “did not merely rely on dental studies to determine the distances that patients may reasonably travel for the allergy services in question, but also looked at how Superior itself analyzed travel distance as well as the numerous studies of ambulatory services including those involving governmental insurance.” (Docket Entry 394-78, at 5.)
As Chief Judge Garcia previously ruled, Superior may challenge the basis for Dr. House's conclusion either through cross examination of the underlying data supporting his opinions or through introduction of evidence as to the relevant geographical market from its own experts. Academy of Allergy & Asthma in Primary Care, et al., v. Allergy & Asthma Network, et al., No. SA-14-CA-35-OLG, at *31-32 (W.D. Tex. Sept. 29, 2017). Such arguments, however, would go to the weight of the offered opinion, rather than the admissibility, and so should be left to the consideration of the jury. As Superior's challenges to Dr. House's definition of the relevant market do not merit the exclusion of his testimony in its entirety, UAS has presented evidence of a relevant market sufficient to withstand summary judgment.
2. Harm to competition.
Next, the Court must determine whether, in the markets identified, the illegal agreement harmed competition. To determine whether a restraint harms competition under the rule of reason, a three-step, burden-shifting framework applies. Under this framework, UAS has the initial burden to prove that the challenged restraint has a substantial anticompetitive effect that harms consumers. Ohio v. Am. Express Co., 138 S.Ct. at 2284. If UAS carries its burden, then the burden shifts to Superior to show a procompetitive rationale for the restraint. Id. If Superior makes this showing, then the burden shifts back to UAS to demonstrate that the procompetitive efficiencies could be reasonably achieved through less anticompetitive means Id.
UAS can make its initial showing directly or indirectly. In this context, direct evidence is “‘proof of actual detrimental effects [on competition].'” Indiana Fed'n of Dentists, 476 U.S. at 460. Examples include effects such as increased prices, decreased output, or lower quality goods. Impax Lab'ys, Inc. v. FTC, 994 F.3d 484, 493 (5th Cir.), cert. denied, 142 S.Ct. 712, 211 L.Ed.2d 400 (2021). Indirect evidence, on the other hand, is proof of market power plus some evidence that the challenged restraint harms competition. Ohio v. Am. Express. Co., 138 S.Ct. at 2284. Eliminating potential competition is, by definition, anticompetitive. Impax Lab'ys, Inc., 994 F.3d at 493.
As with the relevant market analysis, Superior focuses its motion for summary judgment on the testimony of Dr. House. It challenges his proposed testimony in three ways: (1) that Dr. House failed to account for other interchangeable services in the market beyond PCPs and allergists; (2) that Medicaid/CHIP patients do not face increased costs by visiting specialists in the way other patients do; and (3) that his testimony fails to account for existing Texas Department of Insurance (“TDI”) and HHSC regulations. (Docket Entry 408, at 41-42.) Each of these arguments is considered below.
Other services. Superior argues that Dr. House fails to consider other interchangeable services that impact competition, including “ENTs, PCPs credentialed under Superior's policy, and PCPs who administer allergy shots prescribed by allergists.” (Docket Entry 408, at 40.) Chief Judge Garcia considered a related argument, but found that Dr. House's definition of the product market “does not fail for insufficient consideration of the role of ENTs within the product market, since that claimed deficiency goes not to the interchangeability between allergen testing and immunotherapy with some other product . . . .” Academy of Allergy & Asthma in Primary Care, et al., v. Allergy & Asthma Network, et al., SA-14-CA-35-OLG, at 31 (Order W.D. Tex. Sept. 29, 2017). Even if the Court were inclined to depart from Chief Judge Garcia's conclusion, there is no evidence in the record that the PCPs credentialed by Superior or PCPs administering allergy shots prescribed by allergists exist in the defined market in significant enough numbers to offset the lack of PCPs utilizing UAS's services. In such circumstances, the undersigned cannot find that Dr, House's testimony is insufficient in this regard.
Indeed, as with Dr. House, it does not appear that Superior's experts have calculated the availability of these potentially interchangeable services and their effect on the market. (See Docket Entry 394-54, at 18-24.)
Increased costs. Increased costs associated with travel are among the harms to competition identified by Chief Judge Garcia in the previous related case. Academy of Allergy & Asthma in Primary Care, et al., v. Allergy & Asthma Network, et al., SA-14-CA-35-OLG, Order at 38 (W.D. Tex. Sept. 29, 2017) (“[T]he removal of UAS caused market damages in the form of increased costs and wait time for consumers seeking treatment, reduced output and increased difficulty in finding a physician.”). Superior argues, however, that “Medicaid/CHIP patients insured by Superior do not pay any copay at all or pay a flat copay, regardless of who treats them. . . . [and] Superior reimburses enrollees for travel time if they are required to seek allergy treatment farther away.” (Docket Entry 408, at 42 (citing Docket Entry 391-20)). Dr. House's testimony indicates, however, that the measures taken by Superior to ameliorate costs do not “compensate for the enrollee's time costs of travel and the opportunity costs of time which involves employment and household duties. The ‘full cost of care' is more expensive to patients than monetary out-of-pocket costs.” (Docket Entry 394-78, at 7.) Furthermore, the travel reimbursement cited by Superior is available only after patients have traveled further than 75 miles for care, which exceeds the CBSAs that constitute Dr. House's relevant market. (Docket Entry 394-78, at 6.) Once again, while Superior's travel reimbursement policy might dimmish the weight of Dr. House's testimony, it does not warrant exclusion of the testimony or summary judgment for Superior.
TDI and HHSC regulations. In a related argument Superior points out that TDI and HHSC issue regulations set travel distances for patients seeking services like allergy testing and immunotherapy; according to Superior, these regulations preclude Dr. House from accounting for the distance and time of travel in his analysis of harm to competition. (Docket Entry 246, at 15.) It is true that state regulatory programs enjoy “anti-trust immunity,” and that such immunity may extend to private parties that follow those regulations in some circumstances.” DFWMetro Line Servs. v. Sw. Bell Tel., Corp., 988 F.2d 601, 604-05 (5th Cir. 1993). But in this case, the cited travel regulations do not protect Superior from liability. While the regulations provide for reimbursement of some travel by Medicaid/CHIP patients, they do not require the credentialing policy that Superior adopted; nor do they defeat the effect such a policy had on patent choice.
Dr. House's CSBAs are premised on the distance that patients might be willing to travel for ambulatory services like allergy testing and treatment; while TDI and HHSC might set the travel requirements beyond which reimbursement is required, these regulations do not prevent a denial of access to treatment especially as Superior identified “a significant percentage” of counties that do not have access to a contracted allergist/immunologist within the 75 miles. (Docket Entry 392-55, at 2.)
In any event, in addition to Dr. House's testimony UAS presents evidence from PCPs regarding patients who were no longer able to access or continue allergy testing and immunotherapy services. (See, e.g., Docket Entry 391-90, at 92-93.) This additional evidence is tangible proof of harm to consumers in the market who are no longer able to access a service they once were. UAS has created a fact issue as to whether competition has been harmed.
C. Statute of Limitations.
Defendants also seek summary judgment on limitations grounds. (See Docket Entry 408, at 45; Docket Entry 410, at 26.) The Court considered the applicable statute of limitations in a previous Report and Recommendation (Docket Entry 135), which was adopted by the District Court (Docket Entry 140).
The parties refer to a ruling made by Judge Lamberth in yet another related case. (Docket Entry 408, at 44 (citing Acad. of Allergy & Asthma in Primary Care v. Quest Diagnostics Inc., 2019 WL 919203, at *2 (W.D. Tex. Feb. 22, 2019)). This opinion as to the statute of limitations has since been reversed by the Fifth Circuit. See Acad. of Allergy & Asthma in Primary Care v. Quest Diagnostics, Inc., 998 F.3d 190, 196-99 (5th Cir. 2021).
As discussed in the previous Report and Recommendation, both the Sherman Act and the Texas Free Enterprise and Antitrust Act impose four-year limitations periods. See 15 U.S.C. § 15b; TEX. BUS. & COM. CODE ANN. § 15.25 (West 2019). Under both state and federal law, a cause of action for an antitrust claim accrues each time a defendant commits an act that injures the plaintiff. Bell v. Dow Chem., Co., 847 F.2d 1179, 1186 (5th Cir. 1988) (citing Imperial Point Colonnades Condo., Inc. v. Mangurian, 549 F.2d 1029, 1035 (5th Cir. 1977)). If some injurious acts occurred outside of the statute of limitations, and some occurred within, the plaintiff is limited to recovering damages “resulting only from those acts committed less than four years before commencement of his suit.” Imperial Point Colonnades Condo., Inc., 549 F.2d at 1034.
In this case, UAS filed its lawsuit against Superior on September 29, 2017; therefore, to survive the motion to dismiss, UAS must provide evidence of injurious acts occurring after September 29, 2013. This Report and Recommendation considers this time frame as it applies to each of Defendants' actions.
1. Superior.
Superior argues that “all of the allegedly conspiratorial conduct took place before August 2013. UAS will be unable to tender any credible evidence which shows that the alleged ‘conspiratorial' meetings and communications took place later than in spring and summer 2013, which is when Superior implemented its Credentialing Policy.” (Docket Entry 408, at 45.) Superior is correct that accrual for an antitrust claim generally occurs at the time plaintiff becomes aware of an injurious conspiracy. As the Supreme Court has held, however, “each overt act that is part of the violation and injures the plaintiff . . . starts the statutory period running again, regardless of the plaintiff's knowledge of the alleged illegality at much earlier times.” Klehr v. A.O. Smith Corp., 521 U.S. 179, 189 (1997) (emphasis added). Thus, while a plaintiff cannot recover for acts accruing outside the limitations period, an act within the limitations period can still support a lawsuit. Imperial Point Colonnades Condo., Inc., 549 F.2d at 1034.
As recounted above, UAS has introduced evidence of injurious acts occurring after September 29, 2013. The record includes evidence of the November 14, 2013, email exchange between Parkland and El Paso First. (Docket Entry 392-77, at 2.) And in December of 2013, Superior hired Dr. Handal to speak to PCPs in El Paso, counseling them against their use of UAS's services. (Docket Entries 393-51 & 394-52.) Moreover, there is evidence in the record that Superior eventually formally instituted its credentialing policy on August 1, 2014. (Docket Entry 392-58.)
This evidence points to overt acts taken by alleged members of the conspiracy, including Superior, after the limitations date. Superior's request for summary judgment on limitations grounds should be denied.
2. Centene.
Centene was added to this suit as a defendant on September 25, 2019. Thus, Plaintiffs must show that a cause of action accrued after September 25, 2015. UAS argues that it can show overt acts by Centene within that period.
Centene argues that in refusal-to-deal cases such as this one, mere recitations of a previous refusal to deal are not overt acts sufficient to restart the recitations period. (Docket Entry 410, at 25-27.) In support of this theory, Centene cites Rx.com, Inc. v. Medco Health Sols., Inc., 2008 WL 11449354, at *6 (E.D. Tex. Mar. 11, 2008). The Court should decline to follow Rx.com; as the Fifth Circuit has made clear, recent repetition of actions that violate the Sherman Act do constitute continuing violations for statute of limitations purposes. Poster Exch., Inc. v. Nat'l Screen Serv. Corp., 517 F.2d 117, 127-28 (5th Cir. 1975) (“Employing the limitations statute . . . to immunize recent repetition or continuation of violations and damages occasioned thereby not only extends the statute beyond its purpose, but also conflicts with the policies of vigorous enforcement of private rights through private actions.”)
One of the acts alleged by UAS is that “Defendants expanded application of their ongoing refusal to deal to physicians in 2017 purely based on their relationship with UAS, including denying claims from specialists such as Dr. Ahammed Hashim, whom otherwise would have been considered sufficiently ‘trained' as a pulmonologist under Superior's original policy.” (Docket Entry 424, at 37.) Dr. Hashim recalls attempting to bill Superior 6 times between 2017 and 2018 for allergy services offered in conjunction with UAS, all of which were denied. (Docket Entry 391-90, at 90-93.) Centene claims that this is merely an action in conjunction with its existing credentialing policy, but UAS contends that Dr. Hashim was a qualified specialist who should have been able to seek reimbursement for allergy services offered in conjunction with UAS. It is unclear from the record whether Dr. Hashim should have been able to bill for immunotherapy services; the credentialing policy indicates that “allergist[s], immunologist[s], or otolaryngologist[s]” would be able to bill for these services without being credentialed (Docket Entry 391-21, at 2), but Superior's notice delaying implementation of it's the policy states that “allergists, immunologists, otolaryngologists, and pulmonologists” would all be the kind of specialty provider who would be able to perform allergy testing and immunotherapy services. (Docket Entry 392-83.)
Whether pulmonologists are the kind of specialty provider who needed credentialing, and whether Dr. Hashim himself would have qualified, are disputed fact questions material to the issue of whether Centene committed any overt acts within the limitations period. In light of the questions of fact, Centene's motion for summary judgment on limitations grounds should likewise be denied.
D. Defendants' Enumerated Affirmative Defenses.
Plaintiffs seek summary judgment as to the following affirmative defenses asserted by defendants: (1) Illinois Brick, (2) First Amendment, (3) legitimate competition, (4) failure to join necessary and indefensible parties, (5) failure to mitigate injuries and damages, and (6) unclean hands. (Docket Entry 414.) As agreed by the parties, Illinois Brick is a component of antitrust standing, not an affirmative defense, as so the motion should be denied as moot on that ground. See note 6, supra. Defendants have voluntarily withdrawn their legitimate competition defense (Docket Entry 417, at 7 n.2), so the motion should be denied as moot on this ground as well. With regard to the remaining affirmative defenses, this Report and Recommendation first addresses Defendants' First Amendment defense before turning to the other defenses still at issue.
1. Defendants' First Amendment Defense.
Plaintiffs seek summary judgment on Defendants' First Amendment defense. In support of the defense, Defendants argue that they are entitled to seek immunity under the Noerr-Pennington Doctrine. (Docket Entry 417, at 21-23.)
“[W]here a restraint upon trade or monopolization is the result of valid governmental action, as opposed to private action,” those urging the governmental action enjoy absolute immunity from antitrust liability for the anticompetitive restraint. E. R.R. Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127, 136 (1961); see also United Mine Workers of Am. v. Pennington, 381 U.S. 657, 670-71 (1965) (same). By extension, even if the anticompetitive restraint results directly from private action, the restraint cannot form the basis for antitrust liability if the private action is “incidental” to a valid effort to influence governmental action. Noerr Motor Freight, Inc., 365 U.S. at 532-33. Under the Noerr-Pennington doctrine, “[c]oncerted efforts to restrain or monopolize trade by petitioning government officials are protected from antitrust liability.” Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 499 (1988).
Superior claims that Plaintiffs' allegations are “replete with accusations that Superior or other Alleged Conspirators furthered their alleged conspiracy by contacting government agencies,” including conversations in which Superior attempted to influence Dr. Glomb when he was still employed by HHSC, and conversations among the MCOs at meetings hosted by HHSC. (Docket Entry 417, at 21-22.) Such contacts do not necessarily support a Noerr-Pennington defense, however. As discussed above, Plaintiffs do not present instances of government contact to show that the MCOs' agreement was to influence HHSC to prevent UAS from operating in the market. Instead, the cited communications are offered to corroborate the private agreement between the MCOs. (See, e.g., Docket Entries 391-5 and 391-109) The underlying conspiracy in this case is an alleged agreement between the nongovernmental MCOs to boycott UAS, another nongovernmental entity. Rather than antitrust effects being incidental to lobbying efforts, here any lobbying efforts appear to be governmental incidental to the alleged private antitrust activity. See Allied Tube & Conduit Corp., 486 U.S. at 505.
In support of its invocation of the Noerr-Pennington doctrine, Superior refers to Chief Judge Garcia's summary judgment ruling in a previous case, cited above, as well eventual as the jury verdict in that case. While the jury in that case ultimately found against the plaintiffs on the basis of the doctrine, the allegations in that case were different. There, the jury specifically found that the purpose of the agreement in that case was to persuade local, state, and federal lawmakers to take official government action. (Docket Entry 392-15, at 6.) Here, there is at minimum a genuine dispute as to that issue. Indeed, in denying summary judgment on the previous case Chief Judge Garcia likewise found a genuine dispute. Academy of Allergy & Asthma in Primary Care, et al., v. Allergy & Asthma Network, et al., SA-14-CA-35-OLG, Order at 36 (W.D. Tex. Sept. 29, 2017).
Superior alternatively argues that summary judgment should not be granted on its Noerr-Pennington defense because it is “entitled to show that UAS's experts on liability and damages failed to segregate out [the] lawful conduct of communicating with government agencies from their opinion on alleged antitrust injury.” (Docket Entry 417, at 23.) It cites to a portion of Dr. House's report in which he discusses evidence that the Defendants had engaged in a conspiracy, evidence which included communications between Superior and HHSC about whether Superior would be allowed to implement its credentialing policy. (Docket Entry 394-80, at 10-12.) For the reasons similar to those set out in the previous paragraph, it is not clear how government communications or lobbying efforts caused any part of the harm to competition alleged in this case. Nevertheless, because the record is not fully developed on this issue, it would be prudent to deny summary judgment as to this affirmative defense at this time, without prejudice to Plaintiffs' right to seek relief by way of proposed jury instructions or motion for directed verdict at trial.
2. Defendants' Other Affirmative Defenses.
Plaintiffs also seek summary judgment on Defendants' affirmative defenses of failure to join necessary and affirmative parties, failure to mitigate damages, and unclean hands. (Docket Entry 414, at 29-31.) Plaintiffs base their argument largely on the Rule 30(b)(6) deposition of Centene Representative Holly Munin, who testified that she was not sure as to the factual or legal bases for these defenses. (Docket Entry 391-112.) When answering questions about the bases of these defenses, Munin frequently stated that she was unsure about the legal theories in the case and referred back to the pleadings and other documents that had been filed. (See, e.g., Docket Entry 391-112, at 10.)
Defendants correctly argue that it is inappropriate to require a Rule 30(b)(6) witness to opine on legal matters or marshal all the evidence in support of a claim or defense; such requirements are properly placed upon the pleadings and argument of counsel. In its briefing, counsel for Superior details the theories behind each of these asserted defenses. (Docket Entry 417, at 24-34.) In these circumstances, Defendants should not be foreclosed from presenting evidence in support of the defenses at trial. Whether the jury should be formally instructed about any of these defenses may be considered by the Court at the close of evidence. Cf. FED. R. CIV. P. 50(a).
E. Plaintiffs' Claims under the Declaratory Judgment Act.
Finally, both Plaintiffs and Superior seek summary judgment on Plaintiffs' claims for declaratory relief. (Docket Entry 408, at 46-50; Docket Entry 414, at 31-36.) Plaintiff's claims are premised on 42 C.F.R. § 438.214, which provides “[a]n MCO, PIHP, or PAHP may not discriminate in the participation, reimbursement, or indemnification of any provider who is acting within the scope of his or her license or certification under applicable state law, solely on the basis of that license or certification.” See 42 C.F.R 438.214(c) (2016). As Superior points out however, the regulation also provides that it should not be construed to “preclude the MCO, PIHP, or PAHP from establishing measures that are designed to maintain the quality of services and control costs and are consistent with its responsibilities to enrollees.” Id. Whether the credentialing policy at issue in this case was enacted to discriminate against UAS or to maintain quality of services and control costs is, as discuss above, a central factual issue. Summary judgment on this issue is therefore inappropriate.
V. Conclusion and Recommendation.
Based on the foregoing, I recommend that the pending motions be addressed as follows: Superior's and Centene's Motion for Summary Judgment (Docket Entries 408 and 410) should be DENIED. Plaintiffs' Motion for Partial Summary Judgment (Docket Entry 414) should be DENIED IN PART, DENIED AS MOOT IN PART, and DENIED WITHOUT PREJUDICE IN PART. The motion should be DENIED with regard to Plaintiffs' claims under the Declaratory Judgment Act; it should be DENIED AS MOOT with regard to Defendants' Illinois Brick and legitimate competition affirmative defenses; and it should be DENIED WITHOUT PREJUDICE to renewal as a motion for directed verdict with regard to Defendants' affirmative defenses under the First Amendment, for failure to join necessary parties, for failure to mitigate damages, and for unclean hands. Defendants' Motion to Strike or, Alternatively, Objections to Plaintiffs' Evidence in Support of Motion for Partial Summary Judgment (Docket Entry 420), Plaintiffs' Objections to and Motion to Strike Certain Evidence on Defendants' Motions for Summary Judgment (Docket Entry 426), Defendants' Motion for Reconsideration (Docket Entry 389) should all be DENIED WITHOUT PREJUDICE to renewal by way of evidentiary objection or motion at trial.
VI. Instructions for Service and Notice of Right to Object.
The United States District Clerk shall serve a copy of this Report and Recommendation on all parties by either (1) electronic transmittal to all parties represented by attorneys registered as a “filing user” with the clerk of court, or (2) by mailing a copy to those not registered by certified mail, return receipt requested. Written objections to this Report and Recommendation must be filed within fourteen (14) days after being served with a copy of same, unless this time period is modified by the district court. 28 U.S.C. § 636(b)(1); FED. R. CIV. P. 72(b). The party shall file the objections with the clerk of the court, and serve the objections on all other parties. A party filing objections must specifically identify those findings, conclusions or recommendations to which objections are being made and the basis for such objections; the district court need not consider frivolous, conclusive or general objections. A party's failure to file written objections to the proposed findings, conclusions and recommendations contained in this report shall bar the party from a de novo determination by the district court. Thomas v. Arn, 474 U.S. 140, 149-52 (1985); Acuna v. Brown & Root, Inc., 200 F.3d 335, 340 (5th Cir. 2000). Additionally, failure to file timely written objections to the proposed findings, conclusions and recommendations contained in this Report and Recommendation shall bar the aggrieved party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the district court. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).