First, do no harm. Second, crush the competition?

By Darren Kafka           

In Four Corners Nephrology Associates, P.C. v. Mercy Medical Center of Durango, the Tenth Circuit affirmed the District Court for the District of Colorado's grant of summary judgment in favor of the defendant-respondent Mercy Medical Center of Durango ("Mercy").  The plaintiffs-appellants, Dr. Mark Bevan ("Dr. Bevan") and his practice, Four Corners Nephrology Associates, P.C. ("Four Corners Nephrology"), brought an anti-trust action against Mercy.  Four Corners provides an interesting snapshot of anti-trust law in the medical-provider setting.

Despite the high demand for dialysis among members of the Ute nation, individuals seeking treatment in Durango, Colorado, would have to drive fifty miles to Farmington, New Mexico, to avail themselves of Dr. Bevan and his Four Corners Nephrology practice.  Mercy acted to change this, at first requesting Dr. Bevan, who already had consulting privileges at Mercy, to administer treatment in Durango.  After Dr. Bevan repeatedly refused, Mercy hired Dr. Saddler to establish a practice at Mercy.  In order to pay Dr. Saddler and to ensure the solvency of his practice (and thus the continued existence of dialysis treatment in Durango), Mercy and the Ute Nation agreed to underwrite up to $2.5 million of Dr. Saddler's losses.

Dr. Saddler's hire, however, triggered the ire of Dr. Bevan.  In accordance with Mercy's by-laws, the hire of a full-time nephrologist automatically terminated Dr. Bevan's consulting privileges.  As the saying goes, you don't know what you've got 'till it's gone.  So, Dr. Bevan tried to acquire for himself a similar deal with Mercy as Dr. Saddler had obtained, despite his earlier opposition.  Mercy's by-laws, however, required that Dr. Benson reside within thirty minutes of the hospital to receive such an arrangement.  Undeterred by this, but apparently unwilling to leave Farmington, Dr. Bevan attempted to convince Mercy, first, that he lived in an office space in Durango, and second, that he lived on a vacant lot just outside of the town.

Complicating matters, Mercy became concerned that Dr. Bevan's insistence on joining its active staff was a ruse to drive Dr. Saddler's practice out of business.  Apparently, Dr. Bevan had engaged in a similar gambit in Page, Arizona.  In Page, a dialysis center opened and began competing with Four Corner's in Farmington.  Dr. Benson opened his own clinic in Page directly competing with the new clinic.  The two competing clinics were unable to generate enough revenue to stay in business and the new clinic closed down.  Shortly thereafter, Dr. Bevan closed down his clinic in Page, leaving the town without a dialysis treatment center.

Concerned that Dr. Bevan would attempt a similar ruse in Durango, Mercy designated Dr. Saddler as its sole provider of nephrology services.  In response, Dr. Bevan filed an anti-trust suit against Mercy alleging violations of the Sherman Act and the Colorado Antitrust Act.  The District Court granted Mercy's motion for summary judgment, and Dr. Bevan appealed.

Dr. Bevan rooted his claim in the notion that Mercy was attempting to engage in monopolist activity by granting Dr. Saddler the status of sole provider of nephrology services, thus creating a monopoly in the Durango area for nephrology services.  The Tenth Circuit briefly entertained this claim, in part because Dr. Bevan argued that Mercy created a monopoly among the 1.6% of Mercy's customers who paid for their own treatment.  Although 70% of patients at Mercy have their treatment prices set by the government or insurers, the 1.6% who self pay are "subject to unilateral price increases by the hospital."  The court lingered on this issue, citing, but not endorsing, the D.C. Circuit's decision in FTC v. Whole Foods Markets, Inc.  Judge Gorsuch, writing for the Tenth Circuit stated, "The parties’ monopoly power arguments raise interesting questions, including the pertinence, if any, of a firm’s control over discrete, if limited, market segments, such as self-payers."  However, the court moved on from the market-segment issue, leaving it unresolved.

Ultimately, Dr. Bevan's claim failed on two grounds.  First, Mercy persuaded the Tenth Circuit that its behavior failed to reach the level of anti-competitive behavior barred by the Sherman Act.  The court analogized this case to Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, holding that Mercy may legitimately recuperate its investment in infrastructure by denying competitors access.  The court justified its decision by pointing to essential market forces.  According to the court, "it is the investor’s potential pay-off that breeds risk-taking investment. To deny the payoff is to deter the investment." Judge Gorsuch further stated, "[h]aving made a substantial investment in developing its own nephrology practice—indeed, having even tried to secure Dr. Bevan’s services for that practice—Mercy is entitled to recoup its investment without sharing its facilities with a competitor."

Second, Dr. Bevan's argument failed in the face of the court's analysis of his proposed remedy.  Dr. Bevan asked to be able to join Mercy's staff on par with Dr. Saddler.  In essence, Dr. Bevan argued that he should be able to join and profit from Mercy's monopoly.  The court identified this as a fundamental misconception of anti-trust law, stating: "Whatever injury [Dr. Bevan] may have suffered . . . it is not one the antitrust laws protect because a producer’s loss is no concern of the antitrust laws, which protect consumers from suppliers rather than suppliers from each other.

The Tenth Circuit thus affirmed the District Court's grant of summary judgment.  While the court ultimately sided with the alleged monopolist, the backdrop of Dr. Bevan's supposed nefarious plot to end dialysis treatment in Durango should give anti-trust proponents some measure of satisfaction.  However, the actors in this drama may cause the audience to wonder, if the first rule of medicine is do no harm, perhaps the second is crush the competition.