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Affiliations Are Still Risky Under Section One

In the push to coordinate health care, many hospitals and providers are seeking to enter into affiliation agreements with other providers whereby they utilize their resources for a central economic purpose. In some cases, the entities are unable to consummate a corporate merger due to, for instance, the religious affiliation of one of the entities. Under these affiliation agreements, the providers remain separate corporate entities, but centralize all other functions so as to operate as one entity. This type of affiliation is usually accomplished through a joint operating agreement centralizing contracting and budgeting in one entity. The Supreme Court of the United States in American Needle, Inc. v. National Football League, 560 U. S. 183 (2010) looked to how the entities operated to determine whether they are capable of conspiring under Section One of the Sherman Antitrust Act.

A recent decision out of the Sixth Circuit, however, may limit the ability of an affiliation to shield its activity from Section One of the Sherman Act. In Medical Center at Elizabeth Place, LLC v. Atrium Health System, ---- F.3d ---- (6th Cir. 2016), the plaintiff claimed that an affiliation of hospital defendants conspired to deny it access to managed care contracts which it needed to compete in the hospital services market in Dayton Ohio. The defendants are four independent hospitals that operated as a network under the name Premier Health Partners pursuant to a joint operating agreement. The hospitals claimed that the network should be characterized as a single entity and, as such, would be incapable of conspiring under Section One of the Sherman Act. The district court, citing American Needle and a case from the Middle District of Pennsylvania, agreed with the defendants and granted summary judgment to the hospital defendants holding that the Premier Network operated as one economic unit. A majority of the Sixth Circuit panel that heard the appeal reversed.

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