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American Home Healthcare Services, Inc. v. Floyd Memorial Hospital and Health Services

United States District Court, S.D. Indiana, New Albany Division

March 6, 2018




         This matter is before the Court on a Motion for Judgment on the Pleadings filed by Defendant/Counter Claimant Floyd Memorial Hospital and Health Services a/k/a The Health and Hospital Corporation of Floyd County, and Baptist Healthcare System, Inc. (“Floyd Hospital”) and Floyd Memorial Hospital and Health Services (“Floyd Home Health”) (collectively, “Defendants”). (Filing No. 30.) Also before the Court is Plaintiff/Counterclaim Defendant American Home Healthcare Services, Inc's. (“American”) Motion to Dismiss Floyd Hospital's counterclaims. (Filing No. 38.) American initiated this anti-trust litigation alleging that Floyd Hospital has attempted to monopolize home healthcare referrals of patients discharged from its hospital and interfered with American's patient relationships regarding the patients' selection of a home healthcare agency. Floyd Hospital alleges counterclaims against American for tortious interference with existing contracts and business relationships as well as defamation. For the following reasons, the Court denies Floyd Hospital's Motion for Judgment on the Pleadings, and grants in part and denies in part American's Motion to Dismiss.

         I. BACKGROUND

         Floyd Hospital is an acute care, public hospital located in New Albany, Indiana. (Filing No. 31 at 3.)[1] Floyd Hospital owns Floyd Home Health, which is a licensed home healthcare agency. Id. American is also a licensed provider of home healthcare services, and its principal office is located in Jeffersonville, Indiana. (Filing No. 1 at 2.) Many patients require and receive outpatient home healthcare services upon discharge from hospitals. (Filing No. 41 at 2.) At the time of the patients' discharge from the hospital, discharge planners (employed by the hospital) make the arrangements for the patients to receive home healthcare services. Id. When home healthcare services are deemed necessary, Medicare regulations require the hospital to provide the patient with a list of home healthcare agencies that are Medicare-eligible, available, and that serve the geographic area in which the patient resides. 42 C.F.R. § 482.43 (c). Home healthcare agencies “must request to be listed by the hospital as available.” Id. As part of the discharge planning process, the hospital may not specify or limit the qualified providers that are available to the patient and must inform the patient of their freedom to choose among participating Medicare providers. 42 C.F.R. § 482.43 (c)(7).

         Although American concedes that it is listed on a pamphlet of available home health agencies furnished by Floyd Hospital to its patients, it alleges that Floyd Hospital has installed mechanisms into the discharge planning process which increase the likelihood that Floyd Home Health will receive the most patient referrals. (Filing No. 31-1; Filing No. 41 at 7.) Specifically, American alleges that physicians (who make home healthcare referrals) must go through an extra step to select any home health provider besides Floyd Home Health due to the fact that the only two choices on the computer drop-down menu have been “Floyd” and “other”. (Filing No. 41 at 7.) If a patient wanted to use the “other” category, the physician would have to go through an extra step to write down specifically which agency the patient chose. Id. Floyd and American operate in six identical counties (Floyd, Clark, Harrison, Scott, Washington, and Crawford) with American serving an additional three counties (Jefferson, Jackson, and Orange) (Filing No. 31-1).

         Floyd Hospital has capacity for 243 beds. (Filing No. 31 at 8.) American alleges that Floyd Hospital is the dominant short-term acute care hospital facility in Southern Indiana (Floyd County), while Floyd Hospital alleges that Floyd County is part of the Greater Louisville metropolitan area, which is served by many acute care hospitals. (Id.; Filing No. 41 at 3.) There are factual disputes as to whether the relevant geographic hospital market is Southern Indiana or the Greater Louisville metropolitan area; however, for purposes of the pleadings stage, it is undisputed that Floyd Hospital's acute care hospital competitors (within Southern Indiana) are Clark Memorial Hospital and Kentuckiana Medical Center-both located in Clark County, Indiana. (Filing No. 41 at 3.) Additionally, American alleges that in 2015, Floyd Hospital had more than double the patient revenue of Clark Memorial Hospital and more than eight times the revenue of Kentuckiana Medical Center. Id.

         Medicare home healthcare patient referrals result in higher reimbursement rates (and profits) to providers than Medicaid home healthcare patients. Id. at 4. In 2015, Floyd Memorial received home healthcare payments from Medicare totaling $10, 874, 908.00 on total charges of $11, 658, 920.00. Id. American's Complaint alleges that in 2015, “no less than 64% of the Medicare patients discharged from Floyd Memorial Hospital to a home health agency were referred in-network to Floyd Home Health”, while the remaining 30.2% of referrals were spread among six other home health agencies. (Filing No. 1 at 7.) American also alleges upon information and belief, total self-referrals for Floyd Home Health constitute no less than 70% of the total referral base currently. Id. In 2015, American received 11 referrals (1.3%) of Medicare patients from Floyd Hospital which included a less desirable mix of patients (from a financial standpoint) that resided far away, and/or Medicaid patients. (Filing No. 41 at 6.)

         The Centers for Medicare & Medicaid Services (“CMS”) publishes quality ratings by assigning stars to home healthcare agencies.[2] According to the site, American earns a rating of 3-stars and Floyd Home Health earns a rating of 4 ½-stars; however, American alleges that there is little to no positive correlation between star ratings and the proportion of referrals received. Id. (Filing No. 41 at 6.)

         American alleges that based on several specific eyewitness reports from patients and their family, Floyd Hospital denied patient choice by referring patients to Floyd Home Health without offering any choices, advocating exclusively for Floyd Home Health, and/or assigning patients to Floyd Home Health despite the patient's choice to use American's services. Id. at 6-7. Based on the foregoing, American claims that Defendants have been, and continue to be, in a positon to starve the competition to a point at which competition will cease and Defendants will hold a monopoly with respect to supplying the relevant product in the relevant geographic market. Id. at 8. American has asserted claims for attempted monopolization under Section 2 of the Sherman Act, as well as state law claims for tortious interference with existing and business relationships with patients. Id.

         On August 19, 2016, before filing suit, Dr. Abdul Buridi (“Dr. Buridi”) sent an email to Floyd Hospital employed physicians, which took issue with Floyd Hospital's referral process and implicitly warned that the physicians could be held responsible for violation of Stark and antitrust laws. (See Filing No. 29-1.) The email also stated that Dr. Buridi's purpose in writing was to see if the issue could be resolved amicably before American's attorneys filed a lawsuit in federal court. Id. at 2. Floyd Hospital's counterclaim is based on this email and it asserts state law claims for defamation, and tortious interference with existing and business relationships.


         Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move to dismiss a complaint that has failed to “state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). When deciding a motion to dismiss under Rule 12(b)(6), the court accepts as true all factual allegations in the complaint and draws all reasonable inferences in favor of the plaintiff. Bielanski v. County of Kane, 550 F.3d at 633 (7th Cir. 2008). However, courts “are not obliged to accept as true legal conclusions or unsupported conclusions of fact.” Hickey v. O'Bannon, 287 F.3d 656, 658 (7th Cir. 2002).

         The complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). In Bell Atlantic Corp. v. Twombly, the Supreme Court explained that the complaint must allege facts that are “enough to raise a right to relief above the speculative level.” 550 U.S. 544, 555 (2007). Although “detailed factual allegations” are not required, mere “labels, ” “conclusions, ” or “formulaic recitation[s] of the elements of a cause of action” are insufficient. Id.; see also Bissessur v. Ind. Univ. Bd. of Trs., 581 F.3d 599, 603 (7th Cir. 2009) (“it is not enough to give a threadbare recitation of the elements of a claim without factual support”). The allegations must “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. Stated differently, the complaint must include “enough facts to state a claim to relief that is plausible on its face.” Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (citation and quotation omitted). To be facially plausible, the complaint must allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).

         Federal Rule of Civil Procedure 12(c) permits a party to move for judgment after the parties have filed the complaint and answer. Rule 12(c) motions are reviewed under the same standard as a motion to dismiss under 12(b)(6). Frey v. Bank One, 91 F.3d 45, 46 (7th Cir. 1996). Like a Rule 12(b)(6) motion, the court will grant a Rule 12(c) motion only if “it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief.” N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 452 (7th Cir. 1998) (quoting Craigs, Inc. v. General Elec. Capital Corp., 12 F.3d 686, 688 (7th Cir. 1993)). The facts in the complaint are viewed in light most favorable to the non-moving party; however, the court is “not obliged to ignore any facts set forth in the complaint that undermine the plaintiff's claim or to assign any weight to unsupported conclusions of law.” Id. (quoting R.J.R. Serv., Inc. v. Aetna Cas. & Sur. Co., 895 F.2d 279, 281 (7th Cir. 1989)). “As the title of the rule implies, Rule 12(c) permits a judgment based on the pleadings alone. . . . The pleadings include the complaint, the answer, and any written instruments attached as exhibits.” Id. (internal citations omitted).


         A. Judicial Notice

         As an initial matter, the Court declines to take judicial notice of the website information that Floyd Hospital has injected into the pleadings. “A court may take judicial notice of facts that are (1) not subject to reasonable dispute and (2) either generally known within the territorial jurisdiction or capable of accurate and ready determination through sources whose accuracy cannot be questioned.” Ennenga v. Starns, 677 F.3d 766, 773-74 (7th Cir. 2012) (citation omitted). While websites such as the Indiana State Department of Health and Centers for Medicare & Medicaid Services are sources whose accuracy cannot be questioned, the data extrapolations that Floyd Hospital has offered as the subject of judicial notice are subject to reasonable dispute.

         The relevant geographic market is an essential part of a claim for attempted monopolization. See Fishman v. Estate of Wirtz, 807 F.2d 520, 531 (7th Cir. 1986). There are factual disputes regarding the territorial areas (and relevant product) that would meet the relevant geographic market for antitrust analysis. Floyd Hospital has defined the relevant geographic market as the six to nine counties that both home healthcare agencies operate in, then has used public records to support its factual contentions in showing Floyd Home Health's share of Medicare payments in its self-defined market. (Filing No. 31 at 7-8.) American alleges, in its Complaint, that the relevant geographic market is Floyd Hospital, which is located in Floyd County, Indiana. (Filing No. 1 at 5.) On a motion to dismiss, the court accepts as true all factual allegations in the complaint, thus judicial notice of data extrapolations that conflict with the geographic market as defined in the Complaint-Floyd Hospital-is inappropriate at this stage.

         B. Floyd Hospital's Motion for Judgment on the Pleadings (Filing No. 30)

         American filed this action alleging that Floyd Hospital's operation of its home healthcare agency constitutes attempted violation of the Sherman Act. Floyd Hospital, pursuant to Federal Rules of Civil Procedure 12(c) moves for judgment on the pleadings as to each of the claims asserted against them in the Complaint.

         1. Section 2 Sherman Act Claim

         Section 2 of the Sherman Act provides for an attempted monopolization claim where “the employment of methods, means and practices which would, if successful, accomplish monopolization, and which, though falling short, nevertheless approach so close as to create a dangerous probability ...

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