Opinion
NO. 97-1840, SECTION: "D"(3)
January 3, 2001
ORDER AND REASONS
The Trial of this matter was held before this court, without a jury, on October 2, 2000 through October 10, 2000, and post-Trial briefing was completed on November 22, 2000. Now, after considering the evidence, assessing the credibility of the witnesses, and reviewing the parties' Post-Trial memoranda, the court makes the following findings and conclusions.
I. Background
Plaintiff, Surgical Care Center of Hammond, L.C. d/b/a St. Luke's Surgicenter (St. Luke's) is a Louisiana limited liability company with its principal place of business in Hammond, Louisiana. St. Luke's owns an outpatient surgical facility which commenced operation in Hammond, Louisiana, in November 1996. This outpatient surgical facility is presently the only free-standing ambulatory surgery center in the immediate Hammond-Ponchatoula area.
Hammond, Louisiana is about 55 miles north of New Orleans, Louisiana on Interstate 55, and about 47 miles east of Baton Rouge, Louisiana on Interstate 12.
Defendant, Hospital Service District No. 1 of Tangipahoa Parish d/b/a North Oaks Medical Center (North Oaks), is a Louisiana Hospital Service District created pursuant to LSA-R.S. 46:1051 et seq., with its principal place of business in Hammond, Louisiana. North Oaks owns and operates a 255-bed hospital located approximately one-quarter mile from St. Luke's. In the Hammond-Ponchatoula area, North Oaks is the largest acute care hospital, offering a full range of both inpatient and outpatient services, including outpatient surgery. The upper tier of its management is a Board of Commissioners appointed by the Tangipahoa Parish Council.
The other hospitals in the Hammond-Ponchatoula area are Hood Memorial Hospital, which is a sister hospital service district with only 28 acute beds and no operating rooms. and Lallie Kemp Hospital, a charitable institution largely serving indigent patients.
Defendant, Quorum Health Resources, Inc. (Quorum), is a Delaware corporation with its principal place of business in Brentwood, Tennessee. Pursuant to a management contract with North Oaks, Quorum provides management services to North Oaks, including the provision of the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) for North Oaks. However, the CEO and CFO are selected by and subject to final approval of the North Oaks Board.
Until St. Luke's opened its doors in 1996, there was no effective competition to North Oaks for outpatient surgery in Hammond-Ponchatoula area. In late 1992, North Oaks had purchased the only other acute care hospital (Westpark) in the Hammond-Ponchatoula area, and North Oaks converted it to a rehabilitation facility. The physician membership interests of St. Luke's are owned, either directly or through professional corporations by the following physicians who are or were appointed to the medical staff of North Oaks: Drs. Vincent Kidd; Bon Suarez; Ralph Maxwell; Michael Fajoni; Greg Mula; Rich Staggers; Mark Berry; Bill Black; Laughlin Winkler; David Doan; Steve Littlewood; Nancy Mellin; David Gaudin; Lance Caulfield; Lawrence Ferachi; Richard Drude; Charles Genovese; and Greg Allen.
In this suit, St. Luke's claims that North Oaks and/or Quorum have injured St. Luke's outpatient surgery business by engaging in conduct which: (1) is anti-competitive and violates Section 2 of the Sherman Act, 15 U.S.C. § 2; (2) violates the Louisiana Monopolies Law, LSA-R.S. 51:123; and (3) constitutes unfair methods of competition and unfair practices in violation of the Louisiana Unfair Trade Practices Law, LSA-R.S. 51:1405.
This court originally found that the Louisiana state legislature had granted the hospital district immunity from federal antitrust laws. 1997 WL 465289 (E.D.La. 1997), aff'd, 153 F.3d 220 (5th Cir. 1998) (panel decision). But the Fifth Circuit, en banc, reversed and remanded. Surgical Care Center of Hammond v. Hospital Service District No. 1, 171 F.3d 231 (5th Cir. 1999)( en banc).
II. Legal Analysis
A. Section 2 of the Sherman Act, 15 U.S.C. § 2Section 2 of the Sherman Act makes it unlawful for any person to "monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States. . . ." 15 U.S.C. § 2. Monopoly power is "the power to control price or exclude competition." United States v. E.I. duPont de Nemours Co., 351 U.S. 377, 391, 76 S.Ct. 994, 1004, 100 L.Ed. 1264 (1956).
To prevail on a completed monopolization offense under Section 2, a plaintiff must demonstrate: (1) "the possession of monopoly power in the relevant market"; and (2) "the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." Dimmitt Agri Industries, Inc. v. CPC International Inc., 679 F.2d 516, 525 (5th Cir. 1982) (citations omitted).
To prevail on a Section 2 attempt claim, a plaintiff must show: (1) "specific intent to accomplish the illegal result"; and (2) "a dangerous probability that the attempt will be successful." Id.
In our court a section 2 plaintiff attempting to prove either completed monopolization or attempt must provide the [factfinder] with sufficient evidence to permit it to define the relevant geographic and product market. . . . Proof of the relevant market in attempt cases is required in connection with the dangerous probability of success element of the attempt offense. Thus, courts often state the "dangerous probability" and "relevant market" requisites as one combined requirement of "establishing a dangerous probability of monopolization in a relevant market.Id. (emphasis added).
The offense of monopolization further "requires that the defendant dominate the relevant market." Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 489 (5th Cir. 1984)
The precise market share a defendant must control, absent supporting evidence of monopoly power before he is guilty of monopolization, remains undefined. . . . (However] Supreme Court cases, as well as cases from this court, suggest that absent special circumstances, a defendant must have a market share of at least 50 percent before he can be guilty of monopolization.Id. (citations and notation omitted, emphasis added)
Traditionally, however, courts have required a market share much higher than 50% to support a finding of monopoly power. Id. at n. 11.
In an "attempt to monopolize suit", the Fifth Circuit has instructed that:
While we "must be particularly wary of the numbers game of market percentage". . . . a defendant must have some legally significant share of the market before he approaches the level of dangerous probability of success condemned by the attempt provision of section two.
We do not suggest here a market share percentage that of itself rises to the level of legal significance, but note that a share of less than the fifty percent generally required for actual monopolization may support a claim for attempt monopolization if other factors such as concentration of market, high barriers to entry, consumer demand, strength of the competition, or consolidation trend in the market are present.Id. at 490 (citations omitted, emphasis)
However, a market share of less than 10% usually will not support a finding of attempt to monopolize. Domed Stadium, 732 F.2d at 491.
In its Complaint, St. Luke's alleges the relevant product market to be "the provision of acute care services and surgical care." (Complaint, ¶ 32). St. Luke's further defines two relevant submarkets: (1) inpatient surgical care; and (2) outpatient or ambulatory surgical care. Id.
In its Complaint, St. Luke's also alleges that the relevant geographic market "is the service area comprised of all of Tangipahoa Parish, St. Helena Parish, and the eastern portion of Livingston Parish." Id. at ¶ 33. However, as discussed below, the relevant geographic market for antitrust purposes is broader than what St. Luke's proposes it is.
With this backdrop, St. Luke's alleges that:
North Oaks has monopoly power in the relevant product market over all acute, inpatient medical and surgical services in the relevant geographic market. This monopoly power is demonstrated by its ability to raise prices and exclude entrants.
North Oaks is attempting to gain, and there exists a dangerous probability that it will gain, monopoly power in the relevant submarket for outpatient surgical care in the relevant geographical market.
(Complaint, ¶¶ 34-35).
However, as discussed below, the court finds that St. Luke's has failed to carry its burden of showing that North Oaks has either monopolized or, with any dangerous probability of success, attempted to monopolize the outpatient surgical services submarket. St. Luke's has also failed to prove that North Oaks has a monopoly of the inpatient hospital services submarket, which St. Luke's needed to establish as part of its monopolistic leveraging claim.
1. North Oaks has had no monopoly on the out-patient surgical facilities submarket since the entry of St. Luke's.
It is undisputed that North Oaks has had no monopoly on the out-patient surgical facility services submarket since the entry of St. Luke's. According to Plaintiff's own antitrust expert, Hugh W. Long, Ph.D.:
On a strictly numerical market share basis, it would appear that North Oaks enjoyed a monopoly position in ambulatory surgical care in 1996 (over 70% market share) prior to the entry of St. Luke's into the market. However, the ability of St. Luke's to penetrate [the out-patient surgery] market to the extent that it did in 1997 is consistent with other factors that suggest there is little monopoly power that can be exercised directly in this product market.
In particular, there are few if any classic barriers to entry into the ambulatory surgical services market. The necessary physical assets (land, building, equipment) are available and do not require extraordinary capital investment. The skilled personnel required, particularly licensed surgeons, are also available. Meeting necessary legal and regulatory requirements is not unduly burdensome.
The fact that, in its first year of operation, St. Luke's achieved a 24.7% share of the North Oaks ambulatory surgery market . . . shows little evidence of per se textbook monopoly power in ambulatory surgical services.
At Trial, the report of Plaintiff's antitrust expert (Hugh W. Long, Ph.D.) and the report of Defendant's antitrust expert (William J. Lynk, Ph.D.) were received into evidence. Further, both Dr. Long and Dr. Lynk testified at Trial using their respective reports as the bases of their testimony, and thereby subjected themselves to cross-examination on the contents of their reports.
Dr. Long also explained that in 1999 North Oaks had between 42.3% and 44.3% of what he defines as the relevant market for ambulatory surgery, while St. Luke's had between 22.1% and 23.3% of that "market". (Long Report, Table 3). In answering the court's question "What percentage of the market share, in your opinion, would an ambulatory center have to have to exert monopoly power?," Dr. Long responded: "[I]f by monopoly power we mean raising prices above competitive levels, my sense is that you would, for ambulatory surgical, would probably have to be up in the 80 per cent, 85 per cent area." (Long TR. 54, italics added).
Dr. Long also testified that: "If we're talking market power, in the sense of excluding competition, then [market share would] probably [have to be] in the 60% to 75% range." (Long TR. 54, italics added). While Dr. Long is of the opinion that there is a higher percentage of market share needed for raising prices above competitive levels than for excluding competition, the court has been cited to no caselaw or antitrust treatise making such a distinction. Nevertheless, North Oaks' share of 42.3% and 44.3% of the out-patient surgery market falls far short of either the 80-85% of the market share required to exert monopoly power by raising prices above competitive levels, or the 60% to 75% of the market share to exclude competition.
2. Attempted Monopolization of the out-patient surgery market?
Again, Plaintiff's own antitrust expert opined that:
The fact that, in its first year of operation, St. Luke's achieved a 24.7% share of the North Oaks ambulatory surgery market . . . shows little evidence of per se textbook monopoly power in ambulatory surgical services.
Notwithstanding this record, North Oaks may still have attempted to maintain its 1996 monopoly position in ambulatory surgery although in the short run it was not highly successful in doing so.
(Long Report, p. 10, emphasis and underscore added). Aside from this concession which weakens Plaintiff's "attempted monopolization" claim from the outset, the court next discusses why Plaintiff failed to prove this claim at Trial.
(a) Monopolistic leveraging?
While it is undisputed that North Oaks had no monopoly on the out-patient surgical facilities submarket since the entry of St. Luke's into the market, St. Luke's claims that North Oaks has attempted to monopolize this submarket through several means, the "most pernicious" of these is
Complaint, ¶ 38.
the tying agreement between acute, inpatient medical and surgical services, relevant markets in which North Oaks has monopoly power, and outpatient surgical care, the relevant submarket in which North Oaks is attempting to gain a monopoly. By refusing to deal with managed care plans on anything but an exclusive basis, North Oaks has leveraged its monopoly in one relevant submarket to gain dominance in another.
(Complaint, ¶ 38).
At Trial, St. Luke's allegations regarding its monopolistic leveraging claim became more specific, but less severe than those which were originally pled in the Complaint. At Trial, St. Luke's claimed that North Oaks secures "exclusive contracts" with certain Health Maintenance Organizations (HMO's) and Preferred Provider Organizations (PPO's), wherein North Oaks gives the HMO or PPO an enhanced discount (up to 25%) off billed charges in return for which North Oaks is designated by the HMO or PPO as the sole provider (within a certain geographic area) of any services (both in-patient and outpatient) North Oaks is capable of providing. Thus, by choosing to enter such an exclusive contract to gain the enhanced discount, the participating HMO or PPO agreed to have outpatient surgery performed at North Oaks, and not at St. Luke's.
To prevail on this aspect of its Sherman Act § 2 claim, Plaintiff must first prove that North Oaks had market power of the inpatient hospital facility services submarket, for it is in this market that St. Luke's claims North Oaks has market power that it used as leverage to injure competition through use of exclusive contracts with managed care plans. There are three steps in determining North Oaks' market power in this submarket:
(1) determine the product and service area in which North Oaks attracts the substantial majority of its inpatient business;
(2) determine the geographic locations of other hospitals that also currently serve a substantial number of the patients residing in the North Oaks service area. These other hospitals are those competitors who have the ability to serve North Oaks' current patients should those patients choose to seek out alternative sources of hospitalization; and
(3) measure North Oaks' share of all the business within North Oaks' relevant geographic market.
As the court next discusses, Plaintiff has failed to properly perform these steps. (1) Step One: Determine the Product and Service Area
In Eleven Line, Inc. v. North Texas State Soccer Ass., Inc., 213 F.3d 198 (5th Cir. 2000), the Fifth Circuit declined to endorse and did not rule on the district court's application of a § 2 "monopolistic leveraging" theory of liability. Id. at 206, n. 16. The court noted that this theory is the subject of a circuit split. Id.
The first part of this determination, the product, is easily defined: inpatient hospital facility services. However, the second part of this determination, the geographic area in which North Oaks draws most of its inpatient business, i.e., its inpatient service area, is more involved.
In its Post-Trial Memorandum, Plaintiff argues that "North Oaks targets all of its marketing efforts in Tangipahoa Parish." (Memo. at 4). However, as this court repeatedly stated during the Trial of this matter, what North Oaks perceives as its service area is not equivalent to the geographic service area for antitrust purposes. Even Plaintiff's antitrust expert, Dr. Long, agreed that "the traditional provider notions of "primary" and "secondary" service areas are not necessarily consistent with geographic market definitions in economics." (Long Report at 6).
Because this court finds in the present case that Plaintiff has failed to prove that North Oaks has market power of inpatient hospital services, the court need not further consider a § 2 "monopolistic leveraging" theory of liability. Like the Fifth Circuit in Eleven Line, this court notes the issue of whether or not there is a § "monopolistic leveraging" theory of liability but preserves this issue for a future day.
The court also notes that even if the court found that Plaintiff proved its Sherman § 2 claim against North Oaks, North Oaks would nevertheless be immune from paying money damages pursuant to the Local Government Antitrust Act, 15 U.S.C, § 34-36.
From the evidence presented at Trial, the court finds that this inpatient service area is determined by analyzing data which consists of all North Oaks inpatient admissions summarized by zip code of patient address. While both parties' experts used zip code areas to determine the service area, the experts used different formulas.
Dr. Long's Step One Analysis
Plaintiff's, anti-trust expert, Hugh W. Long, Ph.D., used the Zwanzinger, Melnick, Mann "patient origin" approach or "minimal-marginal" method to define North Oaks' service area. In so doing, Dr. Long specified a "floor" to include all zip code areas (rank ordered from largest to smallest share of the provider's total activity) necessary to account for at least 60% of that activity, plus all those additional zip code areas which contributed at least 3% of the provider's total activity in the acute inpatient product market. As a result, he took into account enough zip codes to account for approximately 75% of North Oaks' inpatient business. Using the 75% cutoff, Dr. Long determined that 9 to 11 zip code areas represented 76% to 82% of North Oaks' acute inpatient care activity in every year, 1995 through mid-1999.
Jack Zwanziger, Glenn A. Melnick, and Joyce M. Mann, "Measures of Hospital Market Structure: A Review of the Alternatives and a Proposed Approach," Socio-Economic Planning Science, (24)2. 1990, pp. 81-95. Dr Long reports that the Elzinga and Hogarty "shipment" approach is analogous to the patient origin approach. (Long Report at 6).
See Long Report, Table 2, § B ( attached hereto as Court's Addendum 1).
The underlying source of Dr. Long's data was obtained from HCIA, Inc., a healthcare information service provider that tabulates this data for the State of Louisiana (among many other states).
Dr. Lynk's Step One Analysis
Defendant's anti-trust expert, Dr. Lynk, used data from the 1998 calendar year, and defined North Oaks' inpatient service area as the narrowest area sufficient to account for 90% of its inpatient days. Dr. Lynk primarily relied on the work of economists, Kenneth Elizinga and Thomas Hogarty, and explainedAs the unit of measurement for inpatient hospital activity, Dr. Lynk used "patient days" and Dr. Long used "patient admissions". However, both Dr. Lynk and Dr. Long agreed that the difference was not material. (Lynk TR. 14; Long TR. 118).
Dr. Lynk "did not see any obvious rationale for excluding" indigent patients, and further testified that because North Oaks "admits patients that they anticipate not providing payment," he is "not positive that their exclusion is warranted." (Lynk TR. 32). Nevertheless, Dr. Lynk he testified that excluding them would result in a "very immaterial adjustment" to his ultimate market share determination. (Lynk TR. 32-33).
On the other hand, Dr. Long opined that it was proper to exclude the medically indigent from the pool of patients for which the parties might compete, and thus he modified his definition of the product market to persons ineligible for free care provided by the State of Louisiana's Charity Hospital System (CHS). Nevertheless, with regard to Lallie Kemp (a CHS hospital physically proximate to the parties), Dr. Long testified that excluding these indigent patients did not make a material difference in his conclusions. (Long TR. 95). Similarly, Dr. Long reported that the split between charity and non-charity patients at Earl K. Long Hospital (another hospital in the CHS system located in Baton Rouge, Louisiana) had no significant effect on his market analysis, and thus all of its patients were assumed to be non-charity. (Long Report, p. 3, n. 1). that this definitional cutoff criterion of "service area" is the usual one within the hospital industry. Using this 90% cutoff, Dr. Lynk determined that the geographic range for North Oaks' inpatient business, i.e., its inpatient service area, is fairly expansive consisting of 17 zip codes.
These zip codes are the first 17 listed in Lynk's Table 2 ( attached hereto as Court's Addendum 2). They cover essentially the entire range of Tangipahoa and St. Helena Parishes, extend in the west to cover much of Livingston Parish, and penetrate in the east into Washington Parish and St. Tammany Parish, and they account for 90.71% of inpatient days and 90.50% of inpatient admissions at North Oaks.
The court adopts Dr. Lynk's Step One Analysis.
The court finds that in both caselaw and economic literature, 90% is the preferred cutoff to use in defining a service area. See Kenneth G. Elzinga Thomas F. Hogarty, "The Problem of Geographic Market Definition in Antitrust Merger Suits," 18 Antitrust Bull. 45 (1973); Kenneth G. Elzinga Thomas F. Hogarty, "The Problem of Geographic Market Definition Revisited: The Case of Coal," 23 Antitrust Bull. 1 (1978); California v. Sutter Health System, 84 F. Supp.2d 1057, 1072 (N.D.Cal. 2000), aff'd, 217 F.3d 846 (9th Cir. 2000); FTC v. Tenet Health Care Corp., 186 F.3d 1045 (8th Cir. 1045); Minnesota Ass'n of Nurse Anesthetists v. Unity Hospital, 5 F. Supp.2d 694 (D.Minn. 1998), aff'd, 208 F.3d 655 (8th Cir. 2000).The "strong" market (90%) inclusion standard advocated by Elzinga and Hogarty assumes that localities providing up to 10% of the firm's business can be excluded from consideration, in order to focus on the area from which the firm receives "nearly all" of its business. In contrast, the "weak" market (75%) standard assumes that locations providing 25% of the firm's business — one out of every four units of sale — can be ignored. Thus, in the absence of some other compelling reason the court finds not present in the case at bar, the 75% formula is materially more incomplete and less reliable than the 90% formula.
Dr. Long acknowledged that the 75% was a minimum percentage initially used by Elzinga and Hogarty in the 1970's, and through the years, the threshold was revised to 90%. Nevertheless, Dr. Long maintained that the 75% threshold was more appropriate in this case due to the lack of homogeneity of the product. However, the issue of "product homogeneity" was addressed in Dr. Lynk's analysis because he omitted from the geographic market determination analysis all data on patients who had DRGs that were not observed at North Oaks. In other words, under Dr. Lynk's analysis, only patients leaving the North Oaks' service area and traveling for hospitalization that they could have received at North Oaks were considered.
DRG=Diagnostic Related Group. A DRG is a numerical code that serves to classify patients into one of approximately 500 clinically cohesive groups that demonstrate similar consumption of hospital resources and length of stay patterns. 65 Fed. Reg. 47054, 47057 (2000).
These classifications are used by the federal government in administering Medicare and Medicaid programs and by insurers to evaluate reimbursement, utilization of resources, treatment protocols, related conditions, and demographic distribution. Examples of DRGs would be "extracranial vascular procedures," "chronic obstructive pulmonary disease," and "specific cerebral disorders." DRGs have been recognized as an appropriate means of comparing hospital services. See Federal Trade Comm'n v. Freeman Hosp., 69 F.3d 260, 270-71 (8th Cir. 1995).FTC v. Tenet Health Care Corp., 186 F.3d 1045, 1051 n. 9 (8th Cir. 1999).
Dr. Lynk testified that he excluded 100 DRGs from his calculations. (Lynk, TR. 66).
North Oaks is not a small rural hospital, but rather a 255-bed, full service hospital. While North Oaks does not have a burn unit and does not do transplants, it performs open-heart surgery and other complicated procedures.
Further, to the extent that there are some variations of health care services included within each DRG, there was no substantive showing (other than Dr. Long's conjecture) that these possible variations within the DRG's make the 75% threshold more preferable in defining the service area in this case. To the contrary, the court finds that significant differences in procedural complexity have already been taken into account by the Health Care Financing Administration (HFCA) when classifying DRG's and assigning individual types of cases to particular DRG's. See e.g., 65 Fed. Reg. 47047 (HFCA describing the DRG system in the preamble to regulations proposed on August 1, 2000).
Thus, the court adopts Dr. Lynk's 90% formula and rejects Dr. Long's 75% formula to determine the service area.
(2) Step Two: Identify the Locations of Other Hospitals that Do or Can Compete with North Oaks for Its Inpatient Admissions
The second step of the geographic market analysis switches the focus from "where does North Oaks get its patients?" to "where do patients who reside in North Oaks' service area go for hospitalization if they do not go to North Oaks?"
"To define a market is to identify producers that provide customers of a defendant firm (or firms) with alternative sources for the defendant's product or services." 2A Phillip E. Areeda et al., ANTITRUST LAW ¶ 530a, at 150 (1995). The relevant product and geographic markets must reflect the realities of competition. Brown Shoe Co. v. United States, 370 U.S. 294, 336-37, 82 S.Ct. 1502, 1530, 8 L.Ed.2d 510 (1962). Critically, evidence 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. See Federal Trade Comm'n v. Freeman Hosp., 69 F.3d 260, 168-69 (8th Cir. 1995). The possibilities for substitution must be considered. Blue Cross and Blue Shield United, 65 F.3d at 1409-10.Doctor's Hospital of Jefferson, Inc. v. Southeast Medical Alliance, Inc., 123 F.3d 301, 311 (5th Cir. 1997) (emphasis added).
Dr. Long's Step Two Analysis
Dr. Long completely ignored Step Two.
Dr. Lynk's Step Two Analysis
Preliminarily, the court agrees with Dr. Lynk's finding that while North Oaks relies on its service area for 90.71% of its patient-day volume, the residents of the service area rely on North Oaks for only 50.90% of the inpatient days. The remaining 49.10% go to competing hospitals both inside and outside of the service area. Thus, the court concludes that with out-migration "leakage" of roughly 50%, the service area alone is too porous to constitute a relevant "monopoly" market all by itself.
See also Lynk Report, Table 4 (using a "city" analysis and showing that of the total 99,387 inpatient days that originate from within North Oaks service area, only about half of them (50,588 or 50.90%) are for hospitalization in Hammond at North Oaks). Lynk Table 4 is attached hereto as Court's Addendum 4.
Lynk Report, Table 3 (using a "zip code area" analysis). While Table 3 shows that 49.10% of the North Oaks' service area patients go to other hospitals in Louisiana, Table 3 does not identify which city or hospital these patients out-migrate to. Lynk Table 3 is attached hereto as Court's Addendum 3.
Next, in his analysis of out-migration leakage, Dr. Lynk looked at the "city" destination of patients originating from within the North Oaks' service area. In so doing, he found that 93.26% of the inpatient days of patients residing from within the North Oaks service area were spent in hospitals in the five cities of Hammond (with 50.90% of service area days), Covington (with 17.67%), New Orleans (with 10.33%), Independence (with 8.27%), and Baton Rouge (with 6.09%).
Lynk Report, Table 4. This is analogous to and symmetric with the 90% inclusion criterion used in step one to construct the North Oaks service area.
Dr. Lynk then found that "[t]here are nineteen hospitals in these five communities that are direct, relevant competitors of one another for the North Oaks service area patients" and that, by this inclusion criterion, North Oaks faces significant, direct, current competition from at least eighteen other hospitals." (Lynk report at 34).
See Lynk Report, Table 5 for a listing of these nineteen hospitals, one of which is North Oaks.
Dr. Lynk concluded that the relevant geographic market for inpatient hospital services includes: "the five cities of Hammond, Covington, New Orleans, Independence, and Baton Rouge, and of course the intervening residential communities that are surrounded by them. These five hospital destination cities are in the five parishes of Tangipahoa, St. Tammany, Orleans, Jefferson, and East Baton Rouge; the five intervening residential parishes are St. Charles, St. John the Baptist, St. James, Ascension, and Livingston, for a total of ten parishes within which the relevant geographic market is contained." Id.
The court is not persuaded by Dr. Lynk's Step Two analysis but Plaintiff has failed to rove relevant geographic market because Dr. Long failed to perform any Step Two analysis.
In his out-migration analysis, Dr. Lynk did not exclude indigent patients. While Dr. Lynk testified that excluding indigent patients would result in an immaterial adjustment in his ultimate calculation of market share (Lynk Table 5; Lynk TR. 32-33), the court cannot determine from the record whether exclusion of indigent patients would have materially adjusted his initial out-migration results set forth in his Table 3 and Table 4.
While the court finds that Dr. Lynk gave due consideration to out-migration, the court does not make a wholesale buy of Dr. Lynk's analysis for several reasons. First, while Dr. Lynk defined North Oaks service area (Step One) with concise zip code areas, he measured out-migration using cities, substantially less precise and accurate units of measurements. Further, though Dr. Lynk listed the nineteen hospitals (including North Oaks) which he found to be direct, relevant competitors of one another for the North Oaks' service area patients, he failed to delineate how many, if any, of any particular hospital's patients came from the North Oaks service area. Finally, because Dr. Lynk included in his list of nineteen hospitals Ochsner Foundation Hospital, which is not located in the city of New Orleans, the court questions the inclusion of the city of New Orleans in Dr. Lynk's definition of relevant geographic market.
Lynk Report, Table 5 ( attached hereto as Court's Addendum 5).
If Dr. Lynk had used "zip code areas," a more precise and accurate measurement than "cities," to determine out-migration of patients from North Oaks' service area, the quandary of whether or not Ochsner Foundation Hospital and the city of New Orleans should be included in defining the relevant geographic market would have been eliminated.
Indeed, the use of zip code areas (as the more concise building blocks) would have allowed one to determine incremental additurs to the relevant geographic market and thus the boundaries of the relevant geographic market could be defined with more precision.
Thus, the court is not completely persuaded by the accuracy of Dr. Lynk's Step Two analysis, and finds that Dr. Lynk likely overstated the relevant geographic market. Nevertheless, it is Plaintiff's burden to properly determine the relevant geographic market, and Plaintiff has failed to do so. In short, as previously stated, Dr. Long ignored this second step of determining alternative locations or relevant competitors. Consequently, Dr. Long's definition of the relevant geographic market consisted only of the inaccurately small service area he had calculated. This is improper because "the geographic market is not comprised of the region in which the seller attempts to sell its product, but rather is comprised of the area where his customers would look to buy such a product." Tunis Bros. Co., Inc. v. Ford Motor Co., 952 F.2d 715, 726 (3d Cir. 1991).
Thus, where North Oaks got its business, where it conducted its marketing activities, where it recruited physicians and staff, or even where it negotiated contracts with managed care plans cannot by law define a relevant geographic market for antitrust analysis purposes.
(3) Step Three: Measure North Oaks' Share of All the Business Within the Market
Dr. Long's Step Three Analysis
Dr. Long found that North Oaks' market share for acute inpatient care was in the 68% to 71% range in every year analyzed. (See Table 4, attached to Long Report). However, because Dr. Long failed to perform Step Two, what Dr. Long has actually measured is "share of service area" rather than relevant geographic market share. Thus, because Dr. Long substantially understated the relevant geographic market, his calculation of market share in the 68-71% is necessarily overstated.Dr. Long also did not include in this 68% to 71% calculation data from Hood Memorial Hospital, which is located in Tangipahoa Parish. Accordingly, Dr. Long even overstates North Oaks' share of its service area.
As Dr. Lynk explained, Hood failed to report its data to HCLA, so its data was "flat-out missing" from the overall data file. (Lynk TR. 93-93).
Dr. Lynk's Step Three Analysis
Dr. Lynk, relying on the work of Landes and Posner, calculated North Oaks' market share as 5.39% inpatient days (or 5.22% inpatient admissions). In making this calculation, Dr. Lynk determined that patients from the North Oaks service area went for treatment to hospitals in the cities of Hammond, Covington, New Orleans, Independence and Baton Rouge for 93.27% of hospital days. He then divided the number of inpatient days at North Oaks by the number of inpatient days at the 19 hospitals located in Hammond, Covington, New Orleans, Independence and Baton Rouge.
See William M. Landes and Richard A. Posner, "Market Power in Antitrust Cases," 94 Harvard L. Rev. 937, 963 (1981) ("If a distant seller has some sales in a local market, all its sales, wherever made, should be considered part of that local market for purposes of computing the market share of the local seller."); see also Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327, 81 S.Ct. 623, 627, 5 L.Ed.2d 580 (1961); United States v. Rockford Memorial Hospital, 898 F.2d 1278, 1283 (7th Cir. 1990).
Lynk Report, Table 5 ( attached hereto as Court's Addendum 5).
Lynk Report, Table 5 ( attached hereto as Court's Addendum 5). North Oaks' patient days (55,768)/Total patient days at 19 hospitals (1,035,545)=5.39%.
The court does not endorse Dr. Lynk's Step Three Analysis.
Because the court is not completely persuaded by the accuracy of Dr. Lynk's Step Two analysis, and finds that Dr. Lynk likely overstated the relevant geographic market, the court does not endorse Dr. Lynk's Step Three Analysis. Further, the court notes that while the Landes-Posner approach has some general appeal, the court finds that in this case Dr. Lynk's calculation of market share may be understated because there is no indication of how many patients, if any, from the North Oaks' inpatient service area actually went to each of the 19 hospitals that Dr. Lynk used is his calculation. Thus, the court questions Dr. Lynk's inclusion of any and all patients admitted to the 19 hospitals to determine the denominator of patient days, no matter where they came from. Ochsner Foundation Hospital, for instance, attracts patients from all over the world, and it is not located in the city of New Orleans.Nevertheless, the court does find as significant that "[e]ven if [the] market extended from Hammond only as far as Covington — ignoring the flood of service area patients going to more distant localities — the hospitals in Covington alone are virtually the equal of North Oaks, . . . which is another reason why the idea of the exercise of market power by North Oaks is an illusion." (Lynk Report, p. 38 and Lynk Table 5).
Covington, Louisiana is approximately 25 miles east of Hammond, Louisiana, and both are north of Lake Ponchartrain.
Covington's hospitals (St. Tammany and Lakeview) had a total of 54,314 days, compared to North Oaks' patient days of 55,768; thus, 54,314/55,768 97.39%. (Lynk Table 5, attached hereto as Court's Addendum 5).
Covington's hospitals had a total of 14,170 admissions, compared to North Oaks' admissions of 10,387; thus, 14,170/10,387=136.42%. (Lynk Table 5, attached hereto as Court's Addendum 5).
In its post-trial brief, Plaintiff argues that:
even if Covington hospitals (St. Tammany Parish and Columbia Lakeview) are included in the relevant geographic area, then North Oaks' market share based on patient days is 49.2%. If one includes Summit Hospital in the relevant geographic area, North Oaks' market share drops down to 45.1%. Either of these high percentages is clearly sufficient to conclude that North Oaks has substantial market power, particularly in light of the existing "special market conditions". ( Domed Stadium, supra)
(Plaintiff's Post-Trial Memo. pp. 12-13 n. 13)
However, Plaintiff is mixing apples and oranges when it argues application of Domed Stadium here. While for "attempted monopolization", a share of less than 50% may suffice if other factors are also present, Domed Stadium points out "completed monopolization" generally requires a 50% or higher percentage of market share. Thus, in the context of determining North Oaks' market share of the inpatient hospitalization services, the 50% or higher percentage of market share for a completed monopolization is the applicable threshold, and not the less than 50% threshold which is applicable only in attempted monopolization claims.
Finally, the evidence presented at Trial about contracts between North Oaks and managed care plans also supports the conclusion that North Oaks does not possess market power in the inpatient market. Not all of the managed care contracts executed by North Oaks were "exclusive" in the sense that the managed care companies received an enhanced discount off billed prices if they agreed to have their members use North Oaks for both inpatient services and outpatient surgery. At least one plan, Aetna, specifically rejected the exclusive contract option, and Ochsner Health Plan actually terminated its contract with North Oaks, turning instead to Lallie Kemp, Hood Memorial and St. Tammany for inpatient hospital needs. If North Oaks truly had the ability to control prices, it would have been able enforce an offer that could not be refused with these and other plans.
The only evidence that showed North Oaks would negotiate an all or nothing contract (i.e., a truly exclusive contract) was St. Luke's evidence pertaining to Ochsner Health Plan.
It is Plaintiff's burden to prove both the relevant geographic market and the relevant market share. Plaintiff has proved neither. Thus, the court concludes that Plaintiff has failed to establish that North Oaks has monopoly power over the inpatient hospital services market, and accordingly, Plaintiff's claim that North Oaks used its monopoly power over the inpatient market in an attempt to monopolize the outpatient market falls.
(b) North Oaks' market share of the out-patient surgery market in light of Domed Stadium-type factors does not support Plaintiff's claim of attempted monopolization.
As previously stated, Plaintiff's antitrust expert, Dr. Long, found that in 1999 North Oaks had between 42.3% and 44.3% of what he defines as the relevant market for ambulatory surgery. (Long Report, Table 3). In Domed Stadium, the Fifth Circuit noted that "a share of less than the fifty percent generally required for actual monopolization may support a claim for attempted monopolization if other factors such as concentration of market, high barriers to entry, consumer demand, strength of competition, or consolidation trend in the market are present." 732 F.2d at 490.
However, in this case, such factors do not support a finding of attempted monopolization of the out-patient ambulatory surgery market of North Oaks. Again, Dr. Long's opinion (set forth in part supra, pp. 7-8) is telling:
the ability of St. Luke's to penetrate [the out-patient surgery] market to the extent that it did in 1997 is consistent with other factors that suggest there is little monopoly power that can be exercised directly in this product market.
In particular, there are few if any classic barriers to entry into the ambulatory surgical services market. The necessary physical assets (land, building, equipment) are available and do not require extraordinary capital investment. The skilled personnel required, particularly licensed surgeons, are also available. Meeting necessary legal and regulatory requirements is not unduly burdensome.
The fact that, in its first year of operation, St. Luke's achieved 24.7% share of the North Oaks ambulatory surgery market . . . shows little evidence of per se textbook monopoly power in ambulatory surgical services. Notwithstanding this record, North Oaks may still have attempted to maintain its 1996 monopoly position in ambulatory surgery although in the short run it was not highly successful in doing so.
(Long Report, p. 10).
Even if St. Luke's would cease to operate in the future, its share of the outpatient surgical market would not all go to North Oaks. Rather, Dr. Long explained that the volume of outpatient surgery handled by St. Luke's "would break proportionately to the existing market," which he estimated would result in an outpatient market share for North Oaks "somewhere in the high 50's, low 60's." (Long TR. 123). While Dr. Long speculated that North Oaks would consequently have "some degree of ability" to "deter the new entry of competition" in the short run, he conceded that North Oaks would have a "very limited ability" to raise prices above the competitive levels. (Long TR. 124). Simply put, Plaintiff through its own expert has failed to show a "dangerous probability" that an actual monopoly position will ultimately be achieved by North Oaks in the out-patient surgery market. Dimmitt Agri, 679 F.2d at 525.
There was certainly no indication from the evidence adduced at Trial that St. Luke's will go out of business in the foreseeable future.
Defendant's anti-trust expert, William J. Lynk, Ph.D., also reported and testified that monopolization of the outpatient market is unattainable.
(c) Other alleged actions and inactions of North Oaks do not warrant imposition of Sherman § 2 liability.
Plaintiff complains that, in addition to its claim of monopolistic leveraging, other actions and inactions by North Oaks had actual detrimental effects on St. Luke's and proof of such obviates the need for determining market power. These other actions and inactions include the exclusive contracts North Oaks entered into with managed care companies; North Oaks' refusal to sign a Patient Transfer Agreement; North Oaks' refusal to sign a Blood Type and Cross Match Agreement; North Oaks' refusal to lend St. Luke's equipment; North Oaks' staff employment practices; the break-up of the Urology Clinic (Drs. Vincent Kidd and Robert Kidd); the recruitment of Dr. Steve Watson; and influencing patient selection of physician.
At the outset, the court finds that in the Fifth Circuit and elsewhere, courts generally subscribe to the view that evidence of a defendant's conduct is inadequate to sustain a finding of monopoly, absent accurate information demonstrating a requisite market share. Dimmitt Agri, 679 F.2d at 528-531 and nn. 11-14.
It is also unclear, under existing caselaw, whether proof of actual detrimental effects obviates a determination of market power in a Sherman ¶ 2 "attempted monopolization" case in the Fifth Circuit. Nevertheless, even if this is a valid theory in the Fifth Circuit, the court finds that St. Luke's has failed to prove that North Oaks' alleged actions and inactions had detrimental effects of St. Luke's in the context of Sherman ¶ 2 liability.
In FTC v. Indiana Federation of Dentists, 476 U.S. 447, 106 S.Ct. 2009, 90 L.Ed.2d 445 (1986), the Court found that a dental association rule forbidding members to submit x-rays to dental insurers in connection with claims forms constituted an unreasonable restraint of trade in violation of Sherman Act § 1 . In its ruling, the Court stated:
Since the purpose of the inquiries into market definition and market power is to determine whether an arrangement has the potential for genuine adverse effects on competition, "proof of actual detrimental effects, such as reduction of output," can obviate the need for an inquiry into market power, which is but a "surrogate for detrimental effects."106 S.Ct. at 2019, quoting 7 P. Areeda, Antitrust Law ¶ 1511, p. 429 (1986). And then the Court concluded that:
the finding of actual, sustained adverse effect on competition . . . is legally sufficient to support a finding that the challenged restraint was unreasonable even in the absence of elaborate market analysis.106 S.Ct. at 2019.
In Great Western Directories, Inc. v. Southwestern Bell Telephone Co., 63 F.3d 1378, 1384 (5th Circuit 1995), the court cited FTC v. Indiana Federation of Dentists for the proposition that "[p]roof of actual detrimental effects can obviate the need for the inquiry into market power." However, that decision was reversed in part by Great Western Directories, Inc. v. Southwestern Bell Telephone Co., 74 F.3d 613 (5th Cir. 1996), which in turn was vacated pursuant to settlement.
As discussed below, the court finds that these other alleged actions and inactions, while they certainly were not helpful to St. Luke's, either constituted an exercise of justified business activities or failed to damage St. Luke's.
(1) Exclusive managed care contracts
With regard to the exclusive managed care contracts, Plaintiff's expert, Dr. Long, testified on cross-examination that it would be reasonable for North Oaks to seek exclusive managed care contracts as a competitive response to the fact that the physician owners of St. Luke's have a financial incentive to refer patients to St. Luke's. (Long TR. 102-03). On re-direct, Dr. Long further testified that it "would be a perfectly reasonable competitive response to competition" for North Oaks to seek exclusive contracts from managed care companies." (Long TR. 131).
Further, there was also testimony from managed care representatives that it was common practice to contract for inpatient and outpatient services in one contract. And there was testimony from most managed care representatives (excluding Ochsner) that North Oaks offered the managed care companies the option of an exclusive contract at a higher level of discount or a nonexclusive contract at a lower discount. The court concludes that the managed care contracts at issue were reasonable and pro-competitive.
(2) Patient Transfer Agreement and Blood Type and cross Match Agreement
St. Luke's requested that North Oaks sign a patient transfer agreement. North Oaks rejected St. Luke's proposal and counter offered with a requirement that St. Luke's guarantee payment from transferred patients. While there was some evidence that such a requirement in not customary, the court cannot conclude that such a requirement was an unfair trade practice. Further, there was no evidence that the opening of St. Luke's was delayed or that the lack of a transfer agreement with North Oaks caused St. Luke's any damages. Indeed, patients were in fact transferred and no transfer request was ever denied.
With regard to the Blood Type and Cross Match Agreement, North Oaks' lab director testified why she recommended against agreeing to St. Luke's proposal that North Oaks provide St. Luke's with a blood type and cross match agreement: North Oaks does not have a blood bank, but gets blood from the Blood Center for Southeast Louisiana; developing protocol to meet quality assurance and accreditation standards would be difficult; when St. Luke's made the proposal, North Oaks had limited storage space; and determining inventory needs for both St. Luke's and North Oaks would be difficult and pose economic risk to North Oaks. The court concludes that North Oaks' decision to reject St. Luke's proposal was reasonable and rational.
(3) Borrowing and lending equipment, and staff employment practices
While there was some evidence that North Oaks on occasion refused to lend St. Luke's equipment or supplies, there was no showing that North Oaks had any legal obligation to do so and further there was no showing that St. Luke's suffered any damages as a result. Similarly, there was some credible evidence that North Oaks management instructed its surgical staff that they could not "moonlight" at St. Luke's and that, if they left North Oaks to work at St. Luke's, they would not be rehired. However, this does not constitute an unfair trade practice, and St. Luke's suffered no damages and was able to hire qualified personnel.
(4) Break-up of the Urology Clinic, the Recruitment of Dr. Watson, and Influencing Patient Selection of Physician
While there was evidence that there were disagreements between Dr. Vincent Kidd and Dr. Robert Kidd, brothers and partners of the Urology Clinic, there was insufficient evidence that North Oaks precipitated or fostered the break-up of the Urology Clinic. Further, the evidence established that Dr. Steve Watson (a urologist) was not improperly recruited or afforded inappropriate assistance by North Oaks. Finally, there was insufficient evidence that North Oaks had any policy or made any concerted effort to direct patients away from Dr. Vincent Kidd (an investor at St. Luke's)
Accordingly, Plaintiff's claims under § 2 of the Sherman Act must be dismissed.
B. Louisiana Monopolies Law, LSA-R.S. 51:123
LSA-R.S. 51:123 provides that "No person shall monopolize, or attempt to monopolize, or combine with any other person to monopolize any part of the trade or commerce within this state." As the court next explains, the court finds that North Oaks is immune from liability for claims asserted under this law.
While North Oaks must "cooperate with other public and private institutions and agencies engaged in providing hospital and other health services to residents of [its] district," the Louisiana state legislature enacted LSA-R.S. 46:1071-76 "to enhance the ability of a hospital service district to compete effectively and equally in the market for health care services." LSA-R.S. 46:1071. Further, under LSA-R.S. 46:1077, part of the Hospital Service District Law, a hospital district like North Oaks is given the discretionary authority to (among other things) contract to sell hospital health services.
LSA-R.S. 9:2798.1(B) provides that:
Liability shall not be imposed on public entities or their officers or employees based upon the exercise or performance or the failure to exercise or perform their policymaking or discretionary acts when such acts are within the course and scope of their lawful powers and duties.Id. (italics added).
Here, Plaintiff claims that the following actions or inactions of Defendants violated the Louisiana Monopolies Act: the exclusive contracts North Oaks entered into with managed care companies; North Oaks' refusal to sign a Patient Transfer Agreement; North Oaks' refusal to sign a Blood Type and Cross Match Agreement; North Oaks' refusal to lend St. Lukes equipment; North Oaks' staff employment practices; the break-up of the Urology Clinic (Drs. Vincent Kidd and Robert Kidd); the recruitment of Dr. Steve Watson; and influencing patient selection of physician. However, the court finds that these actions or inactions were discretionary acts from which North Oaks is immune from liability under LSA-R.S. 9:2798.1(B).
The provisions of LSA-R.S. 9:2798.1(B) are not applicable:
(1) To acts or omissions which are not reasonably related to the legitimate governmental objective for which the policymaking or discretionary power exists; or
(2) To acts or omissions which constitute criminal, fraudulent, malicious, intentional, willful, outrageous, reckless, or flagrant misconduct.
LSA-R.S. 9:2798.1(C).
The court finds that these exceptions to the immunity provision do not apply here.
However, if North Oaks is not immune from liability under the Louisiana Monopolies Law, for the same reasons the court found that St. Luke's has failed to prove its Sherman § 2 claim, the court finds that Plaintiff has failed to prove its claims asserted under the Louisiana Monopolies Law. Accordingly, such claims must be dismissed.
The Louisiana antitrust statutes are essentially copies of the federal antitrust statutes, and thus they are generally interpreted in the same manner as the federal antitrust laws. However, there is some question as to whether the Louisiana antitrust laws apply only to intrastate commerce, and not to interstate commerce (which is involved in this case). In Free v. Abbott Laboratories, Inc., the Fifth Circuit certified this question to the Louisiana Supreme. 174 F.3d 270, 277 (5th Cir. 1999). However, the Louisiana Supreme Court denied certification. 739 So.2d 216 (La. 1999).
When the case ultimately made its way back to the Fifth Circuit, the court "assume[d] arguendo that Louisiana antitrust laws apply to a conspiracy carried on interstate that has effects within the state. But see HMC Management Corp. v. New Orleans Basketball Club, 375 So.2d 700, 706-07 (La.App. 4th Cir. 1979)." Free, 176 F.3d 298, 299 (5th Cir. 1999). Likewise, in this case, the court assumes arguendo that the Louisiana antitrust laws are applicable (if North Oaks is not immune from liability under the Louisiana Monopolies Law). . .
C. Louisiana Unfair Trade Practices Law, LSA-R.S. 51:1405
LSA-R.S. 51:1405 provides that "Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are . . . declared unlawful." A practice is unfair when it offends established public policy and when the practice is unethical, oppressive, unscrupulous, or substantially injurious. Jefferson v. Chevron U.S.A. Inc., 713 So.2d 785, 792 (La.App. 4th Cir. 1998). Acts which constitute unfair or deceptive practices are not specifically defined in the statute and are determined by the courts on a case-by-case basis.
Again, at the outset, the court finds that North Oaks is immune from liability for claims asserted under the Louisiana Unfair Trade practices Act for the same reasons the court found North Oaks was immune from liability for claims asserted under the Louisiana Monopolies Act. However, if North Oaks is not statutorily immune from liability, the court finds that Plaintiff has failed to prove that North Oaks' actions or inactions (including the exclusive contracts North Oaks entered into with managed care companies; North Oaks' refusal to sign a Patient Transfer Agreement; North Oaks' refusal to sign a Blood Type and Cross Match Agreement; North Oaks' refusal to lend St. Luke's equipment; North Oaks' staff employment practices; the break-up of the Urology clinic (Drs. Vincent Kidd and Robert Kidd); the recruitment of Dr. Steve Watson; and influencing patient selection of physician) are unfair trade practices for the same reasons the court found that St. Luke's has failed to prove that North Oaks' actions or inactions had detrimental effects of St. Luke's in the context of Sherman ¶ 2 liability. (See pp. 29-33, supra)
D. Quorom
The court finds that Quorom at all times, acted as the agent of North Oaks. As a matter of law, a corporation and its agent are incapable of conspiring with one another to violate the antitrust laws. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768 (1984). Thus, there is no basis to establish any independent liability on the part of Quorum.
E. Damages
As discussed above, the court finds that none of the actions or inactions of North Oaks are actionable. Nevertheless, the court makes the following comments regarding the Plaintiff's evidence of damages. At Trial, St. Luke's economist, Dr. Kenneth Boudreaux, explained that he based his damages calculation on a series of assumptions regarding the potential economic performance of St. Luke's which allegedly would have occurred "but for" certain actions alleged to have been undertaken by North Oaks. In particular, Dr. Boudreaux relied on the profarma assessment made by Irv Gregory, who relied on the track record of two "similar" ambulatory surgical centers located in Houston. While Mr. Irving has substantial experience in the business of ambulatory surgical centers, the court nevertheless finds that his projections for St. Luke's were but a "hope" based on an educated guess as to the projected market similarities between St. Luke's and the two other Texas ambulatory surgical centers. Because of the numerous variables inherent in such a comparison, the court finds there was an insufficient showing at Trial regarding the accuracy of the assumptions relied on by Dr. Boudreaux.
Further, as support for his "but for" calculations of the assumed performance of St. Luke's, Dr. Boudreaux reviewed the financial statements of other outpatient surgical centers and compared them to St. Luke's, but there was an insufficient showing that these other outpatient surgical centers served patients with demographic and economic conditions similar to St. Luke's. Thus, while Dr. Boudreaux's testimony showed that St. Luke's was not as successful as its investors had hoped, the court concludes that St. Luke's damages are much too speculative, and if sustained were not a result of any illegal activity by Defendant.
III. Conclusion
For the reasons set forth above, the court finds that all of Plaintiff's claims against Defendants should be dismissed. Judgment will be entered accordingly.
COURT'S ADDENDUM 1 Table 2 (continued) THE NORTH OAKS GEOGRAPHIC MARKETS BY YEAR (ZCAs ACCOUNTING FOR 3% OR MORE OF NORTH OAKS ACTIVITY)
B. ACUTE INPATIENT CARE ZCA 1995 1996 1997 1998 1999(6 mos) 16.0% 70403 10.9% 12.7% 14.1% 15.5% 16.6% 70454 16.0% 15.6% 14.5% 15.4% 15.5% 70401 18.0% 16.9% 16.1% 13.7% 12.6% 70422 6.9% 6.1% 6.6% 7.3% 7.1% 70443 6.8% 7.1% 6.7% 6.8% 6.5% 70444 6.0% 5.2% 5.2% 5.3% 5.4% 70711 3.8% 4.5% 4.3% 3.8% 4.4% 70466 3.9% 4.3% 4.7% 4.3% 4.2% 70462 3.5% 3.3% 3.4% 3.9% 3.9% 70404 __ 3.3% 3.1% __ 3.3% 70451 3.2% __ 3.1% __ __ SIGNIFICANT ZCAs 10 10 11 9 10 TOTAL SHARE OF NORTH OAKS ACTIVITY 78.9% 78.9% 81.8% 75.8% 79.6%COURT'S ADDENDUM 2 Table 2 North Oaks Hospital Service Area for Inpatient Services 1998
Cumulative Service Patient Days to Cumulative Percent Percentage Zipcodes Parish Area North Oaks Percent Days Percentage Days Admissions Addmissions 70403 Tangipahoa * 9,341 16.75 16.75 15.49 15.49 70454 Tangipahoa * 8,299 14.88 31.63 15.34 30.83 70401 Tangipahoa * 7,784 13.96 45.59 13.64 44.47 70422 Tangipahoa * 4,134 7.41 53.00 7.33 51.80 70443 Tangipahoa * 3,763 6.75 59.75 6.78 58.57 70444 Tangipahoa * 3,144 5.64 65.39 5.20 63.77 70466 Tangipahoa * 2,304 4.13 69.52 4.33 68.10 70462 Livingston * 1,965 3.52 73.04 3.80 71.91 70711 Livingston * 1,719 3.08 76.12 3.83 75.74 70404 Tangipahoa * 1,632 2.93 79.05 2.74 78.48 70451 Tangipahoa * 1,336 2.40 81.45 2.80 81.28 70456 Tangipahoa * 1,084 1.94 83.39 1.98 83.27 70446 Tangipahoa * 1,082 1.94 85.33 2.49 85.76 70744 Livingston * 1,041 1.87 87.20 2.26 88.02 70441 St. Helena * 735 1.32 88.51 1.65 89.67 70433 St. Tammany * 613 1.10 89.61 0.40 90.07 70438 Washington * 612 1.10 90.71 0.42 90.50 70455 Tangipahoa 512 0.92 91.63 0.89 91.38 70754 Livingston 411 0.74 92.37 0.84 92.22 70449 Livingston 282 0.51 92.87 0.52 92.74 70465 Tangipahoa 248 0.44 93.32 0.56 93.30 70785 Livingston 223 0.40 93.72 0.51 93.81 70437 St. Tammany 210 0.38 94.09 0.28 94.09 70775 West Feliciana 209 0.37 94.47 0.13 94.21 70453 St. Helena 197 0.35 94.82 0.32 94.53 70726 Livingston 183 0.33 95.15 0.61 95.14 Other 2,705 4.85 100.00 4.86 100.00 Total 55,768 100.00 100.00 Source: HCIANote: Does not include observations with unidentified zipcodes.
COURT'S ADDENDUM 3 Table 3 Outmigration From the North Oaks Hospital Service Area For Inpatient Services 1998
North Oaks Service Area Inpatients Service Area Inpatients to All Louisiana Hospitals
Cumilative North Oaks' Percentage of North Oaks' Other Hospital' Share of Other's Share of Days to North Percent of North North Oaks' Share of Share of Cumulative Cumulative Zipcodes Parish Oaks Oaks' Total Total Zipcode Zipcode Zipcode Area Zipcode Area 70403 Tangipahoa 9,341 16.75 16.75 78.17 21.83 78.17 21.83 70454 Tangipahoa 8,299 14.88 31.63 65.82 34.18 71.83 28.17 70401 Tangipahoa 7,784 13.96 45.59 68.99 31.01 70.93 29.07 70422 Tangipahoa 4,134 7.41 53.00 53.94 46.06 67.94 32.06 70443 Tangipahoa 3,763 6.75 59.75 61.14 38.86 67.10 32.90 70444 Tangipahoa 3,144 5.84 65.39 55.62 44.38 65.92 34.08 70466 Tangipahoa 2,304 4.13 69.52 68.81 31.38 66.08 33.92 70462 Livingston 1,965 3.52 73.04 62.54 37.46 65.90 34.10 70711 Livingston 1,719 3.08 76.12 58.23 41.77 65.55 34.45 70404 Tangipahoa 1,632 2.93 79.05 75.00 25.00 65.86 34.14 70451 Tangipahoa 1,336 2.40 81.45 60.59 39.41 65.69 34.31 70456 Tangipahoa 1,084 1.94 83.39 60.12 39.88 65.55 34.45 70446 Tangipahoa 1,082 1.94 85.33 57.18 42.84 65.33 34.67 70744 Livingston 1,041 1.87 87.20 42.68 57.32 64.59 35.41 70441 St. Helena 735 1.32 88.51 31.00 69.00 63.57 36.43 70433 St. Tammany 613 1.10 89.61 4.58 95.44 54.86 45.14 70438 Washington 612 1.10 90.71 7.39 82.61 50.90 49.10 Total 50,588 90.71 Source: HCIA Note: Does not include observations with unidentified zipcodes. Admissions limited to those with North Oaks Hospital DRGs.