Texas surgeons sue network over hospital "monopoly"

A physician-owned specialty hospital in Texas is taking on the local hospital network in a lawsuit that has the sides wrestling over competition and control in providing patient care.

Two Amarillo surgeons say they've opened a doctor-owned facility because patients don't have many choices of where they can seek care, adding that Baptist St. Anthony's Health System has too much control through its hospital and physician network. The surgeons see doctor-owned hospitals as a way to address the void.

But the physicians say that since they've opened their facility, Baptist has penalized them by trying to keep them out of its network.

Officials from Baptist St. Anthony's Health System, the parent company of BSA Hospital and BSA Network, say it saves them money to contract with big hospitals. That, in turn, allows them to pass those savings on to the hospital and patients. Consequently, they don't contract with smaller, physician-owned specialty hospitals that bear higher costs. The idea, they say, is to make it financially advantageous for doctors to stay in the network.

But doctors and attorneys say concerns about patient access to care and antitrust violations arise when a network monopolizes the market for medical services. They also say it restricts a doctor's ability to make decisions in the best interest of the patient.

The Texas case is an example of a problem going on in states across the country. The increasing number of incidents prompted the AMA to get involved in the Texas case. The Association said when networks do not contract with doctor-owned facilities it restricts patient access to care.

"The issue isn't just for doctors. The issue is what's in it for patients," said William A. Hazel, MD, a board member of the American Medical Association and the AMA/State Medical Societies Litigation Center, which is helping with the doctors' legal expenses.

If hospitals can quash competitive ventures in areas where they have a tremendous market share, "it would establish a precedent that hospitals can use their integrated businesses to punish behavior they consider bad for the hospital," Dr. Hazel said. "And that can be extremely arbitrary."

Trying to break into the market

The Texas lawsuit stems from a dispute between orthopedic surgeons Robert Higgins, MD, and Bill Barnhill, MD, and the hospital and network with which they contract, Baptist. The two doctors own a specialty surgical hospital in the area that competes with Baptist St. Anthony's Hospital, where the doctors have staff privileges.

According to court documents, the BSA-owned network controls more than 75% of the market for the type of surgery patients Drs. Higgins and Barnhill treat, and more than 75% of the managed care network.

The lawsuit accuses the hospital of ending the doctors' privileges and refusing to admit their specialty hospital to the network to "punish" them for referring patients away from BSA. It also alleges that the hospital network, which is a provider for Blue Cross Blue Shield of Texas, violated antitrust and anti-kickback laws.

In addition, the lawsuit claims that BSA wrote to the Texas Blues to report the doctors' "excessive" referrals. The managed care network responded in a letter stating that "a credentialing committee will be asked to recommend termination from the network if the out-of-network referrals have continued," court documents show.

In January 2005, a Potter County Court judge granted a temporary injunction to stop BSA from terminating the doctors until the trial, which is set for April 17.

"Plaintiffs and other physicians will be deterred from investing in and admitting patients to hospitals that compete with ... BSA," the order stated. "Additionally, many patients will lose access to the medical care of their choice."

Patient choice

In addition to the AMA, the Texas Medical Assn. also is helping with the doctors' litigation expenses. TMA General Counsel Rocky Wilcox said the association got involved because it is concerned about the Texas Blues' practice of not contracting with doctor-owned facilities.

"When visiting with BCBS, we shared with them that in areas where they have dominant market share, they should be worried about anti-trust exposure and should reflect on another marketing strategy," Wilcox said.

Recently, he said, the company expressed that it was going to broaden its network.

But attorney Mike Loftin, who represents BSA, said doctors who participate in a network agree to lower charges for medical care in exchange for a flow of patients. When doctors take patients out of network without a medical reason, it defeats the purpose of having the network and robs the plans of their benefits, he said.

"We're not against patient choice," he said. "We feel that because these physicians have a financial incentive to use their own hospital, they are directly and indirectly encouraging patients to go there."

For BSA, the question is whether it is wise to retain physicians who have outside ownership interest. "BSA is not saying they don't have the right to open a hospital," Loftin said. "But can they continue to be in our network when they are doing most of their work at their hospital outside of the network?"

In response to claims that doctors are referring patients for financial benefits, Dr. Hazel, who is an orthopedic surgeon in Virginia, said it was unlikely that physicians are making a lot of money at their hospitals. Most doctors will refer to facilities where their ability to do procedures is uncompromised.

Dr. Hazel also emphasized the importance of looking past the anticompetitive statements in the lawsuit. "We have to look at the area around Amarillo and ask: Do folks really have the choice as to where and how they get their care?"