West Penn Allegheny Health System, Inc. v. UPMC; Highmark, Inc.

Facts

West Penn Allegheny Health System, Inc. (West Penn) (Plaintiff) is Pittsburgh's second-largest hospital system and has a share of less than 23 percent of the market for hospital services in Allegheny County, which includes the City of Pittsburgh. University of Pittsburgh Medical Center (UPMC) (Defendant) is Pittsburgh's leading hospital system, with a 55 percent share of the Allegheny County market for hospital services, and its share of the market for tertiary and quaternary care services is more than 50 percent. Plaintiff and UPMC (Defendant) are the two major competitors in the Allegheny County market for hospital services, and are the only competitors in the market for tertiary and quaternary care services. Highmark (Defendant) is the largest insurer in the Allegheny County market for health insurance, with a market share between 60 and 80 percent since 2000. In 2000, several financially distressed medical providers merged with others to form West Penn (Plaintiff). Highmark (Defendant) funded the merger with a $125 million loan and the intention to preserve competition in the market for hospital services. After the merger, Highmark (Defendant) and West Penn (Plaintiff) had a good relationship. Highmark (Defendant) encouraged investors to purchase bonds from West Penn (Plaintiff), touting West Penn's financial outlook and the quality of medical services provided. In early 2002, Highmark (Defendant) gave West Penn (Plaintiff) a grant of $42 million to invest in its facilities. In contrast, UPMC (Defendant) has been hostile to West Penn (Plaintiff) since it began. UPMC (Defendant) opposed the merger creating West Penn (Plaintiff): it intervened in the merger proceedings, filed an unsuccessful lawsuit to prevent Highmark (Defendant) from funding the merger, and tried to advise investors against purchasing bonds from West Penn (Plaintiff). UPMC's (Defendant) hostility toward West Penn (Plaintiff) continued after the merger and their executives have stated repeatedly that they want to destroy West Penn (Plaintiff). Historically, UPMC (Defendant) has also had a bitter relationship with Highmark (Defendant). For example, when UPMC (Defendant) demanded allegedly excessive reimbursement rates from Highmark (Defendant), Highmark (Defendant) formed Community Blue, a low-cost insurance plan, in response. To participate in Community Blue, a hospital was required to agree to accept reduced reimbursements but would receive a greater number of patients. West Penn (Plaintiff) participated in Community Blue, but UPMC (Defendant) did not, claiming that its reimbursement rates were too low. UPMC (Defendant) responded to Community Blue by forming its own health insurer, UPMC Health Plan. In 1998, UPMC (Defendant) offered a "truce" to Highmark (Defendant) in that each entity would use its market power to protect the other from competition. Initially Highmark (Defendant) rejected UPMC's (Defendant) offer, calling it an illegal attempt to form a super monopoly for the provision of health care, but then ultimately did accept the offer. West Penn (Plaintiff) claimed that UPMC (Defendant) engaged in conduct that effectively insulated Highmark (Defendant) from competition. To support Highmark (Defendant), UPMC (Defendant) would not enter into competitive provider agreements with rivals of Highmark (Defendant). UPMC (Defendant) also shrank UPMC Health Plan (Highmark's (Defendant) main competitor in the insurance market). In return, Highmark (Defendant) agreed to take Community Blue off the market and pay UPMC (Defendant) supra-competitive reimbursement, which caused Highmark (Defendant) to increase its insurance premiums. It also claimed that UPMC (Defendant) systematically "raided" key physicians from West Penn (Plaintiff) by paying them salaries that were well above market rates to hurt other hospitals. UPMC (Defendant) reportedly approached community hospitals in an effort to support referrals only to UPMC (Defendant), while making false statements about the financial health of West Penn (Plaintiff). To support UPMC (Defendant), Highmark (Defendant) provided the financial support to build a new facility for its children's hospital, eliminated its Community Blue low-cost insurance plan, and cut all funding to West Penn (Plaintiff). Highmark (Defendant) rejected the requests of West Penn (Plaintiff) to refinance the loan that was used to fund its 2000 merger. While Highmark (Defendant) believed that refinancing the loan made business sense, it declined to do so out of fear that UPMC (Defendant) would retaliate against it for violating their agreement, which Highmark (Defendant) openly admitted was "probably illegal." Highmark (Defendant) also acknowledged that its reimbursement rates to West Penn (Plaintiff) were low, but were reluctant to raise them because if it did, UPMC (Defendant) would retaliate. During all of the years of this "conspiracy," both UPMC (Defendant) and Highmark (Defendant) recorded record profits while West Penn (Plaintiff) struggled. West Penn (Plaintiff) sued UPMC (Defendant) and Highmark (Defendant) alleging antitrust violations. The trial court granted the defendant's motion to dismiss certain counts. West Penn (Plaintiff) then appealed.