City of Brevard, North Carolina v. HCA Healthcare, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA

ASHEVILLE DIVISION

CIVIL CASE NO. 1:22-cv-00114-MR

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IN RE MISSION HEALTH ) MEMORANDUM OF

ANTITRUST LITIGATION ) DECISION AND ORDER

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THIS MATTER is before the Court on the HCA Defendants’ Motion to

Dismiss the Consolidated Class Action Complaint for Failure to State a Claim

[Doc. 45], the Motion to Dismiss of Defendants ANC Healthcare, Inc. F/K/A

Mission Health System, Inc. and Mission Hospital, Inc. [Doc. 46], the State

of North Carolina’s Motion for Leave to File Amicus Curiae Brief [Doc. 56],

and the Defendants’ Consented-to Motion for Leave to File a Response to

the State of North Carolina’s Amicus Curiae Brief [Doc. 58].

I. PROCEDURAL BACKGROUND

On June 3, 2022, Plaintiff City of Brevard, North Carolina, on its own

behalf and on behalf of all others similarly situated, initiated this action

against HCA Healthcare, Inc.; HCA Management Services, LP; HCA, Inc.;

MH Master Holdings, LLLP; MH Hospital Manager, LLC; MH Mission

Hospital, LLLP (all of which are hereinafter together referred to as “HCA” or

the “HCA Defendants”); ANC Healthcare, Inc. f/k/a Mission Health System,

Inc.; and Mission Hospital, Inc. (which are hereinafter together referred to as

“Mission” or the “Mission Defendants”).1 [Doc. 1].

On July 27, 2022, Plaintiffs Buncombe County, North Carolina, and

City of Asheville, North Carolina, on their own behalf and on behalf of all

others similarly situated, initiated an action against the HCA Defendants and

the Mission Defendants. [Civil Case No. 1:22-cv-00147-MR-WCM, Doc. 1].

On August 4, 2022, Plaintiff City of Brevard moved to consolidate Civil

Case No. 1:22-cv-00114-MR-WCM and Civil Case No. 1:22-cv-00147-MR-

WCM. [Doc. 41]. On August 8, 2022, the Court entered an Order and Initial

Case Management Plan consolidating Civil Case No. 1:22-cv-00114-MR-

WCM and Civil Case No. 1:22-cv-00147-MR-WCM for all purposes up to and

including trial. [Doc. 42]. The Court also designated Civil Case No. 1:22-cv-

00114-MR-WCM as the lead case and ordered Civil Case No. 1:22-cv-

00147-MR-WCM to be closed. [Id.].

1 The Plaintiffs refer to ANC Healthcare, Inc. and Mission Hospital, Inc. together as the

“Mission Defendants” or “Mission.” These Defendants, however, confusingly refer to

themselves together as the “ANC Defendants.” These terms all refer to the same two

Defendants throughout.

On August 19, 2022, Plaintiffs City of Brevard, North Carolina;

Buncombe County, North Carolina; City of Asheville, North Carolina; and

Madison County, North Carolina (collectively, “Plaintiffs”), individually and on

behalf of all others similarly situated, filed a Consolidated Class Action

Complaint against the HCA Defendants and the Mission Defendants. [Doc.

43]. In their Consolidated Complaint, the Plaintiffs allege that the Defendants

have engaged in an anticompetitive scheme to maintain and enhance

monopoly power in two health care services markets in parts of Western

North Carolina: (1) the market for inpatient general acute care and (2) the

market for outpatient care. [Id. at ¶ 4].

On September 9, 2022, the HCA Defendants moved to dismiss the

Consolidated Complaint pursuant to Federal Rule of Procedure 12(b)(6).

[Doc. 45]. On that same day, the Mission Defendants moved to dismiss the

Consolidated Complaint pursuant to Rule 12(b)(6). [Doc. 46].

On November 8, 2022, the State of North Carolina filed a Motion for

Leave to File Amicus Curiae Brief [Doc. 56], and the State conditionally filed

its amicus brief in support of the Plaintiffs [Doc. 56-1]. On November 22,

2022, the Defendants filed a Consented-to Motion for Leave to File a

Response to the State of North Carolina’s Amicus Curiae Brief [Doc. 58], and

the Defendants conditionally filed their response [Doc. 58-1]. The State of

North Carolina’s Motion for Leave to File Amicus Curiae Brief [Doc. 56] and

the Defendants’ Consented-to Motion for Leave to File a Response to the

State of North Carolina’s Amicus Curiae Brief [Doc. 58] are granted, and the

Court has considered the Amicus Curiae Brief of the State of North Carolina

in Support of Plaintiffs [Doc. 56-1] and the Defendants’ Brief in Response to

the State of North Carolina’s Amicus Curiae Brief [Doc. 58-1].

II. STANDARD OF REVIEW

The central issue for resolving a Rule 12(b)(6) motion is whether the

claims state a plausible claim for relief. See Francis v. Giacomelli, 588 F.3d

186, 189 (4th Cir. 2009). In considering the Defendants’ motion, the Court

accepts the allegations in the Complaint as true and construes them in the

light most favorable to the Plaintiffs. Nemet Chevrolet, Ltd. v.

Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th Cir. 2009); Giacomelli,

588 F.3d at 190-92. Although the Court accepts well-pled facts as true, it is

not required to accept “legal conclusions, elements of a cause of action, and

bare assertions devoid of further factual enhancement.”

Consumeraffairs.com, 591 F.3d at 255; see also Giacomelli, 588 F.3d at

189.

The claims need not contain “detailed factual allegations,” but must

contain sufficient factual allegations to suggest the required elements of a

cause of action. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555

(2007); see also Consumeraffairs.com, 591 F.3d at 256. “[A] formulaic

recitation of the elements of a cause of action will not do.” Twombly, 550

U.S. at 555. Nor will mere labels and legal conclusions suffice. Id. Rule 8

of the Federal Rules of Civil Procedure “demands more than an unadorned,

the defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009).

The Complaint is required to contain “enough facts to state a claim to

relief that is plausible on its face.” Twombly, 550 U.S. at

570; see also Consumeraffairs.com, 591 F.3d at 255. “A claim has facial

plausibility when the plaintiff pleads factual content that allows the court to

draw the reasonable inference that the defendant is liable for the misconduct

alleged.” Iqbal, 556 U.S. at 678; see also Consumeraffairs.com, 591 F.3d at

255. The mere possibility that a defendant acted unlawfully is not sufficient

for a claim to survive a motion to dismiss. Consumeraffairs.com, 591 F.3d

at 256; Giacomelli, 588 F.3d at 193. Rather, the well-pled factual allegations

must move a plaintiff’s claim from possible to plausible. Twombly, 550 U.S.

at 570; Consumeraffairs.com, 591 F.3d at 256.

III. FACTUAL BACKGROUND

Construing the well-pled factual allegations of the Consolidated

Complaint as true and drawing all reasonable inferences in the Plaintiffs’

favor, the following is a summary of the relevant facts.

In the 1880s, Mission Hospital in Asheville, North Carolina, was

originally founded as Dogwood Mission to provide charity care to the sick

and poor. [Doc. 43 at ¶ 60]. In 1951, Defendant Mission Hospital, Inc. was

incorporated as a nonprofit institution. [Id. at ¶ 61]. Defendant ANC

Healthcare, Inc. f/k/a Mission Health System, Inc. (hereinafter “Defendant

ANC”) was incorporated in 1981 as a nonprofit corporation. From that time

until 2019, Defendant ANC and Defendant Mission Hospital, Inc. together

(i.e., the Mission Defendants) operated a hospital in Asheville. In the early

1990s, two private acute care hospitals served the Asheville area: the one

operated by the Mission Defendants (hereinafter “Mission Hospital-

Asheville”) and St. Joseph’s Hospital. [Id. at ¶ 62].2

In 1993, the North Carolina General Assembly enacted an initial

version of the Certificate of Public Advantage (“COPA”), a regulation allowing

2 Originally, the Mission Defendants operated only one hospital, which was located in

Asheville, and is referred to in this Order as “Mission Hospital-Asheville,” to distinguish it

from the other facilities that the Mission Defendants later acquired. [See id. at ¶¶ 62-72,

99, 105-106].

hospitals to operate with monopoly power in exchange for subjecting

themselves to state oversight. [Id. at ¶¶ 7, 62]. In 1995, the General

Assembly amended COPA, allowing Mission Hospital-Asheville and St.

Joseph’s to enter into a partnership. [Id. at ¶ 64]. In 1998, the Mission

Defendants purchased St. Joseph’s, acquiring all of St. Joseph’s assets and

operating under one license as “Mission Health System.” [Id. at ¶ 65]. The

General Assembly amended COPA a second time to facilitate the merger.

[Id.]. As a result, “Mission Health System” was exempted from antitrust

regulation in exchange for it accepting price regulations in the form of

“limit[ing] health care costs” and “control[ing] prices of health care services.”

[Id. at ¶ 66].

The 1998 amended COPA documented that:

[Mission and St. Joseph’s] dominate the market

share in two counties. 91% of Madison County

admissions and 87% of Buncombe County

admissions are either Memorial Mission3 or St.

Joseph’s Hospital. Memorial Mission and St.

Joseph’s are located in Buncombe County. Madison

County, which has no hospital, is closer to the two

Asheville hospitals than to any other acute care

hospital.

3 The 1998 COPA refers to Mission Hospital-Asheville as “Memorial Mission.”

[Id. at ¶ 69]. The 1998 amended COPA also acknowledged that “federal and

State antitrust laws may prohibit or discourage” the “cooperative

arrangements” that the COPA allowed. [Id. at ¶ 67].

In 2005, a third amended COPA documented that 93.8% of Madison

County admissions and 90.6% of Buncombe County admissions took place

at Mission’s Asheville facilities.4 [Id. at ¶ 70]. In 2011, a report authored by

economist Greg Vistnes (the “Vistnes Report”) found that COPA limited

Mission’s ability to raise prices and margins only at Mission’s Asheville

facilities. [Id. at 71]. As such, COPA created an incentive for Mission to

acquire facilities outside of Asheville. [Id.].

In 2015, the General Assembly repealed COPA, effective January 1,

2018. [Id. at ¶ 73]. By 2016, Mission held a 93% share in the General Acute

Care Market (“GAC Market”) in Buncombe and Madison Counties. [Id. at ¶

72]. Between 1995 and 2016, Mission acquired five smaller hospitals in

Western North Carolina. [Id.]. On January 1, 2018, the State’s direct

regulatory authority over the prices charged by Mission ended. [Id. ¶ 73].

4 All references to Mission’s Asheville facilities for the period beginning in 1998 refer to

the combined operations of what was formerly St. Joseph’s Hospital with what was known

as Memorial Mission Hospital. Hereinafter such combined operations are referred to

herein as “Mission Hospital-Asheville.”

In or around 2017, executives of the Mission Defendants entered into

private negotiations to sell the assets of both entities to HCA. [Id. at ¶ 74].

On March 21, 2018, the Mission Defendants and the HCA Defendants

announced that the HCA Defendants would be acquiring all of Mission’s

facilities. [Id. at ¶ 75]. On August 30, 2018, the Defendants entered into

such an asset purchase agreement (“APA”), which was amended in January

2019. [Id. at ¶ 76]. In January 2019, the asset transfer was completed. [Id.

at ¶ 77].

The Plaintiffs allegations of anti-competitive conduct by the Defendants

pertain to two defined markets in two defined regions. [Id. at ¶¶ 90-110]. The

first of these is defined as the “GAC Market” (i.e., the General Acute Care

Market) which pertains to inpatient services, such as medical, surgical,

anesthesia, diagnostic, nursing, laboratory, radiology, dietary, and other

treatment services provided in a hospital setting to patients requiring one or

more overnight stays. [Id. at ¶ 92]. The second market is defined by the

Plaintiffs as the “Outpatient Market” which pertains to medical, diagnostic,

and treatment services that are not inpatient medical services. [Id. at ¶ 93].

In each of these Relevant Markets, “the service market includes only the

purchase of medical services by private health plans, namely commercial

insurance plans and employer self-funded plans.” [Doc. 43 at ¶ 91]

(emphasis added).5

The relevant regions as defined by the Plaintiffs are the “Asheville

Region” and the “Outlying Region.” [Id. at 97]. The “Asheville Region” is

defined by the Plaintiffs as consisting of Buncombe and Madison Counties.

[Id. at 99]. The “Outlying Region” is defined by the Plaintiffs as consisting of

Macon, McDowell, Mitchell, Transylvania, and Yancey Counties.6 [Id. at ¶

105]. HCA provides services in the Asheville Region predominately through

its flagship facility, the combined facility in Asheville. [Id.]. HCA operates

the following hospital facilities in the Outlying Region: Transylvania Regional

Hospital; Angel Medical Center, Macon County; Highlands-Cashiers

Hospital, Macon County; Mission Hospital McDowell; and Blue Ridge

Regional Hospital, Mitchell County. [Id. at ¶ 106].

In health care markets, private health insurance plans negotiate with

hospitals for bundles of services that will be offered to members as “in-

network” benefits. [Id. at ¶ 79]. Thus, when a health plan’s member receives

5 This action does not include “sales of such services to government payers, including

Medicare (and Medicare Advantage), Medicaid, and TRICARE (covering military

families), because health care providers’ negotiations with commercial insurers and

employer self-funded plans are separate from the process used to determine the rates

paid by government payers.” [Doc. 43 at ¶ 91].

6 Three of these Counties (McDowell, Transylvania and Yancey) border Buncombe

County. The other two (Mitchell and Macon) do not, but are in Western North Carolina.

services from that hospital, the health plan will pay the hospital the “allowed

amount” for that service, as agreed upon by the health plan and the hospital.

[Id.]. “[I]n a geographic region where a significant area is serviced by a single

hospital that provides essential health care services, that hospital is essential

for health plans to include in their network, and is, in effect a ‘must have’

hospital for that health plan.” [Id. at ¶ 84]. (hereinafter a “Must Have

Hospital”). Plaintiffs allege that Mission-Hospital-Asheville is a “Must Have

Hospital” in both regions. [Id. at ¶ 122].7

The Plaintiffs allege that when HCA contracts with health insurance

plans it uses anti-competitive provisions the Plaintiffs identify as “all-or-

nothing” provisions, “anti-steering” and “anti-tiering” provisions, and “gag

clauses.” [Id. at ¶ 120]. Under such “all-or-nothing” provisions, HCA requires

health plans to include all of HCA’s GAC and Outpatient Services in both

Regions. [Id. at ¶ 125]. Mission had begun including such “all-or-nothing”

provisions in its contracts with health plans as early as 2017. [Id. at ¶ 129].

In 2017, Mission insisted that Blue Cross, the largest health plan in North

Carolina, include in its plans all its services covering all inpatient and

7 The Plaintiffs’ allegations are unclear as to whether they are asserting that Mission

Hospital-Asheville is a “must have” hospital only in the Asheville Region, or in both. Giving

the Plaintiffs the benefit of all reasonable inferences, the Court construes this allegation

as pertaining to both.

outpatient care in both Regions. [Id.]. When Blue Cross declined, Mission

removed itself from Blue Cross’s network for GAC and Outpatient Services,

resulting in 260,000 people in Western North Carolina being unable to seek

care at Mission facilities, including Mission Hospital-Asheville, unless they

paid a higher “out of network” cost. [Id.]. Two months later, Blue Cross

accepted Mission’s terms, including a rate increase and the “all-or-nothing”

provision. [Id. at ¶ 130]. This has continued in HCA’s relationship with Blue

Cross. [Id.].

Under the “anti-steering” and “anti-tiering” provisions, HCA prohibits or

inhibits health plans from encouraging their members to use less expensive

and/or higher quality health care providers of GAC or Outpatient Services.

[Id. at ¶ 131]. These practices include HCA limiting health plans’ ability to

provide information to members about less expensive health care providers

as a condition for such plans including Mission-Hospital-Asheville “in

network”. [Id. at ¶ 136]. HCA further uses “gag clauses” that prevent insurers

from revealing the terms of their agreement in order to obscure their price

increases and anticompetitive contracts from regulators and the public. [Id.

at ¶ 138].

HCA holds approximately 80% to 90% of the GAC Market in the

Asheville Region. [Id. at ¶ 112]. In 2019, Mission Hospital-Asheville held the

following market shares in the following Asheville Region zip codes: 88.9%

for zip code 28806, 86.5% for zip code 28803, and 87% for zip code 28715.

[Id.]. Moreover, HCA holds the following market shares in the following GAC

Markets: 88.3% in Yancey County, 89.1% in Madison County, 88.6% in

Buncombe County, 85.4% in Mitchell County, 78.7% in Transylvania County,

76.4% in McDowell County, and 74.7% in Macon County. [Id. at ¶ 114]. In

zip code 28712 in Brevard, located in Transylvania County, HCA holds an

85.3% market share,8 while Pardee UNC Hospital holds only a 10.4% market

share, despite Pardee UNC being closer and lower cost than Mission

Hospital-Asheville. [Id. at ¶ 147]. Similarly, in zip code 28741 in Highlands,

located in Macon County, HCA holds a 92.4% market share,9 while

Northeast Georgia Medical Center holds a 7.6% market share, despite being

closer and lower cost than Mission Hospital-Asheville. [Id. at ¶ 148]. For

Outpatient Services, Mission holds approximately 80% of the Buncombe

County market. [Id. at 116].

8 This market share comes from HCA’s Transylvania Regional Hospital’s 44.8% market

share in the zip code and HCA’s Mission Hospital-Asheville’s 40.5% market share in the

same zip code. [Id. at ¶ 147 n. 19].

9 This market share comes from HCA’s Highlands-Cashiers Hospital’s 43.8% market

share in the zip code and HCA’s Mission Hospital-Asheville’s 48.7% market share in the

same zip code. [Id. at ¶ 148 n. 20].

HCA’s high market shares have allowed it to raise prices in the

Relevant Markets, and, over the past five years Mission’s and HCA’s prices

for routine or standardized GAC and Outpatient Services have increased at

a faster rate than prices for those services statewide. [Id. at ¶¶ 151-152]. A

recent RAND analysis10 shows that Mission and HCA have raised their prices

well above the typical prices for routine services and procedures in the

Relevant Markets when compared to the prices negotiated between

hospitals and health plans for Medicare. [Id. at ¶ 153]. RAND data from

2018 to 2020 shows that, on average, Mission Hospital-Asheville charged

commercial insurers 305% above the Medicare price for GAC Services,

compared to the North Carolina average of 211% above the Medicare price.

[Id. at ¶ 154]. For Outpatient Services, Mission Hospital-Asheville charged

commercial insurers 343% above the Medicare price, compared to the North

Carolina average of 331% above the Medicare price. [Id.].

Data from a large, private commercial database of health price and

claims information provides examples of HCA’s average prices for specific

procedures. [Id. at ¶ 156]. For example, HCA’s average price to health plans

for C-sections without complications at Mission Hospital-Asheville was

10 RAND is a corporate research organization that analyzes and reports hospital price

data at the systemwide level. [See id. at ¶ 154]. RAND does not report the prices charged

for specific procedures. [Id.].

$10,076 in 2020, while the statewide average was $4,373. [Id. at ¶ 157].

From 2017 to 2020, prices for a C-section without complications increased

17.3% at Mission Hospital-Asheville, compared to a 14.4% increase across

the rest of North Carolina. [Id.]. Over the same period, the price for a

shoulder arthroscopy at Mission Hospital-Asheville increased by 75%, while

it increased only 19% statewide, reaching $2,419 in 2020, compared to the

statewide average of $897. [Id. at ¶ 159]. For stress tests, the average price

declined by 10% statewide, while increasing by 29% at Mission Hospital-

Asheville. [Id. at ¶ 158]. Similarly, the average price of a lipid panel declined

by 19% statewide, while increasing approximately 31% at Mission. [Id. at ¶

160].

At Mission Hospital McDowell, the average price for a CT scan of the

abdomen and pelvis is approximately $2,000, compared to the statewide

average of just under $500. [Id. at ¶ 164]. Since COPA has been repealed,

prices for Outpatient Services at Mission Hospital McDowell have gone from

being well below the statewide average to being approximately 50% above

the statewide average. [Id. at ¶ 165]. Now, prices for Outpatient Services at

Mission Hospital McDowell are within the top 3% of prices in North Carolina,

making it more costly than its only potentially significant competitor,

Carolinas HealthCare System Blue Ridge Morganton. [Id. at ¶¶ 165-166].

Since 2019, HCA has discontinued certain health care services. Under

the Asset Purchase Agreement (APA), the Defendants asserted that they

had “no present intent to discontinue any of the community activities,

programs or services provided” prior to HCA’s purchase of Mission. [Id. at ¶

169]. However, in October 2019, HCA closed outpatient rehabilitation clinics

in Candler and Asheville, and, in 2020, it closed primary care practices in

Candler and Biltmore Park, as well as chemotherapy services in Brevard,

Franklin, Marion, and Spruce Pine. [Id.]. Under the APA, HCA also

“promised” to maintain until January 2029 the same level of charity care

coverage that Mission had prior to the acquisition. [Id. at ¶ 185]. However,

HCA has reduced coverage for non-emergency services, implemented a

requirement that out-of-pocket expenses exceed $1,500 to qualify for charity

care coverage, and ended pre-approval for charity care coverage. [Id.].

HCA has also reduced budgets and staffing at Mission Hospital-

Asheville and at its five smaller hospitals in the Outlying Region. [Id. at ¶

170-171]. As of March 2021, at least 79 doctors have left or planned to leave

HCA facilities, while others describe new employment contracts with HCA as

removing quality of care metrics and focusing on the number of patients seen

and amount billed. [Id. at ¶ 172]. Nurses working in HCA facilities have

described their units as “inhumanely understaffed.” [Id. at ¶ 173].

The North Carolina Department of Justice has received complaints

about primary care and OB/GYN physicians leaving Mission facilities, the

absence of mammogram services at Mission’s Transylvania County

Regional Hospital, reduced nursing and administrative staffing in emergency

departments, inadequate staffing in Mission’s mental health facilities, the

closure of cancer treatment practices, unclean facilities, long wait times for

patients, and increased prices. [Id. at ¶¶ 176-177]. The Leapfrog Group,

and independent organization that assesses quality of care, downgraded

Mission Hospital-Asheville from an “A” to a “B,” noting that the facility fell

short in infections, high-risk baby deliveries, some cancer treatment

procedures, and patients’ experience with elective surgeries. [Id. at ¶ 180].

In 2020, the Centers for Medicare and Medicaid Services (“CMS”) also

threatened to terminate its contract with HCA/Mission over concerns for

patient safety. [Id. at ¶ 181]. Most recently, CMS, which uses patient survey

responses about cleanliness and the responsiveness of hospital staff,

graded Mission Hospital-Asheville two out of five possible stars. [Id. at ¶

182].

IV. DISCUSSION

In their Consolidated Complaint, the Plaintiffs assert claims for

unreasonable restraint of trade in violation of § 1 of the Sherman Antitrust

Act (“Sherman Act”) and unlawful monopolization under § 2 of the Sherman

Act. [Doc. 43 at ¶¶ 201-213]. The Defendants move to dismiss both claims.

[Doc. 45 at 1; Doc. 46 at 1].

A. Statute of Limitations

The ANC Defendants (i.e., the Mission Defendants) argue that the

Plaintiffs’ claims against them are barred by the statute of limitations as the

Plaintiffs have failed to allege any unlawful conduct by them occurring within

the four-year limitations period immediately preceding the filing of this action

(i.e., after June 3, 2018). [Doc. 47 at 16 -17]. Specifically, the Mission

Defendants argue that the only specific contract referenced in the

Consolidated Complaint is from 2017, outside of the four-year limitations

period. [Id. at 16-17; see also Doc. 43 at ¶ 77]. The Mission Defendants

further argue that in January 2019, ANC sold the assets of Mission Health to

HCA and have not provided health care services since that time, and that

because the Plaintiffs did not specifically allege that either of the Mission

Defendants entered into any anticompetitive contractual terms between June

3, 2018, and January 2019, the Plaintiffs’ claims against them must be

dismissed. [Id. at 17-19].

“Ordinarily, a defense based on the statute of limitations must be raised

by the defendant through an affirmative defense, and the burden of

establishing the affirmative defense rests on the defendant.” Goodman v.

Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007) (internal citation omitted).

Therefore, the Court generally cannot reach the merits of an affirmative

defense in ruling on a motion to dismiss under Rule 12(b)(6). Id. Only in

those extraordinary circumstances where all facts necessary to the

affirmative defense “clearly appear[ ] on the face of the complaint” may the

Court address an affirmative defense at the motion to dismiss stage.

Richmond v. Fredericksburg & Potomac R. Co. v. Forst, 4 F.3d 244, 250 (4th

Cir. 1993).

“[D]amages are recoverable under the federal antitrust acts only if suit

therefor is ‘commenced within four years after the cause of action accrued[.]’”

Zenith Radio Corp. v. Hazeltine Rsch., Inc., 401 U.S. 321, 338 (1971) (citing

15 U.S.C. § 15b)). The statute of limitations begins to run when a defendant

commits an act that causes economic injury to the plaintiff. Id.; see also

Pocahontas Supreme Coal Co., Inc. v. Bethlehem Steel Corp., 828 F.2d 211,

217 (4th Cir. 1987). Where there is a continuing violation of antitrust law,

“each time a plaintiff is injured by an act of the defendants[,] a cause of action

accrues to him to recover the damages caused by that act and . . . the statute

of limitations runs from the commission of the act.” Zenith Radio Corp., 401

U.S. at 338. Thus, “in the case of a continuing violation . . . each overt act

that is part of the violation and that injures the plaintiff . . . starts the statutory

period running again, regardless of the plaintiff’s knowledge of the alleged

illegality at much earlier times.” Klehr v. A.O. Smith Corp., 521 U.S. 179,

189 (1997) (analogizing the accrual of private causes of action under federal

antitrust law to civil RICO actions); see also Charlotte Telecasters, Inc. v.

Jefferson-Pilot Corp., 546 F.2d 570, 673 (4th Cir. 1976) (explaining that

where “the plaintiff charges a continual refusal to deal, the statute of

limitations commences to run from the last overt act causing injury to the

plaintiff’s business”); Varner v. Peterson Farms, 371 F.3d 1011, 1019 (8th

Cir. 2004) (explaining that “even when a plaintiff alleges a continuing

violation, an overt act by the defendant is required to restart the statute of

limitations and the statute runs from the last overt act”).

In the context of continuing antitrust violations, where the alleged harm

results from anticompetitive vertical contracts executed before the statute of

limitations period, “[a]cts that are merely ‘unabated inertial consequences’ of

a single act do not restart the statute of limitations.” Varner, 371 F.3d at 1019

(quoting Barnosky Oils, Inc. v. Union Oil Co. of California, 665 F.2d 74, 82

(6th Cir. 1981)). Rather, to restart the statute of limitations, an over act “[(1)]

must be a new and independent act that is not merely a reaffirmation of a

previous act, and (2) it must inflict new and accumulating injury on the

plaintiff.” Id.; see also U.S. Airways, Inc. v. Sabre Holdings Corp., 938 F.3d

43 (2nd Cir. 2019) (quoting DXS, Inc. v. Siemens Med. Sys., Inc., 100 F.3d

462, 467 (6th Cir. 1996)). Under this principle, execution or active

enforcement of a contract is an overt act, but mere performance under that

contract is insufficient to restart the statute of limitations. See Varner, 371

F.3d at 1020; see also U.S. Airways, 938 F.3d at 69; Eichman v. Fotomat

Corp., 880 F.2d 149, 160 (9th Cir. 1989). Therefore, benefits or payments

received by a defendant under a contract executed prior to the limitations

period do not constitute an overt act that restarts the statute of limitations.

See Varner, 371 F.3d at 1019-20 (holding that performance under “tying”

contract executed prior to the limitations period did not constitute a

continuing violation); U.S. Airways, 938 F.3d at 69 (holding that

supracompetitive prices charged under contract executed prior to the

limitations period did not constitute an overt act that restarted the statute of

limitations); Eichman, 880 F.2d at 160 (holding that plaintiffs’ “lease-tying

claim” was barred by the statute of limitations, despite the defendant’s receipt

of profits following the execution of the lease agreement); Aurora Enters.,

Inc. v. Nat’l Broad. Co., Inc., 688 F.3d 689, 694 (9th Cir. 1982) (holding that

the defendant’s receipt of profits under a contract executed prior to the

limitations period did not restart the statute of limitations).

According to the Consolidated Complaint, the “Defendants’ Scheme

involves a web of contracts that Defendants have imposed on insurers,”

including “all-or-nothing clauses,” anti-steering and anti-tiering provisions,

and gag clauses. [Doc. 43 at ¶ 120]. The only specific contract referenced

in the Consolidated Complaint is a 2017 contract between Mission and Blue

Cross, in which Mission required the inclusion of inpatient and outpatient

services in all Relevant Geographic Markets. [Id. at ¶ 129]. The Plaintiffs do

not allege any specific anticompetitive contract between the Mission

Defendants and any insurer between June 3, 2018 and January 2019, when

HCA acquired Mission’s assets. Rather, the Plaintiffs allege that “beginning

in or about 2017, Mission (then ANC), under its immediate pre-buyout

executive management team, had embarked on a continuing, multifaceted

coercive Scheme designed to foreclose competition from rivals, to maintain

or to enhance its monopoly power in the Relevant Markets, and ultimately to

charge supracompetitive prices . . . for GAC and Outpatient Services.” [Id.

at ¶ 12] (emphasis added).

The facts necessary to determine whether the Plaintiffs’ claims against

the Mission Defendants are time-barred do not “clearly appear[ ] on the face

of the complaint.” Indeed, the Plaintiffs’ allegation that the Defendants’

anticompetitive conduct began in 2017 and continued thereafter leaves the

Court to speculate as to precisely when the allegedly anticompetitive

contracts were formed. However, the Plaintiffs’ allegations, taken in the light

most favorable to the Plaintiffs, and giving the Plaintiffs the benefit of all

reasonable inferences, indicate that contracts with the allegedly

anticompetitive provisions were executed after 2017, within the limitations

period. Notably, according to the Plaintiffs, the Consolidated Complaint

“does not allege the specific dates of the contracts and other violations

because that information lies in the hands of Defendants.”11 [Doc. 49 at 12].

Thus, at this early stage of litigation, the Plaintiffs are entitled to the

reasonable inference that the last anticompetitive act of the Mission

Defendants was committed within the limitations period. Accordingly, the

motion to dismiss of the Mission Defendants based on the statute of

limitations defense is denied.

11 According to the Plaintiffs, “[t]hey pay for health care services according to master

contracts negotiated between third-party administrators and providers such as HCA,” and,

therefore, they “do not have access to those contracts.” [Doc. 49 at 13 n. 4].

B. Section 1 Claim

Section 1 of the Sherman Act provides that “[e]very contract,

combination in the form of trust or otherwise, or conspiracy, in restraint of

trade or commerce among the several States, or with foreign nations, is

declared to be illegal.” 15 U.S.C. § 1. To state a claim under § 1, a plaintiff

must allege facts that show “(1) a contract, combination, or conspiracy; (2)

that imposed an unreasonable restraint on trade.” Dickson v. Microsoft

Corp., 309 F.3d 193, 203 (4th Cir. 2002). Courts typically review vertical

restraints on trade under the rule of reason to determine whether conduct is

an unreasonable restraint on trade.12 Continental T.V., Inc. v. GTE Sylvania,

Inc., 433 U.S. 36, 59 (1977) (“When anticompetitive effects are shown to

result from particular vertical restrictions they can be adequately policed

under the rule of reason, the standard traditionally applied for the majority of

anticompetitive practices challenged under [§ 1].”); see also Leegin Creative

Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 885 (2007) (“The rule of

12 “Restraints imposed by agreement between competitors have traditionally been

denominated as horizontal restraints, and those imposed by agreement between firms at

different levels of distribution as vertical restraints.” Business Elec. Corp. v. Sharps Elec.

Corp., 485 U.S. 717, 730 (1988). Here, the HCA Defendants argue that “[t]he alleged

restraints pled in the Complaint – “all-or-nothing” arrangements, anti-steering clauses,

and price confidentiality provisions – are all examples of vertical restraints subject to a

rule of reason analysis.” [Doc. 45-1 at 24]. Neither the Mission Defendants nor the

Plaintiffs contest that the alleged restraints involved in this matter are vertical restraints.

reason is the accepted standard for testing whether a practice restrains trade

in violation of [§ 1].”).

Under the rule of reason, “the factfinder weighs all of the circumstances

of a case in deciding whether a restrictive practice should be prohibited as

imposing an unreasonable restraint on competition.” Continental T.V., 433

U.S. at 49. A restrictive practice is unreasonable where “its anticompetitive

effects outweigh its procompetitive effects.” Atlantic Richfield Co. v. USA

Petroleum Co., 495 U.S. 328, 342 (1990). At the pleading stage, a plaintiff

may assert a claim that a restrictive practice is unreasonable by alleging facts

that demonstrate the practice produced anticompetitive effects in the

relevant markets. United States v. Charlotte-Mecklenburg Hosp. Auth., 248

F. Supp. 3d 720, 728 (W.D.N.C. 2017) (citing W. Penn. Allegheny Health

Sys., Inc. v. UPMC, 627 F.3d 85, 100 (3d Cir. 2010)). “Anticompetitive

effects include increased prices, reduced output, and reduced quality.” W.

Penn. Allegheny Health Sys., 627 F.3d at 100.

A plaintiff can assert a claim that a practice produced anticompetitive

effects directly by alleging facts that indicate “an actual adverse effect on

competition.” Charlotte-Mecklenburg Hosp. Auth., 248 F. Supp. 3d at 728

(citing Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90, 96 (2d Cir. 1998)).

Alternatively, a plaintiff can assert a claim based on indirect anticompetitive

effects by alleging facts that indicate that the defendant has “sufficient market

power to cause an adverse effect on competition.” Id. However, market

power is necessary, but not sufficient, to indirectly demonstrate adverse

effects on competition. Id. Rather, a plaintiff “must show market power plus

‘some other ground for believing that the challenged behavior could harm

competition in the market, such as the inherent anticompetitive nature of the

defendant’s behavior or the structure of the interbrand market.’” Id. (quoting

Tops Mkts., Inc., 142 F.3d at 97).

The Defendants argue that the Plaintiffs have failed to allege specific

anticompetitive contract provisions. [Doc. 45-1 at 14]. In their Consolidated

Complaint, the Plaintiffs do not allege specific contractual language or point

to any specific example of an anticompetitive contract in the Relevant

Markets, aside from one example provided from 2017. Rather, the Plaintiffs

allege that, starting in 2017, the Defendants’ contracts with health insurers

in the Relevant Markets include “all-or-nothing” provisions, anti-steering and

anti-tiering provisions, and gag clauses. [Doc. 43 at ¶¶ 12, 120, 131, 136,

138]. The Plaintiffs further allege that these provisions require health plans

to include the Defendants’ GAC and Outpatient Services in the Outlying

Regions and their Outpatient Services in the Asheville Region; prevent

health insurers from giving members information about less expensive health

care providers; and prevent health plans from revealing the terms of their

agreements with the Defendants. [Id. at ¶ 125, 131, 136, 138]. The Plaintiffs

reference one contract, executed in 2017, in which Mission allegedly

required Blue Cross to include Mission’s inpatient and outpatient services in

the Asheville and Outlying Regions in order to keep the “Must Have Hospital”

(Mission Hospital-Asheville) “in-network.” [Id. at ¶ 122, 129]. In addition, the

Plaintiffs have alleged that the Defendants have employed contract

provisions that thwart competition, even identifying what types of provisions

those are, and have alleged circumstances that give rise to a reasonable

inference that Defendants’ contracts actually contain such provisions. At this

stage of the litigation it is of no consequence that Plaintiffs have not cited

with particularity to such provisions. It is noted that the Plaintiffs do not have

access to the allegedly anticompetitive contracts. [Doc. 48 at 12; Doc. 49 at

13 n.4]. As such, the Plaintiffs are unable to provide specific details at this

early stage of litigation.

The Defendants also argue that the Plaintiffs have failed to allege that

the Defendants’ conduct harmed competition in the Relevant Market. [Doc.

45-1 at 23]. However, the Plaintiffs have alleged that HCA holds between

74% and 90% of the GAC Market in the Asheville and Outlying Regions and

approximately 80% of the market for Outpatient Services in Buncombe

County, [Doc. 43 at ¶¶ 112, 114, 116], and the Plaintiffs have also alleged

numerous anticompetitive effects of HCA’s allegedly anticompetitive contract

provisions. Specifically, the Plaintiffs have alleged that HCA has raised

prices and decreased quality for its health care services. [Id. at ¶¶ 151-182].

The Plaintiffs have also alleged numerous specific examples of price

increases for specific health care services,13 [id. at ¶¶ 153-166], the

discontinuation of certain health care services, [id. at ¶ 169], complaints from

patients and health care providers about understaffing and quality of care,

[id. at ¶¶ 170-177], and the downgrading of Mission Hospital-Asheville by

organizations that assess quality of care [id. at ¶¶ 180-182]. All of these

allegations, taken together and separately, plausibly assert that Defendants’

conduct has harmed competition.

13 The Defendants also argue that “most of the price data that Plaintiffs rely upon is from

Medicare, which the Complaint alleges is irrelevant, and which cannot show that Mission

charged supracompetitive prices in its contracts with commercial insurers.” [Doc. 45-1 at

28-29] (internal citation omitted). The Plaintiffs, however, allege that RAND data

compares “the prices negotiated between hospitals and health plans to the fee schedule

set by Medicare,” which “act[s] as a relative baseline[.]” [Doc. 43 at ¶¶ 153-154]. The

Plaintiffs do not allege that the prices charged by HCA are the prices charged under

Medicare. Rather, the Plaintiffs use the RAND data as a baseline from which to allege

that the prices charged by Mission Hospital-Asheville are higher than the average prices

statewide. [See id. at ¶ 154]. However, the Plaintiffs also allege specific examples of

prices charged by HCA using “[t]he pricing data for specific standardized medical

procedures from a large private, commercial database of health price and claims

information.” [Id. at ¶¶ 156-160, 163-164]. There is nothing in the Consolidated

Complaint, and the Defendants point to nothing, to indicate that the pricing information

from the commercial database is based on Medicare data.

The Defendants argue that the Plaintiffs’ Consolidated Complaint

should be dismissed because the allegedly anticompetitive contract

provisions also have procompetitive effects. [Doc. 45-1 at 26-27]. At the

pleading stage, however, the Court accepts the truth of factual allegations in

the Consolidated Complaint, and the Court “will assume that the plaintiffs

can prove the facts that they allege in their complaint.” Estate Const. Co. v.

Miller & Smith Holding Co., Inc, 14 F.3d 213, 221 (4th Cir. 1994). Further,

“determining whether a restraint on trade is unreasonable is a fact-intensive

inquiry.” Charlotte-Mecklenburg Hosp. Auth., 248 F. Supp. 3d at 729. In the

health care context, the Court “should consider, among other things, the facts

peculiar to the health care industry, the effect of the activities on health

providers, and the impact of the activities on costs to the ultimate consumer,”

as well as “[t]he history of restraint and the purpose or end sought[.]” Id. at

729-30 (quoting Ratino v. Med. Serv. of D.C. (Blue Shield), 718 F.2d 1260,

1272 (4th Cir. 1983)). Accordingly, questions about whether the

procompetitive effects of the Defendants’ contracts with insurers outweigh

the harm to competition alleged by the Plaintiffs are “best resolved after the

benefit of discovery, allowing the fact finder to evaluate the purposes and

competitive effects within the specific context of [the Relevant Markets] and

insurance industry.” Id. (explaining that plaintiff’s complaint should not be

dismissed where plaintiff alleged direct evidence of market harm and

defendant hospital system argued that contractual restrictions had pro-

competitive effects).

Therefore, the Defendants’ motions are denied with respect to the

Plaintiffs’ claim under § 1 of the Sherman Act.

C. Section 2 Claim

Section 2 of the Sherman Act provides that “[e]very person who shall

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, or with foreign nations, shall be deemed guilty of a felony

. . .” 15 U.S.C. § 2. “Simply possessing monopoly power and charging

monopoly prices does not violate § 2[.]” Pac. Bell Tel. Co. v. LinkLine

Commc’ns, Inc., 555 U.S. 438, 447-48 (2009); Verizon Commc’ns, Inc. v.

Law Offs. of Cutis v. Trinko, LLP, 540 U.S. 398, 407 (2004) (“The opportunity

to charge monopoly prices – at least for a short period – is what attracts

‘business acumen’ in the first place; it induces risk taking that produces

innovation and economic growth. To safeguard the incentive to innovate, the

possession of monopoly power will not be found unlawful unless it is

accompanied by an element of anticompetitive conduct.”). Rather, to state

a claim under § 2, a plaintiff must plausibly allege “(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.”

United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966). Thus, “[t]o run

afoul of Section 2, a defendant must be guilty of illegal conduct ‘to foreclose

competition, gain a competitive advantage, or destroy a competitor.’” E.I. du

Pont de Nemours and Co. v. Kolon Indus., Inc., 637 F.3d 435, 450 (4th Cir.

2011) (quoting Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S.

451, 482-83 (1992)).

“In analyzing Sherman Act Section 2 claims . . . courts begin with a

preliminary inquiry into market definition, which serves as a tool to determine

the defendant’s market power.” Id. at 441. Thus, a plaintiff must allege both

a relevant product market and a relevant geographic market. Id. Here, the

Plaintiffs allege that the Defendants possess monopoly power in the GAC

Market and the Outpatient Market in the Asheville and Outlying Regions.

[Doc. 43 at ¶¶ 90-110]. The Defendants do not argue that the Plaintiffs have

failed to allege a relevant product market or a relevant geographic market.

Rather, with regard to the Plaintiffs’ § 2 claim, the Defendants argue that they

acquired their purported monopoly power lawfully under the COPA. [Doc.

45-1 at 8, 14, 16; Doc. 47 at 7, 14-15]. In addition, the Mission Defendants

argue that the Plaintiffs have failed to allege that they unlawfully maintained

monopoly power because “Mission Health’s continued monopoly power is

equally consistent with lawful behavior.” [Doc. 47 at 15-16; Doc. 45-1 at 17].

The HCA Defendants also argue that the Plaintiffs have failed “to allege that

Mission even has monopoly power in the [O]utpatient [M]arket.” [Doc. 45-1

at 14, 17].14

Regarding the Defendants’ argument that the alleged monopoly power

was acquired lawfully under the COPA, the Plaintiffs’ Consolidated

Complaint does not allege the monopoly power acquired under the COPA

was unlawful. Rather, the Plaintiffs’ Consolidated Complaint alleges that the

Defendants’ implemented a coercive scheme using anticompetitive means

to foreclose competition, maintain and enhance the Defendants’ monopoly

power, and ultimately charge supracompetitive prices in the Relevant

Markets – after – the expiration of the COPA. [See Doc. 43 at ¶¶ 12-23, 120-

141]. Further, the Plaintiffs’ Consolidated Complaint sufficiently alleges HCA

14 The Plaintiffs’ § 2 claim is based on the same allegations as their § 1 claim. “A § 1

violation is legally distinct from that under § 2 ... though the two sections overlap in the

sense that a monopoly under § 2 is a species of trade restraint under § 1. The same kind

of practices, therefore, may evidence violations of both.” Dickson v. Microsoft Corp., 309

F.3d 193, 202 (4th Cir. 2002) (quotations and citations omitted). The Court has already

addressed the Defendants’ arguments regarding the Plaintiffs’ § 1 claim. As such, the

Court only addresses the Defendants’ arguments pertaining to Plaintiffs’ § 2 claim that

are distinct form their previous § 1 arguments.

Defendants’ have monopoly power over the Outpatient Market. Specifically,

the Consolidated Complaint alleges that, in large part due to the Defendants’

alleged scheme to maintain and enhance monopoly power, the HCA

Defendants have reduced the availability and quality of Outpatient Services

in the Outlying Region, in turn compelling patients to travel to HCA

Defendants’ Asheville facilities, and have caused prices for Outpatient

Services in the Outlying Region to substantially increase relative to other

providers in North Carolina. [Doc. 43 at ¶¶ 117, 149, 155, 165]. Accordingly,

at this stage of the proceedings, the Plaintiffs’ have plausibly stated a claim

under § 2 of the Sherman Act against the Defendants.

Therefore, the Defendants motions are denied with respect to the

Plaintiffs’ claim under § 2 of the Sherman Act.

ORDER

IT IS, THEREFORE, ORDERED, that the HCA Defendants’ Motion to

Dismiss the Consolidated Class Action Complaint for Failure to State a Claim

[Doc. 45], and the Motion to Dismiss of Defendants ANC Healthcare, Inc.

F/K/A Mission Health System, Inc. and Mission Hospital, Inc. [Doc. 46], are

hereby DENIED.

IT IS FURTHER ORDERED that the State of North Carolina’s Motion

for Leave to File Amicus Curiae Brief [Doc. 56], and the Defendants’

Consented-to Motion for Leave to File a Response to the State of North

Carolina’s Amicus Curiae Brief [Doc. 58], are hereby GRANTED.

IT IS SO ORDERED.

Signed: February 21, 2024

Martifi Reidinger ey

Chief United States District Judge MS

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