Opposition Brief — Little Rock Cardiology Clinic, P.A. v. Baptist Health

No. 09-1183 Ze CA tae

In The

Supreme Court of the Anited States

LITTLE ROCK CARDIOLOGY CLINIC, P.A., ET AL.,

Petitioners,

V.

BAPTIST HEALTH, ET AL.,

Respondents.

¢

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Eighth Circuit

+

BRIEF IN OPPOSITION FOR

RESPONDENTS BAPTIST HEALTH AND

BAPTIST MEDICAL SYSTEM HMO, INC.

¢

GORDON 8S. RATHER, JR. JOHN J. MILES

JUDY SIMMONS HENRY Counsel of Record

TROY A. PRICE WILLIAM E. BERLIN

MICHELLE M. KAEMMERLING CHRISTI J. BRAUN

WRIGHT, LINDSEY & OBER KALER GRIMES

JENNINGS, LLP & SHRIVER

200 West Capitol Avenue 1401 H Street, N.W.

Suite 2300 Suite 500

Little Rock, Arkansas 72201 Washington, D.C. 20005

(501) 371-0808 (202) 326-5008

ymiles@ober.com

Counsel for Respondents

Baptist Health and

Baptist Medical System

HMO, Inc.

JUNE 1, 2010

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

Whether, because petitioners failed to raise the

issue before the district court and Eighth Circuit,

they have waived their argument that the Eighth

Circuit erroneously required them to allege a relevant

market.

Whether, when the claims of antitrust injury,

competitive harm, and damages in petitioners’ com-

plaint were based on their foreclosure from the ability

to compete for privately insured patients and the

complaint alleges that they provide services to pub-

licly insured patients as well as privately insured pa-

tients, a relevant product market limited to privately

insured patients is plausible.

Whether, when the definition of the relevant geo-

yraphic market for health-care services in petitioners’

complaint was based on patient-flow data, allegations

that few residents of an area leave that area for

services are sufficient to plausibly show that the area

constitutes a relevant geographic market.

CORPORATE DISCLOSURE STATEMENT

Respondent Baptist Health is an Arkansas non-

profit corporation. It has no parent or stock. The pa-

rent company of respondent Baptist Medical System

HMO, Inc., is Multi-Management Services, Inc., a

wholly owned subsidiary of Baptist Health. No

publicly held company owns ten percent or more of

the stock of Baptist Medical System HMO, Inc.

il

TABLE OF CONTENTS

Page

QUESTIONS PREGENEIED oiccccessesessecsvccssescssacves i

CORPORATE DISCLOSURE STATEMENT ....... ll

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A. Background and Facts Relevant to the

BI UNINONE ia'cars zinc vccusandidaabens tence tiaassacsvanuasiebas 3

B. Procedural History and Opinions Below.... 8

REASONS FOR DENYING THE PETITION ..... 17

I. LRCC FAILED TO RAISE ITS “DON’T-

NEED-TO-DEFINE-THE-RELEVANT-

MARKET” ARGUMENT BELOW, SO

THAT ISSUE IS NOT PROPERLY BE-

FRE TEE OPEIEE, sis hcdcenisecsctasincccsioreeress 17

Il. IN HOLDING THAT THE COMPLAINTS

ALLEGATIONS FAIL TO SUFFI-

CIENTLY SUPPORT LRCC’S ALLEGED

RELEVANT MARKET, THE EIGHTH

CIRCUIT APPLIED THE SAME MAIN-

STREAM ANTITRUST PRINCIPLES AS

OTHER COURTS OF APPEALS, AND

THE COURT APPLIED THOSE PRIN-

CEP Rate CAPEREGIIE Bak venssccnssenssasasecsenensncces

1V

TABLE OF CONTENTS — Continued

Page

A. The Eighth Circuit’s Holding That

Petitioners Failed To Allege A Plausi-

ble Relevant Product Market Applies

The Same Mainstream Antitrust

Principles As Other Courts Of Ap-

peals Examining Similar Facts And

Antitrust Theories, And The Court

Applied Those Principles Correctly..... 19

B. The Eighth Circuit’s Separate Hold-

ing That LRCC Also Failed To Allege

A Plausible Relevant Geographic

Market Applies The Same Main-

stream Antitrust Principles As Other

Circuit Courts Of Appeals Analyzing

Geographic Markets In Health-Care

Antitrust Cases, And The Court Ap-

plied Those Principles Correctly ......... 24

Il. NOTHING ABOUT THIS CASE PRO-

VIDES IT WITH UNUSUAL IMPOR-

TANCE WARRANTING REVIEW BY

EME Gs paici oid cdstakavasctakudecaisiteuccsesiues 32

eI 0s Nga sass nk elivnac cade aie handeecaucorives 35

TABLE OF AUTHORITIES

Page

CASES

Apani Southwest, Inc. v. Coca-Cola Enterprises,

Inc., 300 F.3d S20 (BCH Cary DOOR) csccrecctscoscccsscccccsess 19

Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) .............. 28, 32

B&H Medical, L.L.C. v. ABP Administration,

Inc., 526 F.3d 257 (6th Cir. 2O08) ...........0..0cccccsersese 22

Bell Atlantic Corp. v. Twombly, 550 U.S. 544

(QFE ) cc'cnicusccsasvnsdeneeneevenpeeeaned a aaa reameeentededes passim

Blue Gross & Blue Shield of Wisconsin v.

Marshfield Clinic, 65 F.3d 1406 (7th Cir.

BPO D asia vnkcccncccnegunncnccsdeisaeunaeeaene nade peitasbertateyss ‘ecnmee

Blue Shield of Virginia v. McCready, 457 U.S.

EGE (ROBE) x csciscccovccortaniea ree eee cast at sinaassvascese 22

Brokerage Concepts, Inc. v. U.S. Healthcare,

Inc., 140 F.3d 494 (3d Cir. 1998)..................c0csseee00. 22

California v. Sutter Health System, 130 F. Supp.

2G LLOO (NDP. Cah, Barrer tester reseccssscccensssccesccess 25

Campfield v. State Farm Mutual Automobile

Insurance Co., 532 F.3d 1111 (10th Cir. 2008)....... 19

City of Cleveland v. Cleveland Electric Illu-

minating Co., 734 F.2d 1157 (6th Cir. 1984).......... 29

Delta Airlines, Inc. v. August, 450 U.S. 346

i: 3) Reepereeererre 17

Double D Spotting Service, Inc. v. Supervalu,

Inc., 136 F.3d GEE COE Gh Bee secencvececescccccocceccces 25

a

TABLE OF AUTHORITIES — Continued

Page

FTC v. Butterworth Health Corp., 946 F. Supp.

1285 (W.D. Mich. 1996), aff’d per curiam,

121 F.3d 708 (6th Cir. 1997) (Table)....................... 25

FTC v. Freeman Hosp., 69 F.3d 260 (8th Cir.

Gordon v. Lewistown Hospital, 272 F. Supp. 2d

393 (M.D. Pa. 2003), aff’d, 423 F.3d 184 (3d

Ry MII sill i ccbuatsseveenuvecsausdeunetivssrecions ilpcaiacanesvesancauee

Hecht v. Pro-Football, Inc., 570 F.2d 982 (D.C.

Sen ET os cuav cate ses nun cee canecaneoesveenenseuseraniies 28, 29

Michigan Division — Monument Builders of

North America v. Michigan Cemetery Asso-

ciation, 524 I-3d 726 (6th Cir. 2008) ................ 24, 25

Morales-Villalobos v. Garcia-Llorens, 316 F.3d

ee acs ac cased duu hngscdseataieciuen 29

Nilavar v. Mercy Health System —- Western

Ohio, 344 Fed. App’x 690 (6th Cir. 2007)......... 25, 27

Reazin v. Blue Cross & Blue Shield of Kansas,

899 F.3d 951 (10th Cir. 1990) ............c.cccscsscccssccecees 23

Slop & Shop Supermarket Co. v. Blue Cross &

Blue Shield of Rhode Island, 373 F.3d 57 (1st

Ce IIE inci s coke vanencuasssciaueaessasasdeeceneweneavenaveedes 21, 22

Surgical Care Center of Hammond, L.C. v.

Hospital Service District No. 1 of Tangipahoa

Parish, 2001 WL 8586 (E.D. La. Jan. 3

?

2001), aff’d, 309 F.3d 836 (5th Cir. 2002) ..............31

Tampa. Electric Co. v. Nashville Coal Co., 365

Fes TOU CRUE F cadicsiecclevucreuckseinineaecaesexseancacons 15, 24, 29

TABLE OF AUTHORITIES — Continued

Page

Thompson v. Metropolitan Multi-List, Inc., 934

ee OPM © Ue Ge IIE ans ricecccccabnsshsstevsnsesnssauaceoncel

United States v. Rockford Memorial Corp., 898

Fe ae ee CTE GIs WIE on ch Adderinsadvicncosbdaencdnerccatens 31

United States v. Rockford Memorial Corp., 717

F. Supp. 1251 (N.D. Ill. 1989), aff’d, 898 F.2d

Ea ee Fy ae SI Wiviinccsaciesdacatacvasensansabsaeniseiuchesesss 15

United States v. United Foods, Inc., 533 U.S.

Ue IIE F< sa acca vcaaccuccdsdubiasirsucvesulondanied dsetiniecsdicsaaces 17

Untvac Dental Co. v. Dentsply Int'l, Inc., 2010-1

Trade Cas. (CCH) ¥ 76.998 (M.D. Pa. Mar.

31, 2010)...... pusudiis basadassddaacnunieavaddaatddacasabecientcucexinnens 20

Wampler v. Southwestern Bell Telephone Co.,

B97 F.Sc 741 (Gti Cir, BO1O) ...cccccocvescccccsevevcesecccossees 24

Worldwide Basketball & Sports Tours, Inc. v.

NCAA, 388 F.3d 955 (6th Cir. 2004)........000000 ce .. 19

STATUTES

Section 4 of the Clayton Act, 15 U.S.C. § 15.............. 23

Section 1 of the Sherman Act, 15 U.S.C.

Se ere ace SAAS BEN OPER EERE THO 1,4, 5, 11, 23

Section 2 of the Sherman Act, 15 U.S.C.

BP oo ccpacl akan cata eae eas hee cee aeons 1. 4, ZO. Zo

FEDERAL RULES

Federal Rule of Civil Procedure 12(b)(6)...............3, 19

Vill

TABLE OF AUTHORITIES

Continued

OTHER MATERIALS

ABA SECTION OF ANTITRUST LAW,

HeaAurit CARE HANDBOOK (4th ed. 2010)

LIB PHituip it. AREEDA, HERBERT HOVENKAMP &

JOHN L. SOLOW, ANTITRUST LAW: AN ANALYSIS

OF ANTITRUST PRINCIPLES AND THEIR APPLICA-

TION (3d ed. 2007).

Admin. Compl., Inova Health System Founda-

tron, FTC Dkt. No. 9326 (FTC filed May 9,

2008), available at http://www.ftc.gov/os/

adjpro/d9326/080509admincomplaint.pdf

ANTITRUST

Page

12, 2

INTRODUCTION

Petitioners seek review of the Eighth Circuit’s

decision affirming dismissal of their third amended

complaint (the Complaint), which attempted to allege

violations of Sections 1 and 2 of the Sherman Act but

failed to allege a plausible relevant product market or

relevant geographic market. Nothing about this case

warrants this Court’s attention.

1. Although Petitioners now argue that they

were not required to define a relevant market, they

conceded below that definition of the relevant market

is essential to all their claims.

2. The Complaint alleges a relevant product

market limited to services provided to privately in-

sured patients, resting entirely on allegations that

private health insurance and public health insurance

(Medicare and Medicaid) are not reasonably inter-

changeable from the perspective of cardiology patients.

The lower courts assumed that those allegations were

true, but concluded that they were largely irrelevant,

given the nature of petitioners’ claims. The Complaint

asserts antitrust claims arising from alleged competi-

tive injury to the plaintiff cardiologists resulting from

their exclusion or foreclosure from patients. For those

claims, the critical question for purposes of market

definition is whether patients covered by private

insurance and patients covered by public insurance

are (or are not) reasonably interchangeable from

the perspective of cardiologists, not whether private

and public insurance are (or are not) reasonably

2

interchangeable from the perspective of patients. As

to the former issue — the determinative issue — the

Complaint alleges no facts at all.

3. The Complaint alleges a relevant geographic

market limited to Little Rock and North Little Rock,

Arkansas (Little Rock). But the only facts alleged to

support that geographic market concerned the per-

centage of cardiology patients residing in Little Rock

who obtain treatment from providers located in Little

Rock. The lower courts assumed that those allega-

tions were true, but concluded that they were insuffi-

cient to plausibly support the alleged geographic

market. The Complaint alleges that providers in

Little Rock draw a large percentage of patients from

throughout the state, but it contains no allegations

that providers in other areas and those in Little Rock

are not reasonably interchangeable from the perspec-

tive of patients residing outside of Little Rock. Absent

these allegations, the facts that are alleged are insuf-

ficient to support the proffered geographic-market

definition.

4. Applying well-established antitrust principles,

the Eighth Circuit affirmed the district court’s judg-

ment that the Complaint failed to allege facts crucial

to market definition and petitioners’ claims. That

decision, which addressed only the factual allegations

of this Complaint, was correct and is consistent with

decisions of the other courts of appeals considering

the same issues. Nothing in the decision will impair

legitimate antitrust claims in the health-care sector

or in other sectors of the economy. The district court

3

provided petitioners with the opportunity to correct

the Complaint’s deficiencies after explaining its short-

comings, but petitioners failed to do so. Petitioners

did not seek hearing or rehearing en banc in the

Eighth Circuit.

The error in this case was not the Eighth Cir-

cuit’s decision, but petitioners’ failure to satisfy firmly

established pleading requirements to plausibly allege

a relevant market. The petition should be denied.

+

STATEMENT OF THE CASE

A. Background and Facts Relevant to the

Petition

Because the Complaint was dismissed pursuant

to Fed. R. Civ. P. 12(b)(6) for failure to allege a plausi-

ble relevant product market or relevant geographic

market, the relevant facts are those alleged in the

Complaint related to relevant market definition in

antitrust cases.

Petitioners are seven cardiologists, their individ-

ual professional corporations, and Little Rock Cardi-

ology Clinic, P.A., a cardiology practice through which

the individual petitioners provide cardiology services

(collectively LRCC). LRCC’s initial complaint, filed

in November 2006, named only the clinic as plain-

tiff and only Baptist Health as defendant. Shortly

thereafter, LRCC filed an amended complaint adding

the individual LRCC cardiologist-members and their

4

professional corporations as plaintiffs. LRCC amended

its complaint again in December 2007, adding as

defendants Arkansas Blue Cross & Blue Shield and

USAble Corporation (a Blue Cross subsidiary) (col-

lectively Blue Cross); Baptist Medical System HMO,

Inc. (a Baptist Health subsidiary) (collectively Baptist

Health); and HMO Partners, Inc. (a joint venture

between Blue Cross and Baptist Health providing

health-maintenance services).

Blue Cross and Baptist Health moved to dismiss

the second amended complaint for failure to state a

claim, arguing, among other things, that its product

and geographic market definitions were fatally vague.

The district court granted the motions from the bench

after a February 2008 hearing but granted LRCC

leave to amend its complaint.

LRCC filed its third amended complaint (which is

the subject of its petition) in March 2008. Counts I

through IV, the same claims as in the previous com-

plaints, allege that Blue Cross and Baptist Health

conspired to unreasonably restrain competition in a

product market variously defined as services provided

by cardiologists or a single product consisting of ser-

vices provided by cardiologists and services provided

by hospitais, in violation of Section 1 of the Sherman

Act (Count. I); and a conspiracy to monopolize (Count

II), attempted monopolization (Count III), and mo-

nopolization (Count IV) of the same provider product

market, in violation of Section 2 of the Sherman Act.

Counts V through VII, which first appeared in this

Complaint, allege violations affecting a market for

D

health insurance: a conspiracy between Blue Cross

and Baptist Health to monopolize the “market for

private insurance” in violation of Section 1 of the

Sherman Act (Count V), attempted monopolization of

that market by Blue Cross and Baptist Health (Count

VI), and monopolization of that market by only Blue

Cross (Count VII). A new Count VIII requests injunc-

tive relief but alleges no new substantive violation.

“

The gravamen of the Complaint is the same as

the previous three complaints: that in 1997, when the

LRCC physicians (who had staff privileges at Baptist

Health) invested in and built a single-specialty car-

diac hospital that competed with Baptist Health,

Blue Cross and Baptist Health retaliated by con-

spiring to terminate LRCC’s participating status in

Blue Cross’s provider network (e.g., Pet. App. at 129a,

q 132); and that six years later, in 2003, when Baptist

Health learned that other physicians on its medical

staff planned to invest in and build an orthopedic

hospital, Blue Cross and Baptist Health conspired in

Baptist Health’s adoption of a policy preventing any

physician who invested in a competing hospital from

maintaining medical-staff privileges at Baptist Health,

a policy that would affect the LRCC physicians

because of their ownership interest in their cardiac

hospital. Jd. at 1384a through 136a, 9] 146-52. An

Arkansas state court enjoined enforcement. Jd. at

136a, J 154.

LRCC’s theory of antitrust injury is based on its

1997 termination from Blue Cross’s network. Accord-

ing to the complaint, the termination and Blue

6

Cross’s refusal to readmit LRCC to the Blue Cross

network thereafter foreclosed the cardiologists from a

substantial number of patients covered by private

insurance and precluded them from competing for

Blue Cross subscribers. Pet. App. at 82a, ¥ 13; 130a,

7 134; 134a, 9 145; 153a, 7 192; 155a, 7 198. LRCC

also alleged that if the Baptist Health 2003 creden-

tialing policy had not been enjoined, LRCC would

have been precluded from providing cardiology ser-

vices at Baptist Health. The defendants’ intent, ac-

cording to the Complaint, was to increase the market

power of Blue Cross in the insurance market and

Baptist Health in hospital services. Jd. at 79a, 7 3.

The Complaint provides at least two definitions

of the relevant product market. It first alleges that

the product market is “those medical services that

cardiology patients receive exclusively in a hospital

from a cardiologist.” Pet. App. at 85a, J 22. In the

next paragraph, the Complaint explains that the rele-

vant product market is a single market consisting ofa

combination of both services provided by cardiologists

and services provided by hospitals. /d. at ¥ 23.

Various paragraphs in the Complaint allege that

the relevant product market does not include provi-

sion of cardiologist services or sales of the single

product market of cardiologist services and hospital

services to all patients, but only those services pro-

vided to patients covered by private insurance, ex-

cluding those services provided to patients with other

sources of payment — e.g., public insurance such as

Medicare and Medicaid. F.g., Pet. App. at 86a, 7 27;

a

88a, 17 35, 36; 155a, ¥ 198. The alleged rationale

for this distinction is that from the standpoint of

patients, private insurance and other sources of pay-

ment, such as Medicare and Medicaid, are not reason-

able substitutes. Jd. at 87a, 732. The Complaint

alleges that LRCC treats publicly insured patients

but that the reimbursement paid by public insurance

is lower than that paid by private insurance. /d. at

154a, 7 193.

The Complaint alleges that the relevant geo-

graphic market consists of Little Rock (Pet. App. at

89a, 7 39), based on allegations that Little Rock resi-

dents needing services overwhelmingly use providers

in Little Rock rather than more distant providers (id.

at 89a, 4] 41; 90a, {| 42; Yla, ¥{j 45-46) and that a ma-

jority of Arkansas cardiologists are located in Little

Rock (id. at 92a, 4 49). The Complaint also alleges,

however, that Little Rock providers “draw large num-

bers of patients” and “a large percentage of residents

from around the state.” Jd.; 98a |q 49, 51.

The Complaint’s antitrust theory and LRCC’s

alleged antitrust injury rest primarily on Blue Cross’s

1997 termination of the LRCC physicians from the

Blue Cross provider network and thus LRCC’s alleged

inability to compete for privately insured cardiology

patients. Pet. App. at 134a, 9 145; 139a, 7 164; 153a,

4 192; 155a, 4 198 (“defendants have proximately

caused antitrust injury to plaintiffs by excluding

and restraining plaintiffs from competing for pri-

vately insured cardiology patients”). According to the

8

Complaint, 138 cardiologists practice in Arkansas, of

whom 51 are located in Little Rock. Jd. at 92a, 7 49.

B. Procedural History and Opinions Below

1. Blue Cross and Baptist Health moved to

dismiss the second amended complaint (which did

not include Counts V through VII alleging anti-

competitive effects in an insurance market) on

several grounds, including that the relevant product

and geographic markets were alleged in fatally vague

and conclusory fashion and that LRCC alleged no

relevant product market in which it and either

defendant were competitors.

At the February 2008 oral argument on these

motions, LRCC acknowledged the need to plead and

prove a relevant market, telling the district court that

“this is not a per se situation, so the rule of reason...

requires some kind of showing of effect or probable

effect, and the only way that a court can evaluate

that is in the context of a relevant market.” Tr. of Feb.

27, 2008 Hearing at 41. About the relevant product

market, LRCC argued both that the product market

is (1) limited to services provided by cardiologists and

(2) a “conjoined” single product market consisting of

two economic complements — services provided by

cardiologists and services provided by _ hospitals.

LRCC agreed with the district court’s statement that

the product market had to be “services offered by

cardiologists” (id. at 25) and that “the product market

defined in the complaint is services offered by

9

cardiologists in hospitals” (7d. at 43), but LRCC also

told the district court that the product market is a

market of “conjoined products” (id. at 24): “(T]he

relevant product has two components. It has a

physician component and a facilities component.” /d.

at 25-26.

At that hearing, LRCC claimed that the relevant

geographic market was “central Arkansas.” When the

district court indicated that it did not know what area

that encompassed, LRCC told the court that it did not

know either. Tr. of Feb. 27, 2008 Hearing at 28.

At the argument’s conclusion, the district court

dismissed the second amended complaint from the

bench, relying on Bell Atl. Corp. v. Twombly, 550 U.S.

544 (2007), but granted LRCC leave to amend. The

district court explained that “the relevant product

market has to be services offered by physicians, and

that’s what the complaint alleges and that’s what the

brief says, that these are services offered by cardi-

ologists and no defendant is a cardiologist and no

defendant competes in that market.” Tr. of Feb. 27

Hearing at 57. The district court also held that the

second amended complaint’s allegations failed to pro-

vide the defendants with sufficient notice of the scope

of a geographic market, which the Complaint de-

lineated merely as central Arkansas.

2. LRCC filed its third amended complaint in

March 2008; Blue Cross and Baptist Health again

moved to dismiss for failure to state a claim. They

argued that the statute of limitations barred all

the claims, that the product- and geographic-market

10

claims remained unduly vague and unsupported, and

that LRCC failed to allege any adverse effect on

competition in the apparent relevant product market

provision of cardiologists’ services.

At the August 2008 hearing on these motions,

LRCC again acknowledged the necessity of pleading

and proving a relevant market, explaining to the

district court that “[t]he relevant market, as the

Court is well aware, is an economic construct that is

essential to antitrust analysis in order to measure

anticompetitive effect.” Tr. of Aug. 6, 2008 Hearing at

83. As to product-market definition, LRCC argued at

one point that the product market included three

components: “We have not only been consistent, but

coherent in describing what is the product/service

market, and it does consist of three elements, and it’s

hospital services and it is private insurance and it is

cardiologist services. They are inevitably combined

and integrated, conjoined; ‘complements’ describes it.”

Id. at 84. Later in the argument, LRCC agreed with

the district court’s statement that “[t]he reasoning

I thought from the complaint, the third amended

complaint and from the brief, was that because a

cardiology patient ... needs both a cardiologist and a

hospital, therefore you treat them both in the same

market. That’s almost an exact quote from the com-

plaint.” Jd. at 94.

3. Several weeks after oral argument on the

motions, the district court dismissed the case as to

all defendants. It held that Counts V through VII

(those alleging a relevant product market of health

ll

insurance) were barred as to all defendants by the

statute of limitations, and that Counts I through IV

(those alleging a provider relevant product market)

were barred by the statute of limitations as to Blue

Cross but not as to Baptist Health. As to Counts I

through IV against Baptist Health, the district court

held that LRCC’s product- and geographic-market

allegations were insufficient and that whether the

product market that LRCC attempted to allege was a

market of only cardiologists’ services or the single

conjoined market, the allegations were insufficient to

support limiting the product market to services ren-

dered to only privately insured patients.

The district court explained that the injury for

which LRCC sought redress resulted from Blue Cross’s

refusal to deal — LRCC’s exclusion from Blue Cross’s

provider network and thus its foreclosure from Blue

Cross subscribers. Pet. App. at 33a. As to the relevant

product market for Counts I through IV, the court

held that they were “incoherent,” resulting from an

incurable defect in LRCC’s legal theory. Jd. at 25a.

Because the district court could not discern whether

LRCC was attempting to allege a product market of

only cardiologists’ services or a conjoined market of

both hospital and cardiologists’ services, it analyzed

both possibilities. As to the former, it explained that

neither Blue Cross nor Baptist Health were com-

petitors in that market and so could not monopolize

or attempt to monopolize it. Jd. at 46a-47a. As to the

Section 1 conspiracy claim (Count I), the district court

explained that the complaint contained no allegations

12

of any unreasonably adverse effect in the market for

cardiology services. Id. at 49a.

Turning to the other possible product market

that LRCC might be attempting to allege — the

conjoined services market — the district court rejected

that market definition because the two types of ser-

vices are complements, not substitutes. It explained

that relevant product markets include only reason-

able substitutes and that, as a matter of law, substi-

tutes and complements are not in the same relevant

product market. Quoting the leading antitrust trea-

tise, the district court explained that “‘[g]rouping

complementary goods in the same market is

economic nonsense.” Pet. App. at 54a (quoting IIB

PHILLIP KE. AREEDA, ET AL., ANTITRUST LAW 4 565a at

406 (3d ed. 2007)). The district court concluded that

“as a matter of law, complementary products sold

separately are not in the same product market.” Jd. at

60a.

The district court also held that regardless of

which product market LRCC was attempting to al-

lege, it could not be limited to services provided to

privately insured patients. The court explained that

given LRCC’s theory of antitrust injury — “their ex-

clusion from the [Blue Cross] network” (Pet. App. at

62a) — the product market must include “all persons

who need cardiologists’ services, not just that smaller

group who are insured or reimbursed” (id. at 62a-63a)

because “[tlo say that these cardiologists are fore-

closed from the [Blue Cross] network says nothing

13

about the impact on competition among cardiologists”

(td. at 63a).

As to the Complaint’s allegations about the

relevant geographic market, the district court ac-

cepted LRCC’s factual allegations that most Little

Rock residents needing cardiology services obtained

those services in Little Rock, but concluded that this

did not mean that Little Rock could be delineated as

an appropriate relevant geographic market. Pet. App.

at 68a. LRCC’s allegations that a large percentage of

the patients using Little Rock providers come from

other areas of the state indicated that the geographic

market was larger than Little Rock, and thus a Little

Rock market was not plausible. /d. at 64a-68a. If the

geographic market could be limited to any area in

which few patients residing in that area left the area

for services, without consideration of the alternatives

available to patients residing outside that area who

come into the area for services, LRCC could have

equally selected any even smaller area where only a

small percentage of patients leave the area for

services. Id. at 69a. Accordingly, the district court

dismissed all counts against all defendants.

4. LRCC appealed the district court’s product

market, geographic market, and statute of limitations

holdings on Counts I through IV. It did not appeal the

district court’s dismissal of Counts V through VI (the

claims alleging violations affecting an insurance mar-

ket) as to all defendants, so no claims relating to an

14

insurance market remained in the case.’ Pet. App. at

6a. In affirming the district court’s decision, the

Eighth Circuit agreed that the Complaint was fatally

flawed for each of two independent reasons: It alleged

neither a plausible relevant product market nor a

plausible relevant geographic market.

The Eighth Circuit recognized the uncertainty of

whether LRCC was attempting to allege a relevant

product market of only the services of cardiologists or

a conjoined product market of cardiologists’ and hos-

pital services, explaining that it was “unclear” what

product market LRCC attempted to allege. Pet. App.

at 8a. It chose, however, to affirm the district court’s

conclusion that whatever the provider product mar-

ket encompassed, it could not be limited to services to

privately insured patients. /d. at 8a.

The court explained that because of the nature of

LRCC’s alleged injury — its foreclosure from and in-

ability to compete for particular patients — the proper

inquiry must determine and include in the relevant

product market all sources of patients available to

LRCC. In a “shut-out supplier” case such as this,

market definition is based on “to whom can the sup-

plier sell?” Pet. App. at 10a. The Complaint’s allega-

tions showed that LRCC accepts both privately

' LRCC and Blue Cross settled the case as to Blue Cross

several days before oral argument in the Eighth Circuit. Blue

Cross filed a brief in the appeal but did not participate in oral

argument.

15

insured patients and those covered by public insur-

ance programs such as Medicare and Medicaid. /d. at

10a. Given those allegations, the Eighth Circuit

explained, the relevant product market could not, as

a matter of law, be limited to services rendered only

to privately insured patients. /d. at 10a-1la.

In reviewing the geographic market issue, the

Eighth Circuit concurred with the district court that

the Complaint’s allegations failed to support a plau-

sible geographic market limited to Little Rock,

explaining that this flaw provided an independent

ground for affirming the district court’s decision. Pet.

App. at 1la. It relied on the principle for defining

geographic markets established in Tampa Electric Co.

v. Nashville Coal Co., 365 U.S. 320, 327 (1961), which

requires assessing both where sellers operate and

where purchasers can turn for the service in question.

Id. To implement the analysis in this case, the court

explained, “[t]he end goal ... is to delineate a geo-

graphic area where ‘few patients leave ... and few

patients enter.’” Jd. at lla (quoting United States v.

Rockford Mem’ Corp., 717 F. Supp. 1251, 1267 (N.D.

Ill. 1989), aff’d, 898 F.2d 1278 (7th Cir. 1990)).

The Eighth Circuit explained that the Com-

plaint’s support for a geographic market limited to

Little Rock consisted merely of allegations that pa-

tients residing in Little Rock overwhelmingly patron-

ize Little Rock providers for cardiology services. The

Complaint, however, did not include allegations

relating to the alternatives of patients residing in

other areas of Arkansas, many of whom used Little

16

Rock providers. Absent allegations relating to the

“inflow” of patients residing outside of Little Rock, an

alleged geographic market limited to Little Rock is

not plausible. Pet. App. at 13a. This first step —

determining from where the providers’ patients come

— is essential, the court explained, because merely

choosing an area in which a large percentage of

residents use providers in that area can result in

“arbitrarily narrow markets.” Jd. at 14a. Based on its

methodology for defining geographic markets, LRCC

could claim that the geographic market included only

the block surrounding the provider if most of that

block’s residents used the provider in question. Jd.

The Eighth Circuit did not purport to prescribe or

mandate any particular methodology that a party

must use to define a geographic market. Instead, it

held only that this Complaint’s factual allegations

could not sustain a plausible geographic market,

given the methodology that LRCC chose to use.

The Eighth Circuit warned against reading its

opinion as holding that a city could not constitute a

relevant geographic market under different allega-

tions, or that a relevant geographic market can never

encompass an area smaller than a firm’s trade or

service area. Pet. App. at 14a, 16a. Rather, its con-

clusion that the Complaint failed to sufficiently allege

a relevant geographic market was based on this Com-

plaint’s allegations. 7d. at 17a. The Eighth Circuit

dismissed the case without reaching the question

whether the statute of limitations barred Counts I

through IV against Baptist Health.

17

LRCC did not request panel rehearing or re-

hearing en banc.

+

REASONS FOR DENYING THE PETITION

I. LRCC FAILED TO RAISE ITS “DON'T-NEED-

TO-DEFINE-THE-RELEVANT-MARKET”

ARGUMENT BELOW, SO THAT ISSUE IS

NOT PROPERLY BEFORE THIS COURT.

As one question presented for review, LRCC

argues that it was not required to allege a relevant

market because it claims that Baptist Health’s con-

duct resulted in anticompetitive effects. Pet. at 1.

LRCC, however, did not raise this issue before either

the district court or the Eighth Circuit in its briefs or

oral arguments, so neither court considered it.

Indeed, at both oral arguments before the district

court, LRCC indicated that defining the relevant

market is an essential element of its case.

Because LRCC raises this question for the first

time in its petition, the issue is not properly before

this Court, and this Court should not consider it.

United States v. United Foods, Inc., 533 U.S. 405, 417

(2001); Delta Airlines, Inc. v. August, 450 U.S. 346,

362 (1981).

18

Il. IN HOLDING THAT THE COMPLAINT’S

ALLEGATIONS FAIL TO SUFFICIENTLY

SUPPORT LRCC’S ALLEGED RELEVANT

MARKET, THE EIGHTH CIRCUIT AP-

PLIED THE SAME MAINSTREAM ANTI-

TRUST PRINCIPLES AS OTHER COURTS

OF APPEALS, AND THE COURT APPLIED

THOSE PRINCIPLES CORRECTLY.

The Eighth Circuit affirmed the district court

judgment on two separate and independent grounds —

LRCC’s failure to provide adequate factual allega-

tions to support both its alleged relevant product

market and its relevant geographic market. Either

shortcoming is fatal to the Complaint.

The premise of LRCC’s petition and the briefs of

amict is that the Eighth Circuit applied, or required

LRCC to apply, incorrect methodologies to define both

the relevant product market and relevant geographic

market. LRCC and the American Medical Association

also argue that the Eighth Circuit decided these

questions as matters of law when they are issues of

fact (Pet. at 13, 16, 27, 30), that the Eighth Circuit

created “radical new approachles]” (Pet. at 30) and

“new substantive rules” (AMA Br. at 7) for defining

relevant markets, and that the Eighth Circuit’s market-

definition analyses conflict with those of other circuit

courts of appeals. The economists’ amicus brief

sweepingly asks this Court to reject the “patient-

flow” methodology for defining relevant geographic

markets, in light of academic papers criticizing that

approach.

19

None of these arguments has merit. Whether a

particular market-definition methodology is proper is

a question of law, not fact. E.g., Worldwide Basketball

& Sports Tours, Inc. v. NCAA, 388 F.3d 955, 959, 960

(6th Cir. 2004). And although market definition is

ultimately a question of fact, lower courts do not

hesitate to grant Rule 12(b)(6) motions when plain-

tiffs fail to adequately support their alleged relevant

markets with sufficient factual allegations. E.g.,

Campfield v. State Farm Mut. Auto. Ins. Co., 532 F.3d

1111, 1118 (10th Cir. 2008) (product market); Apani

Sw., Ine. v. Coca-Cola Enters., Inc., 300 F.3d 620 (5th

Cir. 2002) (geographic market). The market definition

principles applied by the Eighth Circuit are the same

principles as those other courts of appeals have

applied when faced with antitrust theories and alle-

gations similar to those here. The Eighth Circuit

correctly applied those principles to the _ specific

allegations in the Complaint.

A. The Eighth Circuit’s Holding That

LRCC Failed To Allege A Plausible

Relevant Product Market Applies The

Same Mainstream Antitrust Principles

As Other Courts Of Appeals Examining

Similar Facts And Antitrust Theories,

And The Court Applied Those Princi-

ples Correctly Here.

1. The appropriate methodologies for defining

relevant product markets depend on the plaintiff’s

antitrust theory and the type of competitive injury it

20

alleges. LRCC’s theory in this case is one of vertical

foreclosure — that as a result of its termination by

Blue Cross (a purchaser), LRCC (as a seller) was

foreclosed from competing for Blue Cross or other

privately insured patients. Pet. at 20. The potential

antitrust concern in this situation is that a competi-

tor of the excluded seller may obtain market power

because of the seller’s foreclosure from business. See

generally, ABA SECTION OF ANTITRUST LAW, ANTITRUST

HEALTH CARE HANDBOOK 257 (4th ed. 2010) (explain-

ing that no anticompetitive effect is likely unless

foreclosure of the plaintiff “permits the providers with

whom the health plan contracts to obtain or maintain

market power”). That might be possible if LRCC were

foreclosed from a substantial share of all cardiology

patients and if the market included few other com-

peting cardiologists. The Complaint, however, alleges

that even if the relevant geographic market were

limited to Little Rock, that market would include at

least 40 cardiologists in addition to LRCC, and there

is no allegation that those cardiologists were fore-

closed from the market. Cf. Univac Dental Co. v.

Dentsply Int'l, Inc., 2010-1 Trade Cas. (CCH) J 76,998

at 117,032 (M.D. Pa. Mar. 31, 2010) (explaining that

“[a] showing that the challenged practices bar a

substantial number of rivals [from the market] ... is

required to demonstrate a §2 antitrust violation”)

(internal quotation marks omitted).

2. Given the nature of LRCC’s antitrust claims,

the relevant product market cannot be limited to pri-

vately insured patients, excluding patients with other

21

sources of payment. Where the plaintiff’s antitrust

theory is based on vertical foreclosure, decisions from

other circuits and leading commentary agree that the

relevant product market includes all other potential

sources of business to which the seller can turn, not

merely some sub-group of potential business. #.g., IIB

PHILLIP EK. AREEDA, ET AL., ANTITRUST LAW {| 570b1 at

418-19 (3d ed. 2007):

The relevant market for this purpose in-

cludes the full range of selling opportunities

reasonably open to rivals, namely all the

product and geographic sales they may

readily compete for, using easily convertible

plants and marketing organizations. The

foreclosure resulting from a vertical merger

(or other arrangement) is thus measured in a

market including the total output of the

sellers who would be included in the market

for assessing a horizontal merger between

the merging seller and any other allegedly

foreclosed rival.

Leading court of appeals decisions involving facts

similar to those alleged here apply the same princi-

ple. In Stop & Shop Supermarket Co. v. Blue Cross &

Blue Shield, 373 F.3d 57 (1st Cir. 2004), where a Blue

Cross plan refused to admit the plaintiff, a pharmacy,

to its provider network, court rejected, as a matter of

law, the “shut-out supplier” plaintiff’s argument that

the relevant product market could be limited to sales

of prescriptions to patients with insurance. 373 F.3d

at 67. Rather, the court explained that the product

market must include sales to all purchasers,

22

regardless of their source of payment because the

plaintiff’s alternatives to Blue Cross’ subscribers

included “all retail customers for prescription drugs

not just that smaller sub-group who are insured or

reimbursed. To say that some sub-group of customers

is foreclosed proves nothing by itself about the impact

on pharmacies.” 373 F.3d at 66-67 (emphasis in

original). In a case with similar facts, the Third

Circuit reached the same conclusion in Brokerage

Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494,

513-15 (3d Cir. 1998), and the Sixth Circuit approved

the same analysis and result in B&H Med., L.L.C. v.

ABP Admin., Inc., 526 F.3d 257, 263 (6th Cir. 2008).’

3. Nor do any of the cases cited by LRCC

support its argument that the Fighth Circuit erred in

viewing the relevant product market as including all

sources of patients rather than only privately insured

patients. Pet. at 21-25. Product-market definition was

not an issue and was not discussed in Blue Shield v.

McCready, 457 U.S. 465 (1982), a decision involving

* LRCC argues that in some situations, the price differen-

tial between two products may be sufficiently large that they are

not in the same relevant product market (Pet. at 17), but the

Complaint does not include any allegations plausibly showing

that because reimbursement paid to physicians by public insur-

ance programs is lower than that paid by private insurance,

physicians would not turn to publicly insured patients if they

lacked access to privately insured patients. In fact, as noted

before, the Complaint alleges that LRCC provides services to

publicly insured patients as well as to privately insured pa-

tients.

23

only antitrust standing and antitrust injury — issues

arising under Section 4 of the Clayton Act, not under

Section 1 or 2 of the Sherman Act. In Blue Cross &

Blue Shield v. Marshfield Clinic, 65 F.3d 1406, 1410-

11 (7th Cir. 1995), the court analyzed whether health-

maintenance and _ preferred-provider health plans

were in the same or separate product markets, and

held that the product market included both. Whether

the product market included, or could include, both

privately insured patients and publicly insured pa-

tients was not raised by the parties or discussed in

the opinion. Likewise, the question was not an issue

and was not discussed by the court in Reazin v. Blue

Cross & Blue Shield, 899 F.3d 951 (10th Cir. 1990), a

case that examined antitrust standing and several

other issues but did not consider or decide whether

privately insured and publicly insured patients are in

separate product markets.”

In sum, the Eighth Circuit’s decisional principle

of law is consistent with decisions in other circuits in

* The American Medical Association’s amicus brief focuses

on issues that were not addressed by the Eighth Circuit or

raised in the petition — monopsony power in the market for

health insurance. AMA Br. at 9-12. The district court dismissed

all the LRCC claims that were based on effects in the market for

insurance (Counts V through VII) as barred by the statute of

limitations. The Eighth Circuit did not review that issue, and

the petition does not raise it. Moreover, the Complaint does

not allege monopsonization, attempted monopsonization, or

conspiracy to monopsonize.

24

similar cases. As those cases and leading commentary

show, the decision is correct.

B. The Eighth Circuit’s Separate Holding

That LRCC Also Failed To Allege A

Plausible Relevant Geographic Market

Applies The Same Mainstream Anti-

trust Principles As Other Courts Of

Appeals Analyzing Geographic Mar-

kets In Health-Care Antitrust Cases,

And The Court Applied Those Princi-

ples Correctly.

As a second, independent ground for affirming

the district court’s judgment, the Eighth Circuit held,

based on the Complaint’s factual allegations, that

LRCC’s alleged relevant geographic market was not

plausible.

1. The Eighth Circuit applied the principle for

defining geographic markets enunciated in Tampa

Electric Co. v. Nashville Coal Co., 365 U.S. 320 (1961)

— that geographic market definition is a function of

“the area in which the seller operates, and to which

the purchaser can practicably turn for supplies.” 365

U.S. at 327. Courts of appeals have applied this

principle from the time of Tampa Electric to this day.

E.g., Wampler v. Sw. Bell Tel. Co., 597 F.3d 741, 744

(5th Cir. 2010); Mich. Div. — Monument Builders v.

Mich. Cemetery Ass’n, 524 F.3d 726, 733 (6th Cir.

2008). And the Eighth Circuit and other courts have

not hesitated to dismiss complaints at the plead-

ing stage for failing to adequately allege a relevant

29

geographic market. E.g., Double D Spotting Serv., Inc.

v. Supervalu, Inc., 136 F.3d 554, 560 (8th Cir. 1998);

Michigan Division, 525 F.3d at 733.

2. In cases involving markets for health-care

providers, plaintiffs and courts have frequently re-

lied, as the Complaint does here, on “patient-flow”

data to establish geographic markets. See, e.g., Nila-

var v. Mercy Health Sys., 244 Fed. App’x 690, 697 (6th

Cir. 2007); Economists’ Br. at 7 n.2 (citing cases).

Under this methodology, if a small percentage of the

patients using providers in an area come from outside

the area (patient “inflow”) and a small percentage of

patients residing in the area use providers outside

the area (patient “outflow”), the area may properly be

deemed a relevant geographic market. See FTC uv.

Butterworth Health Corp., 946 F. Supp. 1285, 1291-92

(W.D. Mich. 1996), aff’d per curiam, 121 F.3d 708

(6th Cir. 1997); Economists’ Br. at 10.

Allegations of patient inflow and outflow are

both necessary to define the geographic market using

this methodology. See, e.g., Cal. v. Sutter Health Sys.,

130 F Supp. 2d 1109, 1120 (N.D. Cal. 2001)

(explaining that “(t]he first step” in determining the

geographic market is to determine where patients

come from — i.e., “{sJervice area analysis”). Even if

patients residing in the area are unwilling to procure

services from providers outside the area (i.e., patient

outflow is small), a provider could not profitably

increase prices to those patients if a_ significant

portion of the provider’s patients come from outside

the area (i.e., patient inflow is significant), and could

>

26

readily turn to providers outside of the putative

geographic market. For that reason, a small amount

of patient outflow, standing alone, is insufficient to

support a plausible relevant geographic market.

3. The Eighth Circuit did not mandate that

LRCC adopt a patient-flow methodology as a “black

letter pleading requirement” as the briefs of the amici

argue. AMA Br. at 15; Economists’ Br. at 6. The

decision to rely on patient-flow data to support its

geographic market allegation was IL.RCC’s choice

alone. But having chosen to rely on that methodology,

LRCC was required to allege patient-flow information

sufficient to show that the geographic market was

plausible. The Eighth Circuit held correctly that

LRCC failed to do so.

The Complaint alleges that few residents of

Little Rock leave Little Rock for cardiology services

but, although it alleges that many patients come to

Little Rock from around the state (Pet. App. at 93a,

1 49, 51), it provides no indication of the provider

choices those patients have. LRCC correctly points

out that an important variable in defining a geo-

graphic market is the area where patients may turn

for alternative sources of care (Pet. at 29-30), but alle-

gations relating to the area from which the provider

draws patients are essential to identify those patients

whose alternatives require examination. Alleging

only patient outflow from an area that the plaintiff

claims is a relevant geographic market, without al-

leging patient inflow, is akin to attempting to clap

with one hand. Twombly requires factual allegations

27

sufficient to support each essential element of a

plaintiff’s claim; a Zen riddle is not enough.

Instead of including allegations relating to this

first necessary step (cf. Economists’ Br. at 20 (““LRCC

did not produce an inflow statistic”)), LRCC simply

picked an area — Little Rock — where most of the resi-

dents use Little Rock providers. This, by itself, is not

sufficient to allege a plausible relevant geographic

market. Cf Nilavar, 344 Fed. App’x at 697 (ex-

plaining that under this methodology, “plaintiff would

have to show that few residents of his geographic

market leave the area to obtain (the relevant service]

and that few patients residing outside of the [alleged]

geographic market come to the area to obtain |the

relevant service]”) (emphasis added). As both the

district court and Eighth Circuit explain, LRCC’s

methodology and factual allegations permit it to pick

an area as small as a block (or even smaller) around

the provider’s location and conclude that it is a rele-

vant geographic market if a large percentage of that

area’s residents patronize the provider.

A small amount of patient outflow from Little

Rock may be “consistent” with a relevant geographic

market limited to Little Rock, but, standing alone, it

does not “plausibly suggest[ |” that Little Rock is a

geographic market. See Bell Atl. Corp. v. Twombly,

550 U.S. 544, 557 (2007). Absent other allegations,

the alleged small amount of patient outflow is equally

consistent with a_ significantly larger geographic

market. Accordingly, just as in 7wombly, where the

“plaintiffs’ assertion of an unlawful agreement was a

28

legal conclusion ... not entitled to the assumption of

truth” because it was supported only by allegations of

parallel conduct, Ashcroft v. Iqbal, 129 S.Ct. 1937,

1950 (2009) (internal quotation marks omitted), so too

here, J,ARCC’s assertion that the geographic market

can be limited to Little Rock is a legal conclusion that

is not entitled to an assumption of truth because it is

supported only by allegations of patient outflow.

4. The Eighth Circuit did not hold that a city

cannot constitute a relevant geographic market as

LRCC claims. Pet. at 12. Indeed, it emphasized the

opposite, stating explicitly that its rejection of LRCC’s

alleged geographic market based on this Complaint’s

allegations “should not be read to reject the notion

that a city by itself could, in a different case, be a

relevant geographic market.” Pet. App. at 14a. Nor

did the Eighth Circuit hold that a firm’s trade or

service area is necessarily the relevant geographic

market, even citing contrary authority. /d. at 16a.

Rather, it held, based on the specific allegations of

this Complaint, that the bare allegation that a large

percentage of a provider’s patients come from an area

smaller than a provider’s service area provides insuf-

ficient support for a claim that the relevant geo-

graphic market is smaller than the service area (id.

at 17a), a proposition that is correct.

5. None of the decisions cited by LRCC conflict

with the Eighth Circuit’s rejection of LRCC’s applica-

tion of the patient-flow methodology to support its

relevant geographic market. Pet. at 28-30. In Hecht v.

Pro-Football, Inc., 570 F.2d 982 (D.C. Cir. 1977), the

court applied a straight-forward interpretation of the

29

Tampa Electric standard, as the Eighth Circuit did

here, citing that decision as controlling authority. 570

F.2d at 988-89. Hecht noted that single cities can

constitute relevant geographic markets, a possibility

with which the Eighth Circuit agreed. And the issue

in Hecht, unlike here, did not focus on the sufficiency

of the complaint’s geographic market allegations; the

plaintiff had already jumped that hurdle.

In Morales-Villalobos v. Garcia-Llorens, 316 F.3d

51 (1st Cir. 2003), the court indicated that it was

possible that the relevant geographic market could be

as small as one region or could include other regions.

But that decision does not discuss the complaint’s

specific allegations relating to the geographic market

and, moreover, the case was decided prior to Twombly

and thus under a different pleading standard.

The Sixth Circuit’s decision in City of Cleveland

v. Cleveland Elec. Illuminating Co., 734 F.2d 1157 (6th

Cir. 1984), rejected the argument that the geographic

market included the defendant’s service area absent

actual or potential competition throughout that area.

734 F.2d at 1167. Again, the aptness of that decision

for this case is not clear because the case was not

decided based on the facts alleged in the complaint.

In any event, the Kighth Circuit did not adopt a rule

that geographic markets must coincide with a defen-

dant’s service area; it expressly stated the converse.

The shortcoming of the Complaint is that although

it alleges that a large percentage of the patients of

Little Rock providers come from throughout the state,

30

it provides no insight into competition outside of

Little Rock.

Thompson v. Metro. Multi-List, Inc., 934 F.2d 1566

(11th Cir. 1991), relies on the Tampa Electric princi-

ple as did the Eighth Circuit here. 934 F.2d at 1573.

The court limited the geographic market to an area

smaller than the City of Atlanta because it found that

the plaintiff real estate agencies operated only in the

smaller area, so multiple-listing services in other

areas of the city were not reasonable substitutes and

thus not in the same geographic market. Jd. at 1573-

74. The Complaint here, however, alleges that Little

Rock providers serve not only Little Rock residents

but patients throughout the state.

6. The Economists’ Brief, based on little more

than academic writings, urges this Court to reject a

methodology for defining relevant geographic mar-

kets that it concedes federal courts have used “rou-

tinely in healthcare antitrust cases.” Economists’ Br.

at 7. Far from constituting a “discredited geographic

market analysis” (AMA Br. at 15), courts in almost

every circuit analyzing relevant geographic markets

involving health-care providers have approved and

applied the patient-flow methodology that LRCC chose

and the Eighth Circuit analyzed here. The Econo-

mists’ Brief cites decisions from the Second, Sixth,

Seventh, Eighth, and Ninth Circuits specifically

employing the methodology. /d. n.2. Courts in the

Third and Fifth Circuits have also approved the meth-

odology or noted its use without objection. See, e.g.,

Gordon v. Lewistown Hosp., 272 F. Supp. 2d 393, 426

31

(M.D. Pa. 2003), aff’d, 423 F.3d 184 (38d Cir. 2005);

Surgical Care Ctr. v. Hosp. Serv. Dist. No. 1, 2001 WL

8586 at *5-8 (E.D. La. Jan. 3, 2001), aff’d, 309 F.3d

836 (5th Cir. 2002).*

These authorities show that the methodology for

defining geographic markets that LRCC chose and

against which the Eighth Circuit measured the Com-

plaint’s allegations is not an inappropriate or un-

acceptable new substantive rule or “radical new

approach” (Pet. Br. at 30) for defining geographic

markets, but rather a mainstream methodology for

defining markets in health-care antitrust cases. The

Eighth Circuit, not to mention other courts, has ap-

plied it for at least the last 15 years or more. E.g.,

FTC v. Freeman Hosp., 69 F.3d 260, 264-65 (8th Cir.

1995); United States v. Rockford Mem’l Corp., 898

F.2d 1278, 1284-85 (7th Cir. 1990).

Moreover, the economists put forth no alternative

approach and fail to suggest what facts a plaintiff

must allege to support its market definition. And no

lower courts have examined, analyzed, or applied

“In its most recent challenge to a hospital merger, the

Federal Trade Commission based its claim of a northern Vir-

ginia relevant geographic market on patient inflow and outflow

data, alleging: “In 2006, for the hospitals located in Northern

Virginia, approximately 90 percent of their patients came from

Northern Virginia. Of the patients who reside in Northern

Virginia, approximately 90 percent go to hospitals in Northern

Virginia.” Admin. Compl. { 22, Inova Health Sys. Found., FTC

Dkt. No. 9326 (FTC May 9, 2008), available at http://www.ftc.

gov/os/adjpro/d9326/080! v9admincomplaint. pdf.

32

other approaches or rejected patient-flow market

definition methodologies. If the economists’ criticism

of patient-flow methodologies has any merit, the

process of examining and testing other methodologies

should begin in the lower courts, not here. And even if

patient-flow analysis were an inapt methodology, dis-

missal would still have been appropriate because the

Complaint provides no other grounds from which a

relevant geographic market could be gleaned.

The American Medical Association merely pro-

vides hypothetical examples of situations in which it

is possible that Little Rock could constitute a relevant

geographic market under particular sets of facts that

LRCC did not allege. AMA Br. at 16, 17-18. But it

would not advance the development of the law for this

Court to grant review in a case dismissed at the

pleading stage just to consider various hypothetical

possibilities; and in any event, “possibility” is short of

the line of “plausibility.” Jgbal, 129 S.Ct. at 1949-50;

Twombly, 550 U.S. at 557. The Eighth Circuit merely

held that this Complaint’s allegations failed to cross

the line from “possible” to “plausible.” Its conclusion

is correct.

lil. NOTHING ABOUT THIS CASE PROVIDES

IT WITH UNUSUAL IMPORTANCE.

LRCC and its amici offer various reasons of why

this case supposedly has unusual importance: that

the “decision will impose a significantly heightened

pleading standard on antitrust plaintiffs” contrary to

33

Twombly (Pet. Br. at 10), although LRCC does not ex-

plain why this is so; that the decision will “insulat[e]

from antitrust challenge highly concentrated insur-

ance markets in which market and monopsony power

predominate,” thus undermining recent health-care

reform legislation (AMA Br. at 9); and that the Eighth

Circuit’s “insistence that LRCC use a methodology

that is inappropriate” requires correction by this

Court (Economists’ Br. at 21). None of these reasons

withstand examination.

1. The Eighth Circuit’s decision does not impose

any heightened pleading standard. The court was

fully cognizant of the appropriate pleading standard.

Pet. App. at 6a. That standard requires plaintiffs to

plead facts sufficient to show that their claims are

plausible. Given the geographic market definition

methodology that LRCC chose, the Complaint fails to

address an essential variable — patient inflow into the

alleged Little Rock market. Absent information about

that variable, LRCC’s factual allegations are insuf-

ficient.

2. ‘The American Medical Association’s concern

focuses on allegedly “highly concentrated health in-

surance markets” (AMA Br. at 9), which are not

germane to the issues on which LRCC seeks review.

In any event, there is no reason to believe that the

Eighth Circuit’s decision will affect enforcement of

the antitrust laws in markets for health insurance or

permit health insurers to engage in monopsonistic con-

duct. Indeed, neither insurance markets nor allega-

tions of monopsony are at issue here, and nothing in

34

the Eighth Circuit’s opinion is contrary to previous

interpretation and application of the antitrust laws in

cases involving health-care sector industries.

The recently enacted health-reform legislation has

no bearing on this case, which concerns only alleged

conduct that predates that legislation. The American

Medical Association’s assertion that this legislation

provides a reason to grant certiorari makes no sense.

AMA Br. at 9. If the legislation has any relevance, it

counsels in favor of denying the petition because the

outcome and effects of the legislation are nebulous

and amorphous at present. It is impossible to assess

the different role, if any, of the antitrust laws in the

health-care sector as a result of that legislation.

Review of the issues raised in this case because of

health-care reform would be most premature.

3. Regardless of how lower courts might react

to the economists’ criticism of patient-flow data in

defining geographic markets, the Eighth Circuit did

not insist that LRCC base its geographic market

definition on patient flow. It merely reviewed the

allegations that LRCC chose to make under the

methodology that LRCC chose to use. The economists’

criticism is more appropriately presented to the lower

courts in future cases, where, with the benefit of fur-

ther explication, evidence, and analysis, that criti-

cism can be fairly and thoroughly assessed. There is

no reason for that process to begin in this Court, on

the almost. non-existent record here.

— +

35

CONCLUSION

The legal principles that the Eighth Circuit

applied in reviewing the third amended complaint’s

product market and geographic market allegations

are not in conflict with those applied by any other

circuit examining similar facts or allegations. The

Fighth Circuit applied those principles to the Com-

plaint correctly. There is nothing about the case or

the decision that provides it with more importance

than numerous other antitrust cases in which health-

care providers and insurers, or participants in other

important sectors of the economy, are parties. There-

fore, this Court should deny the petition for certio-

rari.

Respectfully submitted,

GORDON S. RATHER, JR.

JUDY SIMMONS HENRY

‘TROY A. PRICE

MICHELLE M. KAEMMERLING

WRIGHT, LINDSEY &

JENNINGS, LLP

200 West Capitol Avenue

Suite 2300

Little Rock, Arkansas 72201

(501) 371-0808

JOHN J. MILES

Counsel of Record

WILLIAM E. BERLIN

CHRISTI J. BRAUN

OBER KALER GRIMES

& SHRIVER

1401 H Street, N.W.

Suite 500

Washington, D.C. 20005

(292) 326-5008

ymiles@ober.com

Counsel for Respondents

Baptist Health and

Baptist Medical System

HMO, Inc.