Economists Incorporated assisted attorneys from Hogan & Hartson and Hogan Marren in successfully defending Advocate Heath Partners of Chicago against claims of more than $250 million by United Heathcare. Advocate is a Physician Hospital Organization with 8 hospitals and almost 3,000 affiliated physicians. United is a national provider of health insurance with a large number of Chicago-area subscribers. Economists Incorporated Chairman Barry C. Harris provided testimony on Advocate’s lack of market power, flaws in United’s statistical analyses of market power and damages, and clinical integration and joint contracting. Dr. Harris was assisted by Paul Godek and Joel Papke of Economists Incorporated. A copy of the decision is appended as a PDF file.
On November 18, 2005, a three-member arbitration panel denied all of United’s claims. United had alleged that from 1999 through 2004 Advocated had engaged in price-fixing, a group boycott, refusals to deal, tying and market allocation. United’s allegations arose from a contract dispute related to Advocate’s move to clinical integration and physician joint contracting. The completion of this two-year arbitration provides one of the first litigated decisions involving joint contracting, clinical integration and related issues.
The panel rejected United’s price-fixing claims based on the “equal responsibility doctrine,” because United knowingly sought a joint contract with Advocate for services of both its employed and associated independent physicians. It also determined that Advocate’s physician network had provided United with “substantial administrative efficiencies.” In a related finding, the panel indicated that Advocate was prepared to offer a clinically integrated product starting in early 2004 and that clinical integration, “sufficiently justified Advocate’s conduct in attempting to reach a joint contract with United.”
The panel further concluded that Advocate lacked the ability to exercise market power, due in large part to Advocate’s share of only approximately 15% in physician and hospital markets throughout metropolitan Chicago. Despite Advocate’s low share in all relevant markets, United sought to establish through statistical analyses that Advocate had actually exercised market power by increasing prices. The panel rejected United’s statistical analysis, explaining that “ [It] has certain questions about the applicability of the methodology of [United’s] regression analysis to the facts of the case…”