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Jan 04

Exclusive Contract Between Hospital and Neurosurgery Group Does Not Run Afoul of State Antitrust Laws

From the American Health Lawyer’s Association:

The U.S. District Court for the Southern District of Mississippi recently held that while an exclusive contract between a hospital and a neurosurgery group may involve anticompetitive conduct, it cannot be attacked as a violation of state antitrust law because such conduct was contemplated by the state legislature. (Danielson v. Memorial Hospital, S.D. Miss., No. 1:05cv270HSO-RHW (Oct. 18, 2007)).

The case in question arose when the trustees of Memorial Hospital at Gulfport (MHG), faced with a lack of neurosurgery coverage in its emergency room, entered into an exclusive contract with Dr. James Doty, a neurosurgeon and the owner of the Brain & Spine Institute (BSI), to provide neurosurgery services. Dr. Harry A. Danielson, a neurologist with staff privileges at MHG, filed suit alleging that the exclusive contract among Doty, BSI, and MHG violated Mississippi’s antitrust laws and amounted to a breach of duty of good faith, unjust enrichment, and tortious interference with a business interest. The defendants moved to dismiss the case.

Judge Halil Suleyman Ozerden of the U.S. District Court for the Southern District of Mississippi ultimately held that the defendants were entitled to a dismissal of their case on the ground that the Mississippi Department of Health had already addressed the issue of whether an exclusive contract between a hospital and a physician for the provision of specialized services violates state antitrust laws and had concluded that such contracts do not run afoul of such laws. Judge Ozerden noted that the state legislature "clearly contemplated anticompetitive conduct" when it authorized community hospitals such as MHG to enter exclusive contracts with a single individual to operate any aspect of hospital operations. The court also concluded that Dr. Danielson was specifically excepted from the terms of the agreement between MHG and Doty and therefore lacks standing to pursue claims relating to antitrust injury. Finally, the court held that the record is insufficient to support Dr. Danielson’s claims of quasi-contract and tortious interference with a business interest.

This decision applies principles similar to the state action defense under the federal antitrust laws.

A copy of the court’s decision is attached.

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