Antitrust Injunction Against ProMedica Vacated by Appeals Court

On Tuesday, the Sixth Circuit Court of Appeals issued its decision in a case between St. Luke’s Hospital and ProMedica Health System, Inc., where the plaintiffs alleged antitrust charges against ProMedica for dropping St. Luke’s as an insurance provider. The court vacated the preliminary injunction against the defendants, allowing ProMedica to terminate a contract with St. Luke’s after it was acquired by a competitor.

In Lucas County, ProMedica and St. Luke’s are two of the major healthcare providers, the opinion said. St. Luke’s offers “premium care at competitive rates,” which “help to explain why ProMedica sought to merge with St. Luke’s in 2010.” Paramount, which is “ ProMedica’s insurance arm,” also contracted with the plaintiffs to list their hospital as an in-network provider.

The Federal Trade Commission (FTC) objected to this merger since they were “wary of ProMedica’s market dominance” and ordered them to divest of St. Luke’s. In this divestiture agreement, they agreed that Paramount would continue their contract with St. Luke’s but that if they underwent a “Change in Control” they could be “immediately terminate[d].” The court explained that this agreement benefited ProMedica, since “Paramount could attract members who might go to St. Luke’s for basic services but move to ProMedica’s hospitals for more complex treatment.” 

In October 2020, McLaren Health Systems bought St. Luke’s, “offer[ing] complex cancer services that ‘compete directly’ with ProMedica and could siphon off patients needing advanced  care from ProMedica’s hospitals.” The day after the acquisition was finalized, Paramount terminated their contract with St. Luke’s, and they retaliated by filing a lawsuit claiming violations of the Sherman Act. The district court granted a preliminary injunction enjoining the defendants from terminating the contract.

The Sixth Circuit stated that ProMedica had a valid business reason to terminate the contract, especially since St. Luke’s signed the contract knowing that this event could happen. They also believed that ProMedica had ample reason to terminate a contract with a valid competitor, and “the reality that ProMedica did not enter an unconditional  five-year relationship with St. Luke’s undermines the district court’s conclusion that ProMedica would not suffer by continuing its relationship with St. Luke’s.”

The court concluded by elaborating that “the theory that ProMedica has long dominated the market and that its cancellation of the Paramount contracts is just one more mile marker on its road to monopolization does not work” since St. Luke’s had grown drastically due to its merger with McLaren.