NorthBay's third attempt at Kaiser Foundation antitrust lawsuit dismissed

By Carrie Salls | Sep 6, 2018

SAN FRANCISCO – NorthBay Healthcare Group and NorthBay Healthcare Corp.’s third attempt to bring antitrust claims against Kaiser Foundation Health Plan Inc., Kaiser Foundation Hospitals Inc. and The Permanente Medical Group Inc. was recently dismissed by the U.S. District Court for the Northern District of California.

In the court order filed Aug. 28, U.S. Magistrate Judge Laurel Beeler noted the district court also threw out NorthBay’s first two lawsuits, and the second amended complaint does not correct the issues that led to those previous dismissals.

“The SAC —like the original complaint and FAC before it —fails to plead that NorthBay suffered antitrust injury, an essential element of its antitrust claims,” Beeler said in the order.

In addition, the judge did not leave the door open for a further amended complaint. “Given that NorthBay has had three chances to plead an antitrust claim and has three times failed to do so, the court holds that further amendment would be futile,” the order said.

NorthBay entities run two hospitals in Solano County, Kaiser Foundation Hospitals operates two competing facilities in the county, and Permanente manages the doctors who work at the Kaiser hospitals, court filings said.

In their lawsuit, the NorthBay entities said Western Health Advantage (WHA), which is 50 percent owned by NorthBay, “is Kaiser Health Plan’s only significant remaining competitor in Solano County.” NorthBay said WHA offers a non-Kaiser health insurance plan for county residents.

“WHA thus poses a competitive constraint on Kaiser Health Plan’s power in setting the price and terms of its insurance plans for Solano County consumers,” court filings said.

WHA “depends on NorthBay to the point that, without NorthBay, WHA would have to exit the market for commercial health insurance in Solano County,” court filings said. As a result, NorthBay claims that, since the defendants have allegedly “steered” trauma patients away from NorthBay and uninsured patients to NorthBay’s facilities, they are also hurting WHA’s bottom line."

Beeler also rejected NorthBay’s argument that defendants violated antitrust laws by terminating an agreement between the parties. The plaintiffs alleged that the termination could be construed “as an attack on NorthBay or an attack on WHA.”

“The defendants terminated an agreement with NorthBay and determined to reimburse NorthBay at lower reasonable-charges rates instead of higher contractual rates, thereby reducing their own costs, which they are permitted to do under California Health and Safety Code,” Beeler’s order said. “This is not an antitrust injury.”

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