Dr. Ricardo Vasquez is a vascular surgeon who has practiced in Bloomington, Indiana, since 2006. Vasquez alleges that in the time since he opened up shop, Indiana University Health (IU Health) has amassed considerable market power in the region's medical industry. See Vasquez v. Indiana University Health, Inc., 40 F. 4th 582 (7th Cir. 2022).
IU Health entered the Bloomington market in 2010 when it acquired Bloomington Hospital. At the time, IU Health was known as Clarian Health Partners; it rebranded in 2011. In May 2017, IU Health expanded its footprint in southwestern Indiana by acquiring Premier Healthcare, an independent physician group based in Bloomington. At the time of the acquisition, Premier employed many of the region's doctors, especially primary-care providers (PCPs). Vasquez alleges that, as a consequence of the Premier acquisition, IU Health now employs 97% of PCPs in Bloomington and over 80% of PCPs in the wider region.
Vasquez contends that in 2017 IU Health launched "a systematic and targeted scheme" to ruin his reputation and practice. The scheme was motivated by Vasquez's commitment to independent practice. IU Health preferred to employ the region's doctors directly, an agenda which Vasquez resisted. In June 2018, IU Health threatened to revoke Vasquez's privileges at Bloomington Hospital, and its employees began to cast aspersions on his reputation—alleging, for example, that he had been sued with unusual frequency. Needless to say, Vasquez disputes the factual accuracy of these claims. In April 2019, IU Health followed through on its threat, revoking Vasquez's Bloomington admitting privileges.
In June 2021, Vasquez sued IU Health, claiming antitrust violations under the Sherman Act, 15 U.S.C. §§ 1-7, and the Clayton Act, id. §§ 12-27. IU Health moved to dismiss, arguing that neither the Sherman Act nor the Clayton Act claims were premised on a plausible geographic market. The district court agreed.
On appeal, Vasquez challenges the dismissal of his claim under Sherman Act section 2, 15 U.S.C. § 2, for failure to allege a proper geographic market.
Reversed — If a hypothetical monopolist could profitably raise prices above competitive levels in a candidate geographic healthcare market, the region (in this case Bloomington) is a relevant geographic market. See FTC v. Advocate Health Care Network, 841 F.3d 460 (7th Cir. 2016).
Vasquez's complaint needed to allege only one plausible geographic market to survive a motion to dismiss. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A rational jury could find that Bloomington is such a market, as we now explain.
In FTC v. Advocate Health Care Network, 841 F.3d 460 (7th Cir. 2016) ("Advocate"), a case concerning a hospital merger, we endorsed the use of the "hypothetical monopolist test" to analyze geographic healthcare markets. As a general matter, that test asks "what would happen if a single firm became the only seller in a candidate geographic region." Id. at 468. "If that hypothetical monopolist could profitably raise prices above competitive levels, the region is a relevant geographic market." Id. But if, instead, "customers would defeat the attempted price increase by buying from outside the region, it is not a relevant market; the test should be rerun using a larger candidate region." Id. In this sense, the inquiry "is iterative, meaning it should be repeated with ever-larger candidates until it identifies a relevant geographic market." Id. Importantly, the determination of the area of effective competition poses a question of fact, not one of law. See Fishman v. Estate of Wirtz, 807 F.2d 520, 531 (7th Cir. 1986).
We see no reason to break with Advocate here. The hypothetical-monopolist test remains the best approach to geographic-market analysis in the healthcare context. It focuses courts' attention on the crucial question whether it is possible, within a given defined geographic area, for a hypothetical single firm to engage in anticompetitive practices (i.e., raising price or reducing output, or otherwise harming consumer welfare). With that in mind, we turn to Vasquez's arguments.
Vasquez first posits that the vascular-surgery market in Bloomington is inherently local. This is because "vascular surgery patients need ongoing care, oftentimes lifetime care." So, Vasquez reasons, if a Bloomington patient "is sent to Indianapolis, that patient must continue to travel for a lifetime if he or she wants continuity of care." And because most patients would consider that a bad deal—as Advocate recognized, see 841 F.3d at 470—insurers (the most directly affected buyers here) face pressure to provide vascular surgery in or near Bloomington. An insurer that does not provide such care risks being outcompeted by other insurers within Bloomington. It follows that a hypothetical monopolist over vascular surgery in Bloomington would be able to abuse its market power considerably by jacking up payor prices and freezing out potential competitors. In particular, because much vascular surgery is performed in a hospital setting with special equipment, a hypothetical vertically integrated monopolist that controlled the hospital, the equipment, and most of the surgeons would be well-positioned to engage in anticompetitive practices.
Vasquez also alleges that vascular surgeons' reliance on referrals makes Bloomington an appropriate geographic market in a second sense. The idea is that while Bloomington residents may be willing to travel to Indianapolis for some categories of specialist care, they will not be willing to drive an hour or more for routine primary care. Bloomington, after all, has two hospitals, a medical-school campus, and a metro population that ought to be more than adequate to support a healthy, competitive primary-care practice market. All agree that vascular surgeons, who are specialists, get most patients by referral from primary-care providers. Thus, a hypothetical monopolist over primary-care services in Bloomington would control not only that market but also the flow of patients to vascular surgeons. By cutting off the flow of new patients to its vascular-surgery competitors, the monopolist could capture the entire market, thereby positioning itself to raise payor prices without repercussion.
Both stories are plausible accounts of how a hypothetical monopolist could wield anticompetitive power in Bloomington's vascular-surgery market. We could stop there; at the pleading stage, a plausible scenario is all we require to establish the geographic market. But as it happens, Vasquez goes considerably further. He alleges not only that a hypothetical monopolist could dominate the Bloomington market in the two ways he suggests but also that IU Health already does so. With regard to vascular surgery itself, Vasquez contends that IU Health controls the hospital with the most advanced equipment and, other than him, all the vascular surgeons. And regarding upstream referrals, he alleges without contradiction that IU Health employs 97% of the primary-care physicians in Bloomington, meaning that virtually every patient sees an IU Health PCP. (That is one reason why the existence of other hospitals in the Bloomington area does not necessarily defeat Vasquez's claim.) To repeat: these contentions are by no means necessary in order adequately to plead a geographic market. But they are sufficient. The hypothetical-monopolist test concerns hypotheticals, as it says on the label, not realities. But the detailed allegations about the on-the-ground realities in Bloomington drive home the key point: Vasquez's allegations easily clear the plausibility bar.
This is not the time to evaluate the merits of Vasquez's allegations, and that in any event is a task that requires expert testimony. The motion-to-dismiss stage does not lend itself to rigorous hypothetical-monopolist analysis. Normally, the way that analysis is conducted is by survey. Experts canvass a representative sample of local market participants, asking about both their actual behavior in the market as it is and how it would change if certain hypothetical conditions came to pass. Here, for instance, an expert might try to determine at what price point an insurer would stop paying for vascular-surgery services in Bloomington, opting instead to cover only patients who went to specialists in Indianapolis. It may turn out that Indianapolis providers are close enough to act as a market check on any and all price increases. If so, Bloomington would not be a geographic market. But for present purposes, we cannot substitute our own speculations for the requisite analysis.
It is worth recalling at this juncture what is required in a pleading. As the Supreme Court put it in Twombly, "a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations...." 550 U.S. at 555, 127 S.Ct. 1955. Indeed, the allegations do not even need to establish the probability of the plaintiff's recovery. Id. at 556, 127 S.Ct. 1955. They need only present "enough fact to raise a reasonable expectation that discovery will reveal evidence" of illegal acts. Id. So too in this case, we need not decide whether Vasquez's story is probable; we are assessing only its plausibility.
The district court found Vasquez's complaint wanting for two reasons. First, it thought that Vasquez's geographic-market allegations were contradictory. The purported contradiction was between two factual claims in the complaint: (1) that patients "prefer to stay within Bloomington to receive care," and (2) that "many of the patients who arrive at Bloomington Hospital for care travel from rural areas, some of them up to two hours away." The district court saw an inconsistency between the two claims, and it thought that clash undermined the Bloomington market's plausibility.
We see several problems with this reasoning. First, Federal Rule of Civil Procedure 8(d)(3) specifically permits contradictory pleadings, and so this criticism was misplaced. And in any event, our own examination of the allegations persuades us that they are not contradictory at all. They concern two different groups of people—urban and rural patients—with different expectations, motivations, and market behaviors. Bloomington is a regional hub, home to a major university and substantial medical infrastructure. Patients who reside there no doubt expect to get most medical care close to home. Patients in surrounding rural communities, in contrast, realistically expect to travel to hospitals in large cities when the alternative is getting sick or dying, though they may otherwise prefer to purchase services at home in Loogootee (population 2,751) or French Lick (population 1,841). Both allegations could be true; indeed, both are true in many places. On top of that, the allegation about two-hour travel is hardly the linchpin of Vasquez's theory of the geographic market. It comprises two clauses buried thirty pages into the complaint, in the context of a tangential discussion of the impacts IU Health's alleged monopoly has on patients. And even assuming some level of tension between Vasquez's allegations, a final problem is that the district court did not attempt to situate that tension in any antitrust market-analysis doctrine. A contradiction could undermine a market's plausibility if it showed that the alleged market failed the hypothetical-monopolist test. But we do not see how that could be true here.
The district court also reasoned that Bloomington could not be "the appropriate geographic market" if "a significant portion of [IU Health's] patients regularly travel substantial distances to get to Bloomington." But this confuses two different sorts of market. The geographic market for an antitrust claim need not—and very often will not—correspond to the comprehensive market that the alleged monopolist serves. See United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586, 593, 77 S.Ct. 872, 1 L.Ed.2d 1057 (1957) (explaining that "the bounds of a relevant market for the purposes of [a] case" need not be "coextensive with the total market"). At the fringes, even a monopolist is likely to face competition. Under Advocate, 841 F.3d at 476, the appropriate object of the geographic-market analysis is the smallest market a hypothetical monopolist could dominate. Patient flows may help to define the borders of that market, but such flows are just one piece of data in the broader picture—they are not likely to be dispositive. To hold otherwise would be to carve a large loophole into antitrust law; realistically, some fuzziness about market boundaries will occur in most cases.
To sum up: Either of Vasquez's accounts of how a hypothetical monopolist could dominate Bloomington's vascular-surgery market suffice for the pleading stage. Dismissal was thus not warranted.
THIS CASEBOOK contains a selection of U. S. Court of Appeals decisions that analyze, interpret and apply provisions of the Sherman Antitrust Act. Volume 1 of the casebook covers the District of Columbia Circuit and the First through the Fifth Circuit Court of Appeals. Volume 2 of the casebook covers the Sixth through the Eleventh Circuit Court of Appeals.