In August 2017, the Washington State Attorney General filed suit to thwart and unwind Franciscan Health System’s consummated 2016 acquisition of two physician practice groups, WestSound Orthopaedics and The Doctors Clinic (TDC). The complaint alleges horizontal price-fixing agreements that raised prices and decreased competition in violation of both state and federal antitrust laws, and seeks equitable disgorgement of the system’s illegal financial gains obtained from the transactions. On July 24, 2018, the federal district court denied Defendants’ motion to dismiss, finding that the State has sufficiently alleged services agreement between the two providers could amount to a horizontal price-fixing agreement. See our blog post here.

On February 19, 2019, the court denied Franciscan’s “weakened competitor” defense, which claimed that TDC would’ve been in financial trouble without making the alleged anticompetitive deal, holding that this defense does not absolve defendants from liability for restraint of trade under the Sherman Act. On March 1, 2019,  the court granted Franciscan’s partial summary judgment on the issue of WestSound acquisition’s alleged violation of Section 7 of the Clayton Act, ruling that the state did not sufficiently plead that the acquisition alone increased prices in the region. However, the issue of the TDC transaction’s alleged violation of Section 1 of the Sherman Act will proceed to trial, which the court had declined to rule on whether it would apply a “per se” or “rule of reason” standard.

In a victory for the state, Franciscan settled prior to trial in March 2019, agreeing to terms that “include a significant payment to the state and will restore competition and choices for healthcare services on the Kitsap Peninsula, benefiting patients and doctors.”