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Advance Nursing Corporation v. South Carolina Hospital Association

United States District Court, D. South Carolina, Greenville Division

October 24, 2016

ADVANCE NURSING CORPORATION, Plaintiff,
v.
SOUTH CAROLINA HOSPITAL ASSOCIATION; SCHA SOLUTIONS, INC; GREENVILLE HEALTH SYSTEM; SPARTANBURG REGIONAL HEALTH SERVICES DISTRICT, INC., d/b/a Spartanburg Regional Healthcare System; MARY BLACK HEALTH SYSTEM; PALMETTO HEALTH; LEXINGTON COUNTY HEALTH SERVICES DISTRICT, INC., d/b/a Lexington Medical Center; TUOMEY; CAROLINAS HOSPITAL SYSTEM; ST. FRANCIS HOSPITAL, INC.; SISTERS OF CHARITY PROVIDENCE HOSPITALS; PROVIDENCE HOSPITAL, LLC; and REGIONAL MEDICAL CENTER OF ORANGEBURG AND CALHOUN COUNTIES, Defendants.

          MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS

          MARY GEIGER LEWIS, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Plaintiff filed this case pursuant to Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 16, for violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. Plaintiff also alleges violations of the South Carolina Antitrust Act (SCAA), SC Code Ann. § 39-3-10, and the South Carolina Unfair Trade Practices Act (SCUTPA), SC Code Ann. § 39-5-10. It brings claims of civil conspiracy and tortious interference with contractual and prospective contractual relations as well. The Court has jurisdiction over the matter under 28 U.S.C. §§ 1331 and 1367.

         Pending before the Court is Defendants South Carolina Hospital Association (SCHA), SCHA Solutions, Inc. (collectively, the SCHA entities), Greenville Health System (Greenville), Spartanburg Regional Health Services District, Inc. d/b/a Spartanburg Regional Healthcare System (Spartanburg), Mary Black Health System, Palmetto Health, Lexington County Health Services District, Inc. d/b/a Lexington Medical Center (Lexington), Tuomey, Carolinas Hospital System, St. Francis Hospital, Inc., Sisters of Charity Providence Hospitals, Providence Hospital, LLC (Providence), and Regional Medical Center of Orangeburg and Calhoun Counties' (Regional Medical) (collectively, the hospital Defendants) motion to dismiss Plaintiff's claims by way of Federal Rule of Civil Procedure 12(b)(6). ECF No. 65. Also pending before the Court are Greenville, Lexington, Regional Medical, and Spartanburg's (collectively, the Government Hospitals) motion to dismiss Plaintiff's claims under Federal Rule of Civil Procedure 12(b)(6) on other bases, ECF No. 66, and Providence's motion to dismiss Plaintiff's claims pursuant to the same rule, also on a separate ground, ECF No. 67. Having carefully considered the motions, the responses, the replies, the record, and the applicable law, it is the judgment of the Court that it will grant Defendants' motions to dismiss in part and deny them in part.

         II. FACTUAL AND PROCEDURAL HISTORY

         Plaintiff filed this case against Defendants on January 18, 2016, its Amended Complaint on March 21, 2016, and its Second Amended Complaint (SAC) on June 24, 2016. The Court largely draws the relevant facts for purposes of this Order from the SAC, ECF No. 63.

         Plaintiff is a South Carolina corporation functioning as a nurse staffing company with its principal place of business located in Greenville County, South Carolina. SCHA is a private, not-for-profit organization doing business in South Carolina made up of member hospitals and health care systems, SCHA Solutions, Inc. is a for-profit subsidiary of SCHA, and the named hospital Defendants have committed to use the SCHA entities exclusively to staff traveling and/or temporary nurses at their facilities. Plaintiff alleges Defendants have conspired to control exclusively the traveling and temporary nurse staffing industry in South Carolina, an effort Defendants purportedly began in or around 2002 and continue to the present.

         According to Plaintiff, sometime around 2002, the SCHA entities and certain of the hospital Defendants met to implement a nurse registry program in South Carolina, whereby the SCHA entities would manage an online registry portal for potential staffing companies to fill available traveling nurse positions for the hospital Defendants, all members of SCHA. SCHA created this program for the direct benefit of the member hospital Defendants, and the SCHA entities still maintain this program. Ostensibly, SCHA Solutions, Inc. is financially incentivized to continue the program because it receives administrative fees for every dollar brought into the registry.

         Through this registry program, staffing companies bid on the available nurse positions, and, if successful, fill those positions at the Defendant hospitals. Upon implementation of the program, the SCHA entities informed staffing companies they could no longer contact or contract with the member hospital Defendants directly. Rather, all negotiations and communications had to go through the SCHA entities.

         Plaintiff claims the SCHA entities have utilized the registry program to standardize the terms and conditions, policies, procedures, and contracts for nurse staffing as well as provide financial incentives for hospitals. This, Plaintiff complains, has reduced temporary and traveling nurse staffing wages and benefits in South Carolina, as well as staffing companies' bottom lines. Moreover, should the SCHA entities fail to approve a staffing company under their self-policed application process, the staffing company is unable to staff nurses with the hospital Defendants. In fact, Plaintiff states the SCHA entities effectively coerced it to join the program when one of their representatives told Plaintiff that failure to join would result in the hospital Defendants no longer doing business with Plaintiff.

         Plaintiff propounds Defendants have acquired control over the temporary and traveling nurse staffing market in South Carolina by using the registry program to their benefit by way of reduced nurse benefits, standardized contract terms between staffing vendors and hospitals, administrative fees to the SCHA entities, application fees to the registry program, and a reduced number of staffing firms able to compete for temporary and traveling staffing positions in South Carolina. These effects keep Defendants financially incentivized to continue to participate in the registry program.

         Plaintiff also avers Defendants expanded the registry program in 2015 to include temporary or per diem nurse positions. Furthermore, certain hospital Defendants have created a radius rule for temporary and traveling nurses whereby the hospital Defendant will decline to staff a nurse if he or she lives within a particular radius of the facility, further suppressing nurse wages. Plaintiff additionally contends Defendants continue to meet and collectively review the registry program's policies, procedures, and contract terms on an annual basis.

         Moreover, the SCHA entities draft and issue the contracts staffing companies must sign to staff with the hospital Defendants. The staffing companies are prohibited from negotiating the terms of the contracts and must either accept the terms or risk being excluded from the program. The contracts also provide that regardless of receipt of payment from the member hospitals, staffing companies must nevertheless pay administration fees to SCHA.

         On July 25, 2016, Defendants filed their motions to dismiss Plaintiff's claims. Plaintiff filed responses in opposition on August 11, 2016, and Defendants filed replies on August 22, 2016. The Court, having been fully briefed on the ...


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