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United States Healthcare, Inc. v Healthsource, Inc.

United States Court of Appeals for the First Circuit
986 F.2d 589 (1993)


Healthsource, Inc. and Healthsource New Hampshire (Healthsource) (defendants) operated a successful HMO in New Hampshire. Health maintenance organizations (HMOs) combine health insurance and healthcare functions to provide low-cost healthcare alternatives. HMOs charge fixed premiums and provide medical services to subscribers. A typical HMO contracts with a group of doctors to provide the medical services. Healthsource contracted with approximately 25 percent of primary-care physicians in New Hampshire. United States Healthcare, Inc. (U.S. Healthcare) (plaintiff) was one of the largest HMOs in the United States. In 1989, U.S. Healthcare wanted to expand into New Hampshire. To create an incentive for Healthsource doctors to remain with Healthsource, Healthsource offered to pay doctors more if doctors agreed not to work for any other HMO. The optional exclusivity term provided an approximately 14 percent increase in pay in exchange for the doctor’s agreement not to work for another HMO. U.S. Healthcare sued Healthsource, arguing the exclusivity term in Healthsource’s contract violated the Sherman Act in two ways. First, U.S Healthcare argued that the exclusivity term was a group refusal to deal and a per se violation of § 1 of the Sherman Act. Second, U.S. Healthcare argued that, under a rule-of-reason analysis, the exclusivity term foreclosed competition in the market for HMO services in New Hampshire. The district court judge found no Sherman Act violation. U.S Healthcare appealed.

Rule of Law


Holding and Reasoning (Boudin, J.)

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