LOS ANGELES, April 22 , 2015 /PRNewswire/ -- A motion to dismiss a lawsuit charging monopolistic business practices in the concierge medicine industry was rejected on Tuesday by the United States District Court (Central District Court of California) in Los Angeles. Judge Dolly M. Gee denied the motion by MDVIP attorneys, setting the stage for a court trial that could help determine the future of the industry.
The Court disagreed with MDVIP's contention that SignatureMD had failed to demonstrate "predatory or anti-competitive conduct aimed at accomplishing [monopoly power]." Judge Gee ruled that "to the extent that MDVIP contends that SignatureMD's monopoly allegations are facially flawed, this Court disagrees."
At issue is SignatureMD's allegation that MDVIP has engaged in unenforceable non-compete clauses, sham litigation, and threats of legal action against doctors, even after the expiration of their contracts, in violation of several Federal and State laws.
Concierge medicine is an alternative to conventional employer-provided, fee-based healthcare under which physicians offer patients greater availability, longer appointments and more personalized service. Patients pay a yearly fee to be part of this practice. Fees typically range from $1,500 to $2,000 per patient per year. MDVIP operates the largest concierge medicine membership program in the United States. SignatureMD is the third largest such company.
According to SignatureMD's Complaint, it has found it difficult and at times even impossible to sign on new doctors to its program because of the restrictive contracts that MDVIP requires its doctors to sign. The contracts are, in essence, evergreen agreements that bind physicians to MDVIP until retirement, even if physicians desire to affiliate with a competing company.
In California, "MDVIP requires a large liquidated damages provision in the non-compete clause of its contracts with member physicians … [that] requires a physician to pay $1 million if he or she leaves the program to join a competitor," according to SignatureMD's Complaint. "As a practical consequence of this clause, physicians have no choice but to continue with MDVIP or leave concierge medicine altogether."
MDVIP dominates and controls the concierge medicine industry with an estimated 71 percent of the physicians enrolled in turn-key programs, a fact that MDVIP does not dispute. SignatureMD has 61 doctors or 7 percent of the total. A third competitor, ranked second in the industry, does not use restrictive agreements and is not a party to the suit.
In order to compete with MDVIP in any local market, other membership program providers such as SignatureMD must sign up internists and family physicians to join their program. MDVIP has systematically locked competitors out of the concierge medicine membership program market by entering into unduly restrictive and lengthy exclusive agreements with physicians that prohibit them from speaking with or joining a competitor's concierge medicine program, even after their contract with MDVIP ends. The non-competitive provisions in the MDVIP agreements are unreasonable in scope and duration, the Complaint alleges. This is a violation of U.S. and California law, the Complaint says, as it locks out competitive providers like SignatureMD.
"Judge Gee's ruling demonstrates the merit of our case; we look forward to moving the case to trial and opening the market to all competitors," said Matt Jacobson, CEO, SignatureMD.
SignatureMD is a privately owned firm established in 2007 and headquartered in Los Angeles. MDVIP, formerly owned by Procter & Gamble, was formed in 2000 and is headquartered in Boca Raton, Florida.
Greg Ptacek / Craig Parsons