A physician network claimed that a hospital group used confidential information it obtained from their business relationship to set up a competing network.
A physician network claimed that the defendant, a hospital group, used confidential information on physician rates it obtained from their business relationship to set up a competing physician network. Counsel for the defendant retained Cornerstone Research and Kate Bundorf of Stanford University to evaluate liability and damages.
In her testimony, Professor Bundorf opined that the disputed information had limited value to defendants. Moreover, defendant’s decision to set up a new physician network would increase competition in the market for capitated physician services.
Professor Bundorf opined that the defendant had access to the disputed information from several sources. As a major health organization, it had substantial information about physician market rates and dynamics from its own business operations. In addition, the disputed information is extensively discussed in academic and trade literature.
In her testimony, Professor Bundorf also opined that the information had limited value because it did not allow the defendant to reconstruct a per-member per-month (capitated) payment to the network. These rates depend on the geographic area of the services covered by each health plan, and are subject to changing market conditions.
Lastly, Professor Bundorf opined that the defendant’s decision to form a new network would increase competition in the market for capitated physician services. A competing physician network potentially would allow health plans to negotiate lower rates for capitated contracts and require networks to offer more favorable terms to attract and retain affiliated physicians. Additionally, this could lead to greater vertical integration between hospitals and physicians in the local market.
Professor Bundorf testified in deposition. The case settled before trial.