## Facts

- West Penn Allegheny Health System, Inc. (West Penn) was formed in 2000 from a merger of distressed providers and became the second-largest hospital system in Allegheny County, Pennsylvania, with under 23% of the county hospital-services market.
- UPMC was alleged to be the dominant hospital system in Allegheny County, with about 55% of hospital services and more than 50% of tertiary and quaternary services; West Penn alleged it and UPMC were the only meaningful competitors in tertiary and quaternary services.
- Highmark, Inc. was alleged to be the dominant health insurer in the county, with a share between 60% and 80% since 2000.
- Highmark initially supported West Penn’s creation and expansion, including financing the merger and later providing financial support; West Penn alleged the relationship later deteriorated.
- West Penn alleged UPMC opposed West Penn’s formation and growth and sought to eliminate it as a competitor.
- After a period of conflict between UPMC and Highmark over reimbursement, Highmark introduced a lower-cost insurance product requiring providers to accept reduced reimbursement for higher volume; UPMC refused to participate, while West Penn joined and allegedly benefited.
- West Penn alleged UPMC and Highmark later formed a reciprocal agreement to protect each other from competition: UPMC would use provider-market power to protect Highmark from insurer competition, and Highmark would use insurance-market power to strengthen UPMC and weaken West Penn.
- Alleged conduct supporting the agreement included Highmark paying UPMC supracompetitive rates and raising premiums rather than resisting; withdrawing favorable support from West Penn; and UPMC steering patients and physicians away from West Penn and making West Penn less attractive to rival insurers.
- West Penn also alleged UPMC engaged in exclusionary conduct and acquisitions aimed at monopolizing specialized (tertiary/quaternary) hospital services.

## Issues

1. Whether the complaint plausibly alleged an agreement between UPMC and Highmark that unreasonably restrained trade in violation of Sherman Act § 1 under the Twombly/Iqbal pleading standard.
2. Whether the complaint plausibly alleged Sherman Act § 2 claims against UPMC, including attempted monopolization (and related monopolization-conspiracy theories), based on market power and exclusionary conduct.
3. Whether the district court improperly resolved competing inferences and discounted well-pleaded factual allegations when granting Rule 12(b)(6) dismissal.

## Decision

- The Third Circuit reversed the dismissal of the Sherman Act claims and remanded for further proceedings.
- The court held West Penn’s allegations plausibly stated a Sherman Act § 1 conspiracy claim based on a coherent quid pro quo between a dominant provider and a dominant insurer.
- The court held West Penn plausibly stated Sherman Act § 2 claims against UPMC, including attempted monopolization, given alleged market power, intent, and exclusionary acts.
- The court vacated the order declining supplemental jurisdiction over state-law claims because the federal claims were reinstated.

## Legal Principles

- On a Rule 12(b)(6) motion, courts must accept well-pleaded factual allegations as true and draw reasonable inferences in the plaintiff’s favor.
- Twombly/Iqbal requires “plausibility,” not proof or probability; a plaintiff need not eliminate all lawful explanations at the pleading stage.
- A court errs at the pleading stage by crediting defendants’ competing economic narrative over the complaint’s factual allegations and reasonable inferences.
- Detailed allegations of reciprocal conduct between firms with market power in related markets can plausibly plead concerted action under Sherman Act § 1.
- Allegations of dominant share, exclusionary conduct, and anticompetitive intent can plausibly plead attempted monopolization under Sherman Act § 2.

## Conclusion

The Third Circuit held that West Penn’s complaint plausibly alleged that a dominant hospital system and a dominant insurer entered a mutually beneficial arrangement that restrained trade and supported attempted monopolization, and it reinstated the federal antitrust claims (and, consequently, the state-law claims for reconsideration) for litigation beyond the pleading stage.


West Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85 (3d Cir. 2010)