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City of New York v. Group Health

November 21, 2008


The opinion of the court was delivered by: Ronald L. Ellis, United States Magistrate Judge



On April 20, 2007, this Court issued an Opinion and Order denying, without prejudice, the City's motion to compel Defendant HIP to produce certain documents responsive to the City's document requests, namely cost and experience documents relating to its accounts, with this information broken down by employer/customer (hereinafter "HIP data" or "data"). (Opinion and Order, April 20, 2007 ("Op. & Order") at 4; see Plaintiff's Memorandum of Law in Support of Motion to Compel Under Federal Rule of Civil Procedure 37(a), October 25, 2007 ("Pl.'s Mem., Oct. 2007") at 1.) Pending before this Court is the City's renewed motion for an order compelling HIP to produce this data. Id. For the reasons set forth below, the City's motion to compel production of these documents is GRANTED.


A. April 20, 2007, Opinion & Order

In its previous motion, the City indicated that the requested information was needed so that it could perform an analysis to determine "whether, and if so by how much, HIP will be able to raise the premium for its HMO product to the City following the [proposed] merger [of GHI and HIP]."*fn1 (Plaintiff's Memorandum of Law in Support of Motion to Compel Under Federal Rule of Civil Procedure 37(a), February 13, 2007 ("Pl.'s Mem., Feb. 2007") at 6-7.) The Court found that, because the information requested would be insufficient standing alone to calculate a post-merger cost analysis, the City's request did not adequately relate to its stated justification for obtaining such information. (Op. & Order at 5-6.) Based on the record presented at the time, the Court concluded that only upon obtaining a substantial amount of similar data from third-party health insurance consumers located within the same market-base would the City be able to perform a comparative analysis with any probative value. Id. at 5. At that time, the City did not have, and had no plan to obtain, the supplemental information from third parties the Court found necessary to this analysis. Id. The Court noted that if the City could articulate a plan for obtaining third-party information and specify which "commercial entities would be necessary for a calculation of the merged entity's profitability of raising prices to have any predictive validity, and that it has the ability to obtain such information from the identified third parties[,]" the Court would allow for reconsideration. Id. at 6.

B. City's Actions in Response to Court's April 20, 2007, Opinion and Order

Subsequent to this Court's April 20, 2007, Opinion and Order, further dispute arose between the parties regarding the City's Second and Third Requests for Documents and a Second Interrogatory Request. (Declaration of John R. Low-Beer, October 25, 2007 ("Low-Beer Decl., Oct. 2007") at 5.) On August 28, 2007, the City filed a second motion to compel "the production of documents and responses to interrogatories, and for reconsideration" of the Court's April 20, 2007, Opinion and Order. The information requested by the City at that time was distinct from that requested in the initial motion to compel. Id. at 4. Subsequently, the parties engaged in negotiations which resulted in substantial accommodation on nearly all issues pertaining to the Second and Third Document Requests, and the City agreed to withdraw its August 28, 2007, Motion to Compel without prejudice. Id. at 5.

On October 25, 2007, the City filed the instant motion, asking the Court to reconsider the April 20, 2007, Opinion and Order, and to compel production of the documents requested in their initial discovery request. (Pl.'s Mem., Oct. 2007 at 1.) In support of this motion, the City reports "the 'record before the Court' has evolved significantly from that before the Court in the Spring." (Low-Beer Decl., Oct. 2007, ¶ 16.) The City asserts it has a "plan to obtain information from third parties . . . and has served subpoenas on a number of large employers and other insurers."

Id. ¶ 3. The City additionally presents different economic models which they argue minimize, if not entirely eliminate, the need for third-party data to predict the likelihood and profitability of HIP raising its premiums post merger. (See Pl.'s Reply at 1.)


A. Relevance

The ultimate issue in this antitrust action is whether the merger of GHI and HIP will substantially lessen competition when the entities cease to compete with each other, and as a result, whether HIP will have the ability to profitably raise its prices. (SeeDefendants' Memorandum of Law in Opposition to Motion to Compel the Production of Cost and Experience Documents, March 6, 2007 ("Defs.' Mem., Mar. 2007") at 2; see also Pl.'s Mem., Feb. 2007 at 7.) The City argues that customer-specific cost information is relevant because it is necessary to calculate the relative profitability of the City's business compared to HIP's other large-group customers, in order to calculate the net profitability to HIP of a given increase in its premiums after the merger. (Pl.'s Mem., Oct. 2007 at 6.) In response to the City's first motion on this issue, the Court concluded that, with adequate data from third parties, the documents at issue here could be applied to a comparative analysis, the results of which would present a prediction of the effect of the merger on insurance premiums. (Op. & Order at 5-6.) The Court determined that under such conditions, the controversial HIP data could lead to information relevant to the instant litigation. The question before the Court here is whether the City now has adequate information to engage in an analysis of the profitability to HIP of raising its premiums post-merger.

In support of its contention that such analysis would be possible with the various data available to them and the HIP data here at issue, the City has submitted declarations by Frank R. Lichtenberg, an expert in the economics of health care. (See generally Declaration of Frank R. Lichtenberg, August 28, 2007 ("Lichtenberg Decl., Aug. 2007") & Declaration of Frank R. Lichtenberg, November 16, 2007 (Lichtenberg Decl., Nov. 2007").) In response, Defendants have provided the declaration of their own expert, Lawrence Wu, who specializes in antitrust and competition policy, with expertise in the area of health care, including health insurance. (See generally Declaration of Lawrence Wu, November 9, 2007 ("Wu Decl., Nov. 2007").) Defendants challenge the predictive value of the data available to the City and assert that the ...

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