SAN DIEGO, March 26, 2013 (GLOBE NEWSWIRE) -- American Specialty Health Group, Inc. ("ASH") has asked the federal court to permit ASH to amend its complaint against Healthways, Inc. to specify that the damages ASH has suffered as a result of Healthways' anticompetitive conduct involve hundreds of millions of dollars. ASH also seeks to add a claim for violation under California's Business and Professions Code section 16600 ("Section 16600"), which prohibits restrictive covenants not to compete. The revised damage demand reflects ASH's assessment of the harm it has suffered as a result of Healthways' "aggressive and illegal campaign to drive out competition" in the Fitness Program Market with Medicare Advantage Plans "by preventing ASH, its most significant competitor, from selling its superior, cost-effective, competing product." The suit, initially filed on December 2, 2011 in the Southern District of California, concerns Silver&Fit® and SilverSneakers®, the Medicare Advantage fitness benefit programs that ASH and Healthways respectively provide to health plans.
In addition to the state law tortious interference and federal antitrust claims already alleged by ASH, the amended complaint alleges that Healthways' exclusivity and covenants not to compete provisions found in its SilverSneakers contracts with fitness facilities are unlawful under Section 16600. Many of Healthways' fitness facility agreements include an exclusivity provision and a post-termination non-compete provision. The post-termination non-compete provision generally prevents fitness facilities (health clubs) from contracting with ASH for a period of up to one year should the facility decide to terminate its contract with Healthways.
ASH alleges that the "purpose and effect of the exclusivity clause and the covenant not to compete – to restrain fitness facilities and ASH from engaging in a lawful business–are apparent from the terms of the provisions themselves." The Second Amended Complaint also alleges that the "exclusivity provisions are boundless in geography and prohibit the facilities from engaging in any trade that could in any way compete with the Medicare services Healthways offers with fitness facilities, whereas the post-termination covenants not to compete, while purportedly limited in nature, effectively punish the fitness facilities for terminating their contracts by forcing them to forego business opportunities for as much as two years."
As a result, ASH alleges in the Second Amended Complaint that the exclusivity and covenants not to compete provisions are void under California law, specifically, Section 16600. That statute provides that, except in circumstances not applicable here, "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." Based on ASH's interpretation of Section 16600, and as set forth in the Second Amended Complaint, "the purpose and effect of the exclusivity clause and covenants not to compete run afoul of California's broad prohibition against restraints on the ability to engage in a lawful profession, trade, or business."
George DeVries, ASH's Chairman and CEO, said that he authorized the filing of the Second Amended Complaint because of ASH's commitment to "seeing free and fair competition in the markets for the sale of fitness benefits for seniors to Medicare Advantage health plans. Unfortunately, this litigation is necessary to achieve that free competition. As the American population ages, exercise and physical fitness have become increasingly important to both sustain senior well-being and to reduce overall health care costs. Reliance on exclusive provider contracting in the fitness arena reduces health plan and senior choice, while increasing costs. I believe that fair competition in the markets to provide fitness benefits for seniors is an important aspect of sound health care policy."
ASH seeks to enjoin "Healthways' unlawful, unfair, and fraudulent conduct" and to recover damages that total into the hundreds of millions of dollars, treble damages pursuant to the Sherman Act, and "restitution as authorized by law."
The case is American Specialty Health Group, Inc. dba American Specialty Health Networks v. Healthways, Inc., case number 11-cv-2819, in the U.S. District Court for the Southern District of California. A copy of the amended complaint can be found here.
About the Silver&Fit Program
The Silver&Fit Program is an integrated fitness and healthy aging program for Medicare beneficiaries who want to improve their quality of life by exercising more. This, in turn, may help them lower their risk for heart disease, strokes, and other chronic conditions; cope with existing medical issues; prepare for medical procedures; and prevent falls. Silver&Fit Program members have access to no- or low-cost memberships at a comprehensive Silver&Fit-contracted network of fitness facilities and exercise centers. For more information, visit SilverandFit.com or call 1-800-848-3555.
About American Specialty Health Incorporated
The Silver&Fit program is provided by American Specialty Health Group, Inc., a subsidiary of American Specialty Health Incorporated (ASH). ASH is a national health services organization that provides a total population health management program, specialty health care management programs, and fitness programs to health plans, insurance carriers, employer groups, and trust funds. Based in San Diego, ASH has more than 1,000 employees and serves more than 32 million members. For more information, visit ASHCompanies.com or call 1-800-848-3555.
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Source:American Specialty Health