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Antitrust Enforcers Sue Four Hospitals For Carving Up South-Central Michigan

Posted  July 1, 2015

By Rosa M. Morales

The Antitrust Division of the U.S. Department of Justice and the Michigan Attorney General’s Office are suing four Michigan hospital systems for allegedly engaging in antitrust violations by agreeing to refrain from advertising in each other’s territories, to the detriment of patient choice and health care benefits for patients and physicians alike.

The complaint in United States & Michigan v. Hillsdale Community Health Ctr. et. al, asks the U.S. District Court for the Eastern District of Michigan to find that the hospitals’ agreements to limit marketing for competing healthcare services in south-central Michigan were per se unlawful under Section 1 of the Sherman Act.  Each of the four hospital systems operates the “only general acute-care hospital or hospitals” in its county.

While three of the hospital systems being sued—Hillsdale Community Health Center (“Hillsdale”), Community Health Center of Branch County, Michigan (“Branch”), and ProMedica Health Center System Inc. (“ProMedica”)—have agreed to settle the charges, the fourth hospital— W.A. Foote Memorial Hospital d/b/a Allegiance Health (“Allegiance”)—has chosen to litigate.

The proposed settlements would prohibit Hillsdale, Branch, and ProMedica from (1) agreeing with any healthcare provider to prohibit or restrict marketing or to allocate geographic markets or territories, and (2) communicating with each other about their marketing efforts.

The governments’ case relies on deposition testimony from senior executives, as well as memoranda and business documents, which reveal that Hillsdale had a “gentleman’s agreement” with its direct rival general acute-care hospitals not to compete with respect to certain services.

According to the complaint, the anticompetitive agreements, which date back to 1999, restrained competition in the provision of a variety of healthcare services.  The alleged market allocation scheme prohibited Allegiance, Branch, and ProMedica from marketing competing oncology or orthopedic services, or from offering free cardiovascular screening services in Hillsdale’s market, which would have conflicted with Hillsdale’s charging for some screenings.  Allegiance allegedly “discouraged” physicians from delivering seminars in Hillsdale County so as not to disrupt the hospitals’ arrangement, which deprived patients and physicians from services, education, and choice.  The competing hospitals allegedly agreed to stay out of each other’s market unless they decided to collaborate on a particular project.

The federal and state antitrust regulators are asking the court to enjoin the hospital systems from continuing such agreements or otherwise engaging in anticompetitive communications regarding their marketing efforts.

Edited by Gary J. Malone

Tagged in: Antitrust Litigation,