Barnes & Thornburg LLP: Antitrust Enforcement For Market Allocation By Michigan Hospitals

By Julie Veldman

On June 25, 2015, the United States Department of Justice (DOJ) and the Michigan Attorney General (Michigan AG) sued four Michigan hospital systems for entering into agreements with a competitor to unlawfully allocate territories for the marketing of competing healthcare services and to limit competition between them. The Michigan hospital systems include Hillsdale Community Health Center (Hillsdale), W.A. Foote Memorial Hospital, d/b/a Allegiance Health (Allegiance), Community Health Center of Branch County (Branch), and ProMedica Health System, Inc. (ProMedica).

An agreement among competitors to allocate a market is per se illegal under federal and state antitrust laws. The DOJ and Michigan AG contend that defendants’ agreements for market allocation “disrupted the competitive process and harmed patients, physicians, and employers,” by, among other things, depriving them of important information needed to make health care decisions and of free medical services and other healthcare opportunities that would have otherwise been available to local patients. 

Although the DOJ has come to a proposed settlement with Hillsdale, Branch and ProMedica, the story of Allegiance Health remains to be told.  Notwithstanding the three hospital systems’ proposed settlement with the government, however, Section 4 of the Clayton Act permits a private party who has been injured as a result of conduct prohibited by the antitrust laws to bring suit in federal court to recover treble damages, as well as costs and reasonable attorneys’ fees. The proposed settlement between the government and the three hospital systems will not impair any person from bringing a private antitrust damage action against those three hospital systems or Allegiance Health. 

The proposed settlement between the government and Hillsdale, Branch and ProMedica prohibits these three hospital systems from agreeing with other healthcare providers to limit marketing or to divide any geographic market or territory. It also prohibits, subject to very limited exceptions, communications among any of the defendants regarding their marketing activities. In addition, the proposed settlement requires that the settling hospitals implement compliance measures, including appointing an antitrust compliance officer to enforce the agencies’ conditions of the settlement for five years, designed to prevent the reoccurrence of similar anticompetitive practices going forward.

Julie Veldman

Julie A. Veldman is an associate in the Columbus office of Barnes & Thornburg LLP, and a member of the firm’s Healthcare Department. Ms. Veldman delivers guidance on healthcare legal issues, including various federal and state regulatory matters, governance, mergers and acquisitions, physician employment matters, physician-hospital contracting, and healthcare antitrust. 

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