Antitrust Law Daily Fact finder must weigh U.S., Michigan market allocation allegations against hospital
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Friday, June 2, 2017

Fact finder must weigh U.S., Michigan market allocation allegations against hospital

By Robert B. Barnett Jr., J.D.

The U.S. Department of Justice Antitrust Division and the state of Michigan were not entitled to summary judgment in a suit alleging that rural acute-care hospitals conspired to restrain trade in their part of southern Michigan because material questions remained as to whether the two hospitals actually reached an agreement to allocate markets, the federal district court in Ann Arbor, Michigan, has ruled. The trier of fact will determine whether one hospital’s decision not to market its services in the other hospital’s "area" was the result of an illegal agreement or merely a unilateral, legitimate business decision one hospital made to ensure continued referrals from the other hospital (U.S. v. W.A. Foote Memorial Hospital d/b/a Allegiance Health, May 31, 2017, Levy, J.).

W.A. Foote Memorial Hospital, d/b/a Allegiance Health is an acute-care hospital in Jackson County, Michigan. Hillsdale Community Health Center is an acute-care hospital in neighboring Hillsdale County. In essence, they are competitors, although Allegiance offers higher acuity services in the areas of oncology, cardiovascular, and orthopedic care that Hillsdale does not offer. The U.S. and Michigan filed suit in Michigan federal district court, alleging that Allegiance and Hillsdale illegally agreed at least since 2009 not to compete in their area of southern Michigan. Specifically, they allege that Allegiance agreed to stop marketing its services in Hillsdale County in return for Hillsdale referring oncology, cardiovascular, and orthopedic patients to Allegiance. The complaint alleges a violation of both §1 of the Sherman Act and §2 of the Michigan Antitrust Reform Act. Because the Michigan law tracks the federal law, a violation of the Sherman Act will also be a violation of the Michigan Antitrust Reform Act. Allegiance filed a partial summary judgment motion, arguing that the full rule of reason analysis should be used to determine whether the agreement violated the Sherman Act, rather than the "quick look" test. The U.S. and Michigan then filed a motion for summary judgment, arguing that an agreement clearly existed and that it was per se unlawful.

Agreement to restrain trade. Compelling evidence existed that the two hospitals had entered into an agreement. For example, several senior employees at Allegiance had referred to their relationship with Hillsdale as an agreement. Even so, the court said, other evidence pointed to the possibility that Allegiance had made a unilateral business decision not to market its services in Hillsdale County so as not to imperil the referrals it was getting from Hillsdale for the services that Hillsdale did not provide. Allegiance’s CEO, for example, referred in a deposition to the decision not to market as "our strategy." She described the decision not to market as an independent choice based on experience in knowing what marketing was effective. Because the evidence in a summary judgment motion must be viewed in favor of the non-moving party, the court concluded that it could not grant the summary judgment because material questions remained as to which of the two interpretations of the relationship between the hospitals was more plausible. The court, therefore, denied the U.S. and Michigan’s motion for summary judgment.

Antitrust principles. On the question of whether the agreement would be evaluated under the full rule of reason analysis or the "quick look" analysis, the court punted. The proper analysis would not be determined, the court said, until such time as the existence of the agreement was established and its structure determined. As a result, it denied Allegiance’s partial motion for summary judgment.

The case is No. 15-cv-12311.

Attorneys: Andrew Robinson, U.S. Department of Justice, for the United States. Doron Yitzchaki (Dickinson Wright PLLC) and James Michael Burns (Baker Donelson PC) for W.A. Foote Memorial Hospital.

Companies: W.A. Foote Memorial Hospital

MainStory: TopStory Antitrust MichiganNews AntitrustDivisionNews

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