Antitrust Law Daily Michigan hospital operator settles long-running market allocation action
Friday, February 9, 2018

Michigan hospital operator settles long-running market allocation action

By Jeffrey May, J.D.

Facing a March 6 trial date, a Michigan hospital operator has agreed to settle a suit brought by the U.S. Department of Justice Antitrust Division and the State of Michigan, alleging that the hospital operator conspired with a rival hospital to restrict marketing of services. Henry Ford Allegiance Health (Allegiance), formerly W.A. Foote Memorial Hospital, is prohibited from agreeing with other hospitals and health care providers to limit marketing or to allocate customers, markets, or territories between providers, under the terms of a proposed consent decree. The settlement also prohibits improper communications with competitors about marketing efforts (U.S. v. W.A. Foote Memorial Hospital, Case No. 2:15-cv-12311-JEL-DRG).

The settlement, which requires court approval, resolves a suit brought in 2015 against four South Central Michigan hospital operators. The complaint named Allegiance Health, as well as Hillsdale Community Health Center, Community Health Center of Branch County, Michigan, and ProMedica Health System Inc. The other three defendants agreed to settle the charges at the time the complaint was filed.

The Justice Department and state alleged that the defendants entered into naked restraints of trade that were per se unlawful under the Sherman and Michigan Antitrust Acts. The defendants allegedly conspired with rival hospitals in neighboring counties to restrict marketing in each other’s respective counties, so as not to solicit certain customers.

According to the Justice Department, the proposed settlement announced today goes beyond the settlements entered with the other hospital operators in 2015.The proposed final judgment would prevent Allegiance from engaging in improper communications with competing providers regarding their respective marketing activities and entering into any improper agreement to allocate customers or to limit marketing. It would prohibit Allegiance, located in Michigan's Jackson County, from continuing to carve out nearby Hillsdale County, home to Hillsdale Community Health Center, from its marketing and business development activities. The proposed settlement further would require Allegiance to hire an antitrust compliance officer.

The settlement also includes a provision that requires the defendant to pay the United States $5,000 for pre-trial litigation costs and to pay the State of Michigan $35,000 to partially cover its costs. An agreement to reimburse the Justice Department for costs is unusual. The Justice Department has, however, recently undertaken an effort to include in consent decree provisions that entitle the government to recover costs for enforcement efforts with respect to the final judgments.

Enforcement of final judgment. As part of an effort by the Antitrust Division to make consent decree enforcement easier, the government included provisions in the settlement that would require Allegiance to reimburse the government for costs and fees in enforcing the final judgment. It also includes provisions that permit the government to establish a violation by a preponderance of the evidence, instead of a clear-and-convincing standard of proof that applies in the absence of such an agreement. These types of provisions have been the topic of a number of recent speeches by top Antitrust Division officials and included in other recent settlements.

Attorneys: Garrett Liskey for U.S. Department of Justice. Dee J. Pascoe, Michigan Department of Attorney General, for State of Michigan. Doron Yitzchaki (Dickinson Wright PLLC) for W.A. Foote Memorial Hospital.

Companies: W.A. Foote Memorial Hospital; Henry Ford Allegiance Health

MainStory: TopStory Antitrust AntitrustDivisionNews MichiganNews

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