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From Antitrust Law Daily, October 24, 2016

U.S. consent decree over alleged market allocation by West Virginia hospital operators approved

By Jeffrey May, J.D.

A consent decree, resolving Department of Justice Antitrust Division allegations that two West Virginia hospital operators conspired to allocate territories by agreeing not to advertise in the other’s respective county was approved by the federal district court in Charleston, West Virginia. The final judgment, which prohibited the hospital operators—Charleston Area Medical Center, Inc. and St. Mary’s Medical Center, Inc.—from entering into such agreements, limited marketing communications between the two except in certain circumstances, and established procedures to ensure compliance with the final judgment, was in the public interest (U.S. v. Charleston Area Medical Center, Inc., October 21, 2016, Copenhaver, J.).

In April, the Antitrust Division filed its complaint against Charleston Area Medical Center (CAMC), which operates four general acute-care hospitals in the Charleston area and is the largest hospital system in West Virginia, and St. Mary’s, which operates a general acute-care hospital in Huntington. According to the government, CAMC and St. Mary’s entered into a "gentleman’s agreement" under which each firm agreed not to market in the other firm's home territory. The defendants agreed that St. Mary’s "would not advertise on billboards or in print in Kanawha County [where Charleston is located] and that CAMC would not advertise on billboards or in print in Cabell County [where Huntington is located]." The challenged agreement was alleged to be an unreasonable restraint of trade because it limits competition in attracting patients.

Under the terms of the final judgment, approved by the court on October 21, CAMC and St. Mary’s are prohibited from agreeing with other healthcare providers, including hospitals and physicians, to limit marketing or to divide any geographic market or territory. The final judgment also prohibits communications between the defendants about their marketing activities, subject to limited exceptions. In addition, CAMC and St. Mary’s have agreed to implement compliance measures, including the appointment of an antitrust compliance officer.

FTC merger challenge. While the final judgment will not expire for at least five years, the court’s approval of the settlement brings to a close a period of intense federal antitrust scrutiny of St. Mary’s business practices. In November 2015, the FTC issued an administrative complaint, challenging St. Mary’s proposed merger with Cabell Huntington Hospital, Inc. The agency alleged that the transaction, if allowed to proceed, would establish a dominant firm with near monopoly power in the general acute care inpatient hospital services and outpatient surgical services markets in various counties in West Virginia and Ohio. Ultimately, the agency dropped the merger challenge in July, in light of a new West Virginia law and the West Virginia Health Care Authority’s decision to approve a cooperative agreement between the hospitals.

The case is No. 2:16-cv-03664.

Attorneys: Barry L. Creech, U.S. Department of Justice, for the United States. Robert W. McCann (Drinker Biddle & Reath) for Charleston Area Medical Center, Inc. David W. Simon (Foley & Lardner LLP) and James W. Thomas (Jackson Kelly PLLC) for St. Mary's Medical Center, Inc.

Companies: Charleston Area Medical Center, Inc.; St. Mary’s Medical Center, Inc.; Cabell Huntington Hospital, Inc.

MainStory: TopStory AcquisitionsMergers Antitrust AntitrustDivisionNews WestVirginiaNews

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