DOJ Requires Termination of West Virginia Medical Center Market Allocation Agreement

On February 6, 2006, the Department of Justice ("DOJ") filed a lawsuit in U.S. District Court in Charleston, West Virginia alleging that a market allocation agreement between Charleston Area Medical Center, Inc. ("CAMC") and HCA Inc. ("HCA") violated Section 1 of the Sherman Act. The DOJ concurrently filed a proposed consent decree ("Final Judgment"), to which both the DOJ and CAMC agreed.

According to the Complaint, on April 17, 2002, CAMC and HCA signed a memorandum of understanding ("MOU") under which HCA would refrain from developing a cardiac-surgery program at Raleigh General Hospital ("Raleigh General"), located in Raleigh County, in exchange for CAMC's support of programs, including a cardiac-surgery program, at two of HCA's other hospitals. The DOJ alleged that Raleigh General was one of three locations in the region where the West Virginia Health Care Authority was likely to approve a new cardiac-surgery program. The DOJ asserted that HCA's Raleigh General was "one of [CAMC's] most significant potential competitors" for cardiac-surgery programs. The Complaint stated that CAMC wanted the new cardiac-surgery program to be located at one of the two other locations, because they were farther away from CAMC than Raleigh General and therefore would compete to a lesser extent with CAMC's cardiac-surgery program. The DOJ asserted in its complaint that CAMC had planned to "compete more aggressively" with Raleigh General if had obtained approval for a new cardiac-surgery program, and that the MOU deprived patients, health plans and employers of the potential benefits of such competition. The DOJ expressed its position that refraining from competition in one area cannot be justified by collaboration elsewhere, stating that "CAMC did not need HCA's agreement not to compete in Raleigh County in order to agree to support HCA's programs at [two of HCA's other hospitals]."

The Final Judgment provides that CAMC may not enforce the provisions of the MOU which are the subject of the Complaint. Also prohibited by the Final Judgment, in the absence of prior notice and approval from the United States, is any agreement with a health-care facility ("Facility") that (1) "allocates any cardiac-surgery service, market, territory, or customer;" (2) prohibits or restricts a Facility from applying for a certificate of need for cardiac-surgery services; or (3) otherwise prohibits or restricts a Facility from providing cardiac surgery. The Final Judgment will expire in ten years, although the Court may grant an extension.

Copies of the ComplaintFinal Judgment and Competitive Impact Statement can be found at these links.

For additional information about this Antitrust Development, please contact Toby G. Singer, leader of the Health Care Antitrust Practice.

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