Health Care Law Blog

DOJ and State of Michigan Bring Antitrust Lawsuit Against Four Michigan Hospitals Three Settle Charges Immediately and One Vows to Fight

The U.S. Department of Justice (“DOJ”), together with the Michigan Attorney General (“AG”), recently filed a lawsuit alleging that four hospital systems located in Southern Michigan violated antitrust laws by agreeing not to compete with one another.

The civil lawsuit was filed in the U.S. District Court for the Eastern District of Michigan and alleged that the four hospitals agreed not to market or advertise themselves in each others’ territories, which constitutes “unreasonable restraints of trade that are per se illegal” under the Sherman Act and the Michigan Antitrust Reform Act.

Three of the defendants, Hillsdale Community Health Center in Jackson County, the Community Health Center of Branch County, and the Toledo-based ProMedica Health System (which operates hospitals in Lenawee County, Michigan), immediately settled the lawsuit.

The three defendants that settled agreed not to enter future agreements that limit or prohibit marketing and advertising activity within the territories of other competitors, or to communicate about marketing or advertising strategies. They also agreed to appoint antitrust compliance officers, cooperate with any further government investigations, and pay $5,000 to the State of Michigan to cover its costs.

However, Allegiance Health in Jackson County is fighting the charges. In a statement, Allegiance Health’s President and CEO, Georgia Fojtasek, stated that government regulators “misinterpreted Allegiance’s conduct.” She emphasized that “Allegiance now looks forward to its opportunity in court, confident that when the full facts are known, the court will rule in its favor.”

The Detroit News reports that the government’s complaint alleges that Allegiance Health and Hillsdale Community Health Center entered into a “hands off” agreement that has limited competitive marketing activity since at least 2009. Court documents allege that Fojtasek of Allegiance Health agreed to take a “Switzerland” approach toward Hillsdale Community Health Center, and even sent Hillsdale Community Health Center’s CEO a Swiss flag.

While hospital and physician collaboration is the new trend with ACOs and clinically integrated networks, the antitrust rules and regulations still apply.  Health systems should review their agreements to ensure that the DOJ or Michigan AG do not interpret their agreements as problematic under the Sherman Act or the Michigan Antitrust Reform Act.

Categories: Hospitals, News & Events