[Federal Register Volume 61, Number 22 (Thursday, February 1, 1996)]
[Notices]
[Pages 3731-3734]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1794]



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DEPARTMENT OF JUSTICE
Antitrust Division
[Civil Action No. 395CV01946RNC]


United States v. HealthCare Partners, Inc., et al.; Public 
Comments and United States' Response to Public Comments

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States publishes below the comments received on 
the proposed Final Judgment in United States versus HealthCare 
Partners, Inc., et al., Civil Action No. 395CV01946RNC, United States 
District Court for the District of Connecticut, together with the 
response of the United States to the comments.
    Copies of the response and the public comments are available on 
request for inspection and copying in Room 215 of the Antitrust 
Division, U.S. Department of Justice, 325 7th Street, N.W., Washington, 
D.C. 20004, and for inspection at the Office of the Clerk of the United 
States District Court for the District of Connecticut, 450 Main Street, 
Hartford, Connecticut 06103.
Rebecca P. Dick,
Deputy Director of Operations, Antitrust Division.
    United States of America, and State of Connecticut, ex rel., 
Richard Blumenthal, Attorney General, Plaintiffs, vs. HealthCare 
Partners, Inc., Danbury Area IPA, Inc., and Danbury Health Systems, 
Inc., Defendants. [Civil Action No. 395CV01946RNC]

January 18, 1996.

United States' Response to Public Comments

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act (commonly referred to as the ``Tunney Act''), 15 U.S.C. 
16(b)-(h), the United States hereby responds to public comments 
regarding the Consent Decree proposed as the basis for settling this 
proceeding in the public interest. After careful consideration of these 
comments, the United States concludes that the proposed Consent Decree 
will provide an effective and appropriate remedy for the antitrust 
violations alleged in the Complaint. Once the public comments and this 
Response have been published in the Federal Register, pursuant to 15 
U.S.C. 16(d), the United States will urge the Court to enter the 
Consent Decree as originally proposed.
    On September 13, 1995, the United States and the State of 
Connecticut filed a Complaint alleging that Defendants HealthCare 
Partners, Inc., Danbury Area IPA, Inc., and Danbury Health Systems, 
Inc. violated Section 1 of the Sherman Act, 15 U.S.C. Sec. 1. The 
Complaint also charges that Defendant Danbury Health Systems, Inc. 
violated Section 2 of the Sherman Act, 15 U.S.C. Sec. 2. Simultaneously 
with the filing of the Complaint, the United States and the State of 
Connecticut filed a proposed Consent Decree, a Stipulation signed by 
all parties to entry of the Decree following compliance with the Tunney 
Act, and a Competitive Impact Statement (CIS).
    Pursuant to the Tunney Act, on September 27, 1995, the Defendants 
filed the required description of certain written and oral 
communications made on their behalf. A summary of the terms of the 
proposed Decree and the CIS and directions for the submission of 
written comments were published in the Danbury News-Times for seven 
consecutive days, from September 22, through September 29, 1995. The 
proposed Consent Decree and the CIS 

[[Page 3732]]
were published in the Federal Register on October 4, 1995. 60 Fed. Reg. 
52014 (1995).
    The 60-day period for public comments began on October 4, 1995, and 
expired on December 4, 1995. Two comments were submitted; the United 
States is filing them as attachments to this Response. The United 
States has concluded that the Consent Decree reasonably, adequately, 
and appropriately addresses the harm alleged in the Complaint. 
Therefore, the United States urges that following publication of the 
comments and this Response, this Court hold that entry of the proposed 
Consent Decree would be in the public interest.

I.

Background

    Danbury Health Systems, Inc. (``DHS'') owns the Danbury Hospital 
which is a 450-bed acute care facility. It is the sole source of acute 
inpatient care in the Danbury area and possesses a monopoly in general 
acute inpatient care. The Hospital also provides outpatient surgical 
care and other services.
    By 1992, managed care organizations had recruited a sufficient 
number of physicians with active staff privileges at Danbury Hospital 
to offer managed care plans to employers and individuals in the Danbury 
area. The introduction of managed care plans into the Danbury area 
reduced the Hospital's market power in inpatient services and decreased 
the number of hospital admissions and length of hospital stays. Managed 
care also resulted in increased competition among the doctors in 
Danbury and reduced referrals to Danbury Office of Physician Services 
(``DOPS''), the Hospital's affiliated multispecialty practice group.
    On May 6, 1994, DHS implemented the first of two means it had 
developed to forestall the continued development of managed care plans 
in Danbury. DHS and virtually every doctor on its Hospital's medical 
staff incorporated HealthCare Partners. The Hospital and the physicians 
authorized HealthCare Partners to represent them jointly in 
negotiations with managed care organizations. Danbury Area IPA 
(``DAIPA'') was also formed on that date as a vehicle for physician 
ownership in HealthCare Partners. Each doctor who joined DAIPA 
contracted with HealthCare Partners and authorized it to negotiate fees 
on the doctor's behalf.
    DHS's second means of forestalling the continued development of 
managed care plans was the exercise of its control over admitting 
privileges at the Hospital. DHS implemented a Medical Staff Development 
Plan to reduce competition among the doctors. It also proposed to amend 
its bylaws to require the active medical staff to perform a minimum 
volume of outpatient procedures at the Hospital rather than at 
competing outpatient facilities.
    These actions, along with the additional conduct alleged in the 
Complaint, violated Sections 1 and 2 of the Sherman Act.

II.

Response to Public Comments

    The two comments on the Consent Decree are both from physicians 
practicing in a group of neonatalogists, Complete Newborn Care. Neither 
objects to entry of the proposed Decree, nor contends that the Decree 
does not adequately and appropriately remedy the violations alleged in 
the Complaint. Dr. Alicia Perez says, in effect, that DHS has 
monopolized the delivery of healthcare in the Danbury area through 
additional means not charged in the Complaint or addressed in the 
Consent Decree. According to Dr. Perez, the formation of DOPS, its 
size, and the administrative functions of the Hospital performed by 
DOPS members unreasonably restrain competition among physicians. Dr. 
Perez asserts that Hospital physicians have improperly induced non-DOPS 
physicians to refer to DOPS and to use the Hospital's facilities. As 
set forth more fully below, Dr. Perez's comments do not provide a basis 
for not entering the Decree.
    Similarly, Dr. Diana M. Lippi's comments do not raise any grounds 
for not entering the Decree. Rather, Dr. Lippi simply urges the 
Department to continue its investigation of DHS in light of the 
relationship between the Hospital and DOPS on which Dr. Perez commented 
and in order to address conduct of the Hospital occurring subsequent to 
the events set forth in the Complaint and redressed in the Decree.
    Dr. Lippi contends that the Hospital is taking new actions to 
restrict medical staff privileges. Dr. Lippi's comments in fact support 
entry of the Decree, in that the Decree limits the Hospital's ability 
to use its control over staff privileges to reduce competition. Entry 
of the Decree gives the Court the authority to punish such actions if 
they violate the Decree. Moreover, the Tunney Act, as explained below, 
does not authorize the Court to reject the Decree on the grounds that 
the Hospital is, or will, abuse its control over privileges in ways 
that independently violate the antitrust laws, but are not challenged 
in the Complaint.

III.

The Legal Standard Governing The Court's Public Interest Determination

    The Tunney Act directs the court to determine whether entry of the 
proposed Decree ``is in the public interest.'' 15 U.S.C. Sec. 16(e). In 
making that determination, ``the court's function is not to determine 
whether the resulting array of rights and liabilities is one that will 
best serve society, but only to confirm that the resulting settlement 
is within the reaches of the public interest.'' United States v. 
Western Elec. Co., 993 F.2d 1572, 1576 (D.C. Cir.), cert. denied, 114 
S. Ct. 487 (1993) (internal quotation and citation omitted).\1\

    \1\ The Western Electric decision concerned a consensual 
modification of an existing antitrust decree. The Court of Appeals 
assumed that the Tunney Act was applicable.
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    The Court should evaluate the relief set forth in the Decree in 
light of the claims alleged in the Complaint and should enter the 
Decree if it falls within the government's ``rather broad discretion to 
settle with the defendant within the reaches of the public interest.'' 
United States v. Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995).
    The Court is not ``to make de novo determination of facts and 
issues.'' Western Elec., at 1577. Rather, ``[t]he balancing of 
competing social and political interests affected by a proposed 
antitrust decree must be left, in the first instance, to the discretion 
of the Attorney General.'' Id. (internal quotation and citation omitted 
throughout). In particular, the Court must defer to the Department's 
assessment of likely competitive consequences, which it may reject 
``only if it has exceptional confidence that adverse antitrust 
consequences will result--perhaps akin to the confidence that would 
justify a court in overturning the predictive judgments of an 
administrative agency.'' Id.\2\

    \2\ The Tunney Act does not give a court authority to impose 
different terms on the parties. See, e.g., United States v. American 
Tel. & Tel. Co., 552 F. Supp. 131, 153 n.95 (D.D.C. 1982), aff'd sub 
nom. Maryland v. United States, 460 U.S. 1001 (1983) (Mem.); accord 
H.R. Rep. No. 1463, 93d Cong., 2d Sess. 8 (1974). A court, of 
course, can condition entry of a decree on the parties' agreement to 
a different bargain, see, e.g., AT&T, 552 F. Supp. at 225, but if 
the parties do not agree to such terms, the court's only choices are 
to enter the decree the parties proposed or to leave the parties to 
litigate.
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    The Court may not reject a decree simply ``because a third party 
claims it could be better treated.'' Microsoft, 56 F.3d at 1461 n.9. 
The Tunney Act does not empower the Court to reject the remedies in the 
proposed Decree based 

[[Page 3733]]
on the belief that ``other remedies were preferable.'' Id. at 1460.
    To a great extent it is the realities and uncertainties of 
litigation that constrain the role of courts in Tunney Act proceedings. 
See United States v. Gillette Co., 406 F. Supp. 713, 715-16 (D. Mass. 
1975). As Judge Greene has observed:

    If courts acting under the Tunney Act disapproved proposed 
consent decrees merely because they did not contain the exact relief 
which the court would have imposed after a finding of liability, 
defendants would have no incentive to consent to judgment and this 
element of compromise would be destroyed. The consent decree would 
thus as a practical matter be eliminated as an antitrust enforcement 
tool, despite Congress' directive that it be preserved.

United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 151 
(D.D.C. 1982), aff'd sub nom. Maryland v. United States, 450 U.S. 1001 
(1983) (Mem). Indeed, where, as here, the Consent Decree comes before 
the Court at the time the Complaint is filed, ``the district judge must 
be even more deferential to the government's predictions as to the 
effect of the proposed remedies * * *.'' Microsoft, 56 F.3d at 1461.
    Moreover, the entry of a governmental antitrust decree forecloses 
no private party from seeking and obtaining appropriate antitrust 
remedies. Thus, Defendants will remain liable for any illegal acts, and 
any private party may challenge such conduct if and when 
appropriate.\3\ If any of the commenting parties has a basis for suing 
Defendants, they may do so. The legal precedent discussed above holds 
that the scope of a Tunney Act proceeding is limited to whether entry 
of this particular proposed Consent Decree, agreed to by the parties as 
settlement of this case, is in the public interest.

    \3\ The commenters in fact previously sued Danbury Hospital and 
DOPS and obtained injunctive relief against them from this Court. It 
is the understanding of the United States that the commenters have 
filed a motion before Judge Dorsey in Perez, et al. v. Danbury 
Hospital and Danbury Office of Physician Services, P.C., Civil 
Action No. 3:94-CV416(PCD), to hold defendants in that case in 
contempt. The contempt motion apparently rests at least in part on 
some of the conduct that Dr. Perez believes the United States should 
now investigate in connection with this case, namely, an allegation 
that DOPS physicians have coerced non-DOPS obstetricians to refer 
neonatalogy patients to DOPS neonatalogists. The United States is 
investigating whether that alleged conduct occurred and, if it did, 
whether it violates the Final Judgment proposed in this action.
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    Finally, the Tunney Act does not contemplate judicial reevaluation 
of the wisdom of the government's determination of which violations to 
allege in the Complaint. The government's decision not to bring a 
particular case on the facts and law before it at a particular time, 
like any other decision not to prosecute, ``involves a complicated 
balancing of a number of factors which are peculiarly within [the 
government's] expertise,'' such as ``whether [the government's] 
resources are best spent on this violation or another, whether the 
[government] is likely to succeed if it acts, whether the particular 
enforcement action requested best fits the [government's] overall 
policies, and, indeed, whether the [government] has enough resources to 
undertake the action at all.'' Heckler v. Chaney, 470 U.S. 821, 831 
(1985); see also Maryland v. United States, 460 U.S. 1001, 1106 (1983) 
(Rehnquist, J., dissenting from summary affirmance). The Court may not 
``reach beyond the complaint to evaluate claims that the government did 
not make and to inquire as to why they were not made.'' 56 F.3d at 1459 
(emphasis added). Entry of the proposed Decree will not prevent the 
government from investigating and challenging, if appropriate, conduct 
not addressed in the current action.

IV.

Conclusion

    The Tunney Act requires that public comments and this Response be 
published in the Federal Register. When that publication has been 
accomplished, the United States will notify the Court and urge entry of 
the proposed Consent Decree based on the Court's determination that the 
Decree is in the public interest.

    Respectfully submitted,
Mark J. Botti,
Pamela C. Girardi,
U.S. Department of Justice, Antitrust Division.
Christopher F. Droney,
United States Attorney.
Carl J. Schuman,
Assistant U.S. Attorney.

Certificate of Service

    I, Mark J. Botti, hereby certify that copies of the Response to 
Public Comments in U.S. v. HealthCare Partners, Inc., et. al., Civ. No. 
395CV01946RNC was served on the 18th day of January 1996 by first class 
mail to counsel as follows:
William M. Rubenstein,
State of Connecticut,
David Marx, Jr.,
McDermott, Will & Emery.
James Sicilian,
Day, Berry & Howard

October 27, 1995.

Gail Kursh,
Chief, Professions and Intellectual Property Section/Health Care 
Task Force, Department of Justice, Antitrust Division, 600 E Street 
N.W. Room 9300, Washington, D.C.

    Dear Ms. Kursh, The consent decree pending in Civil No. 395-CV-
01946-RNC concerning the antitrust suit brought by the Justice 
Department and the Connecticut Attorney General's Office against 
Danbury Health Systems (DHS) and the Danbury Area IPA (DAIPA) should 
be reconsidered in light of the following information.
    The formation of the DAIPA is only a small part of a more far-
reaching attempt by DHS to willfully monopolize health care in the 
Danbury area.
    Despite the outcome of this case, there continues to be ongoing 
and extensive activity by DHS to maintain its monopoly in inpatient 
care and extend this monopoly into the outpatient care arena. These 
activities are a blatant attempt to eliminate competition from area 
physicians and other outpatient services. They promote the almost 
exclusive use of the services of the physician employees of the 
Danbury Office of Physician Services, P.C. (DOPS), other physicians 
affiliated with Danbury Hospital or the new ``Foundation'' which is 
forming, and outpatient ancillary services affiliated with or owned 
by DHS.
    The consent decree prohibits activities by DHS to control 
medical staff privileges to reduce competition. However, at the last 
medical staff meeting on 10/10/95, the Hospital railroaded through 
amendments to the Medical Staff Bylaws including the establishment 
of a committee that could potentially limit the size and mix of the 
medical staff. This committee is to prescreen and interview 
applicants for medical staff privileges before they are evaluated by 
the medical department in which they seek privileges. This could 
allow the committee to discourage applicants representing 
competition to DHS and DOPS from continuing their application 
process. It could allow this committee, and not the competitive 
market, to decide which specialities in the area are over-
represented or understaffed and could potentially allow DHS to 
expand DOPS to the detriment of competing groups.
    Another amendment dissolved the category of ``courtesy staff''. 
Physicians with courtesy privileges are generally affiliated with 
competing hospitals. They do, however, admit a percentage of their 
patients to Danbury Hospital but are not required to fulfill many of 
the responsibilities of an active member of the Danbury Hospital 
staff. By eliminating this category, their patients would then be 
admitted to the ``house 

[[Page 3734]]
doctor'' (DOPS) who would use DOPS consultants for any specialty 
services needed.
    These amendments were ``passed'' without observing the process 
outlined in the Medical Staff Bylaws.
    The medical staff is further controlled by DHS through DOPS. 
Although DOPS physicians constitute only about 25% of the medical 
staff at Danbury Hospital, an arrangement has been established which 
places a DOPS physician as Chairman of each medical department 
(except one, as a result of a per-existing contract) and a DOPS 
physician as Chief of virtually every medical service in which there 
are DOPS physicians. By virtue of their positions of power, DOPS 
physicians control the Executive Committee and 33% or more of all 
but one of the other committees of the medical staff.
    The Chairmen of the departments are, in part, paid by the 
Hospital and, therefore, directed by Hospital recommendations and 
not the desires of the members of their departments. Indeed, when 
asked to whom they report, they reply, the President of the Hospital 
and CEO of DHS, rather than to the president of DOPS, their 
employer. I have knowledge of department Chairmen using their 
position as chairmen to influence referrals of patients to their won 
corporation, DOPS.
    I urge you to continue your investigation of the antitrust 
activities of DHS and Danbury Hosptial to allow fair and 
unrestrained competition for health care services in our community.
          Sincerely,
Diana M. Lippi.

October 23, 1995.

Gail Kursh,
Chief, Professions and Intellectual Property Section/Health Care 
Task Force, Department of Justice, Antitrust Division, 600 E Street, 
N.W., Room 9300, Washington, D.C. 20530.

By facsimile transmission and by regular mail.

    Dear Ms. Kursch: In response to the Legal Notice in the Danbury 
News Times, I have several concerns regarding the proposed final 
Judgment against Health Partners Inc., et al., Civil No. 395-CV-
01946-RNC.
    Despite the objections to the Final judgment filed in the civil 
complaint, it is my opinion that Danbury Health Systems continues to 
protect its monopoly of health care in the Greater Danbury Area.
    The anti-competitive activities of Danbury Health Systems Inc., 
its subsidiaries, and affiliates extends beyond the hospital and 
community walls. As the biggest employer in town the economic 
ramifications of its business associations and its political network 
are too powerful to allow for legitimate competition to exist in any 
arena.
    Control and monopoly of inpatients at Danbury Hospital is 
accomplished through the affiliated physician corporation the 
hospital created in 1985, Danbury Office of Physician Services, P.C. 
(DOPS). The agreement between Danbury Hospital and DOPS physicians 
directly and indirectly restrains competition among physicians in 
Danbury, in violation of Section 1 of the Sherman Act.
    DOPS physicians comprise approximately one fourth of the Medical 
Staff. However, these physicians are employed (paid) by Danbury 
Hospital to hold positions of power and thus control over the 
general Medical Staff. DOPS physicians are Chairmen of all but one 
of the clinical Departments, Chiefs of virtually all sections within 
the clinical departments, and hold the majority vote on many Medical 
Staff Committees. The Chairmen of the clinical departments at 
Danbury Hospital are accountable to the hospital's CEO and not to 
the members of their respective departments. Chairmen of clinical 
departments actively direct patient referrals to DOPS physicians, 
thus taking advantage of their administrative role for their own 
economic self-interest. DOPS physicians are in control of Medical 
Staff Committees, including most Peer Review Committees, and the 
activities of these committees are overwhelmingly targeted against 
non-DOPS physicians. Chairmen of clinical departments are free to 
disband a committee without discussion with or prior notification of 
its members or the President of the Medical Staff. Although DOPS 
physicians are not employed by Danbury Hospital directly, they are 
expected to support the philosophy and the wishes of the 
administration of the hospital.
    Non-DOPS physicians are also intimidated and scare tactics are 
used by administrators to induce referrals to DOPS physicians. There 
are reports of special favors and/or privileges (i.e., O.R. 
schedules) being used as rewards to those physicians that refer to 
DOPS and use Danbury Hospital facilities exclusively.
    During the last few weeks such tactics have been used to coerce 
community obstetricians (chosen to join the soon to be established 
HMO) to refer only to DOPS neonatologists. This practice disregards 
the prior established policy developed by the members of the 
Department of Pediatrics and agreed to by the members of the 
Department of Obstetrics and Gynecology. As a result, this practice 
has significantly reduced the referrals to my group.
    I enclose a list of community pediatricians affiliated with 
Danbury Hospital. All you need to do to verify this anti-competitive 
practice is to ask the pediatricians to describe how they choose a 
neonatologist for referrals.
    Respectfully,
Alicia Perez,

Pediatricians & Neonatologists Associated with Danbury Hospital

Brockfield

John Gundy, MD & Sarojini Kurra, MD, 300 Federal Road, 775-1118

Danbury

Lorraine Braza, MD, 69 Sandpit Road, 798-8228

Costom for Pediatrics Medicines, P.C.

Robert Golenbock, MD, Anna Paula Machado, MD, Joan Magner, MD, 107 
Newtown Road, Suite 1D, 790-0822

Child Care Associates

Pushpa Mani, M.D., Rajadevi Satchi, MD, 57 North Street, Suite 209, 
791-9599
Barry Keller, MD, 16 Hospital Avenue, 743-1201
Uwa Koepke, MD, 57 North Street, Suite 311, 792-4021
Christopher Randolph, MD & Martin Randolph, MD, 70 Deer Hill Avenue, 
792-4021

Pediatric Associates

Leon Baczeski, MD, Bruce Cohen, MD, John Erti, MD, David Gropper, 
MD, Nandini Kogekar, MD, L Robert Rubin, MD, 41 Germantown Road, 
744-1620

Pediatric Health Ctr./Danbury Hospital

Jack S. C. Fong, MD, Chief, Veronica Ron, MD, Gary Wenick, MD, 73 
Stand Pit Road, 797-7216

New Fairfield

Oscar Lascano, MD, Fairwood Professional Building, 746-6000

New Milford

Josef Burton, MD, 23 Poplar Street, 355-4113
Vadakkekara Kavirajan, MD, 7 Pickett District Road, 355-4195

Candlewood Pediatrics

Diane D'Isidori, MD, Wendy Drost, MD, Evan Hack, MD, 17 Poplar 
Street, 355-8190

Newton

Humberto Bauta, MD, Danbury Newton Road, 426-3267
Alex Lagut, MD, 18 Church Hill Road, 426-1818

Pediatric Health Ctr. of Newton

Thomas Draper, MD, 184 Mount Pleasant Road, 426-2400

Ridgefield

Ridgefield Pediatrics

Robert Elisofon, MD, Susan Leib, MD, James Sheehan, MD, 38B Grove 
Street, 438-9557

Southberg

Southberg Pediatrics

Susan Beris, MD, 108 Main Street North, 264-9200

Neonatologists

Neonatologists, Dept. of Pediatrics, Danbury Hospital

Edward James, MD, Chief, Laura K. Lasley, MD, 24 Hospital Avenue, 
Danbury, CT 06810, 797-7150

Complete Newborn Care

Diana Lippi, MD, Alicia Perez, MD, Joseph M. Tuggle, MD, 57 North 
Street, Suite 408, Danbury, CT 06810, 790-4262

[FR Doc. 96-1794 Filed 1-31-96; 8:45 am]
BILLING CODE 4410-01-M