[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