[Federal Register Volume 70, Number 132 (Tuesday, July 12, 2005)]
[Notices]
[Pages 40058-40062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-13533]


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DEPARTMENT OF JUSTICE

Antitrust Division


Public Comment and Response on Proposed Final Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the comment 
received on the proposed Final Judgment in United States v. Bluefield 
Regional Medical Center, Inc. and Princeton Community Hospital 
Association, Inc., Civil Case No. 1:05-0234 (DAF), which was filed in 
the United States District Court for the Southern District of West 
Virginia, together with the United State's response to the comment, on 
June 30, 2005.
    Copies of the comment and the response are available for inspection 
at the Department of Justice, Antitrust Division, 125 Seventh Street, 
NW., Room 200, Washington, DC 20530, (telephone (202) 514-2481), and at 
the Office of the Clerk of the United States District Court for the 
Southern District of West Virginia, 601 Federal Street, Room 2303, 
Bluefield, West Virginia 24701. Copies of any of these materials may be 
obtained upon request and payment of a copying fee.

J. Robert Kramer II,
Director of Operations, Antitrust Division.
    United States District Court, for the Southern District of West 
Virginia, Bluefield Division.
    United States of America, Plaintiff, Bluefield Regional Medical 
Center, Inc., and Princeton Community Hospital Association, Inc., 
Defendants.
    Civil Action No. 1.05-0234.

Response to Competitive Impact Statement on Behalf of the West Virginia 
Health Care Authority

    The West Virginia Health Care Authority (hereinafter ``Authority'') 
files this response to the Competitive Impact Statement published on 
April 7, 2005. The purpose of this response is to set forth the 
Authority's analysis of the state action doctrine and to clarify the 
statutory powers conferred upon the Authority by the West Virginia 
Legislature.

I. Statement of Facts

A. History of Bluefield Regional Medical Center and Princeton Community 
Hospital

    Bluefield Regional Medical Center (hereinafter ``BRMC'') owns and 
operates a 265 bed acute care not-for-profit hospital in Bluefield, 
West Virginia. Princeton Community Hospital (hereinafter ``PCH'') owns 
and operates a 211 bed acute care not-for-profit hospital in Princeton, 
West Virginia. In addition to the Princeton facility, PCH also owns and 
operates St. Luke's Hospital, LLC, a 79 bed acute care hospital in 
Bluefield, West Virginia.
    BRMC and PCH are located in close proximity to one another in 
Mercer County, Southern West Virginia. Mercer County ranks 15 out of 55 
counties for the percentage of non-elderly adults without health 
insurance in the State of West Virginia.\1\ Thus, a significant portion 
of the population of this county is rural and uninsured.
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    \1\ Health Insurance in West Virginia: The Non-elderly Adult 
Report, July 2002 and reprinted May 2003 available at http://www.wvhealthpolicy.org/reports_2002.htm.
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B. Overview of the West Virginia Health Care Authority, Its Cost Based 
Rate Review System and the Certificate of Need Program

    By way of background, the Health Care Cost Review Authority 
(hereinafter ``HCCRA'') was created by the Legislature in 1983, as an 
autonomous agency within state government, W.Va. Code Sec.  16-29B-5. 
The Authority, then known as HCCRA, is charged with the responsibility 
for collecting information on health care costs, developing a system of 
cost control, and ensuring accessibility to appropriate acute care 
beds. W.Va. Code Sec.  16-29B-1, et seq.
    This same legislation expanded the HCCRA's responsibilities to 
include the administration of two previously enacted cost containment 
programs: (1) the Certificate of Need (hereinafter ``CON'') program, 
which is codified at W.Va. Code Sec. Sec.  16-2D-1, et seq.; and (2) 
the Health Care Financial Disclosure Act, which is codified at W.Va. 
Code Sec. Sec.  16-5F-1, et seq. In 1997, the Legislature enacted a 
statute renaming the HCCRA as the West Virginia Health Care Authority. 
W.Va. Code Sec.  16-29B-2.
    The Authority's purpose is ``to protect the health and well-being 
of the citizens of this state by guarding against unreasonable loss of 
economic resources as well as to ensure the continuation of appropriate 
access to cost-effective quality health care services.'' W.Va. Code 
Sec.  16-29B-1. This statute created a three member Board vested with 
the power to ``approve or disapprove hospital rates * * *.'' W.Va. Code 
Sec. Sec.  16-29B-5 & 19.
    The Authority establishes hospital rates for a group of payors 
termed ``nongovernmental payors'' or ``other payors.'' This group 
includes public and private insurers, persons who pay for their own 
hospital services and all other third party payors who are not 
government-related. W.Va. Code Sec. Sec.  16-29B-1, et seq.; Hospital 
Cost Based Rate Review System, 65 C.S.R. Sec. Sec.  5-1, et seq.
    The Authority is also statutorily responsible for establishing the 
nongovernmental average charge per discharge for inpatient and 
outpatient services for acute care hospitals in the state. Accordingly, 
once a year, hospitals may file a rate application with the Authority 
seeking a rate increase pursuant to W.Va. Code Sec.  16-29B-21. 
Ultimately, the Authority has the right to: (1) Approve a rate request, 
(2) modify a rate request, or (3) deny a rate request. W.Va. Code Sec.  
16-29B-19.
    In evaluating rate applications, the Authority utilizes a 
hospital's rate application as the primary source of information in 
setting its rates. The

[[Page 40059]]

Authority also utilizes other documents on file with the Authority as 
additional sources of data, such as audited financial statements, 
Uniform Reporting System Financial Reports, Medicare Cost Reports, the 
hospital's trial balance and the Uniform Billing (hereinafter ``UB'') 
UB-92 discharge bills. The Authority then compares the rate application 
to the audited financial statements, the Uniform Financial Report and 
the Medicare Cost Report in order to determine whether the information 
in the rate application is consistent, in all material aspects, with 
the other filings. The UB-92 information is used to compare discharges 
and case mix indices. The case mix for each hospital is determined from 
diagnostic related groups (hereinafter ``DRG'') weights in effect 
during the hospital's fiscal year.
    The Authority establishes several limits during the rate setting 
process and a hospital is expected to monitor each of these limits to 
ensure that it is in compliance with the Authority's established rates. 
W.Va. C.S.R. Sec.  65-5-10.2. If a hospital exceeds its approved rates, 
then it has an overage. This overage may be justified through case mix, 
outliers, new service or other events which could not have reasonably 
been foreseen. W.Va. C.S.R, Sec. Sec.  65-5-10.3-10.3.4. If any portion 
of the overage is not justified, then the hospital has an unjustified 
overage and is subject to penalties in subsequent years.
    With respect to the CON program, the Authority's Board has been 
empowered by the Legislature to enact legislative rules, to develop the 
State Health Plan and to consider CON applications. W.Va. Code 
Sec. Sec.  16-2D-3(b)(5); 16-2D-5. The law requires that a hospital 
obtain a CON prior to developing cardiac surgery or radiation therapy 
services.
    With respect to the State Health Plan Cardiac Surgery Standards, 
the Authority has exhibited a preference for joint applicants seeking 
to provide cardiac surgery services. The Authority encouraged parties 
to work together to ensure that services were not duplicated in the 
various geographic areas in order to ensure the development of a 
quality open heart program. Several studies have shown a direct 
correlation between high volume programs and success rates. Therefore, 
the Authority determined that joint applications would produce greater 
volumes and therefore provide greater quality of service.

C. CON Applications Filed by BRMC for the Development of Cardiac 
Surgery Services and PCH for the Development of a Comprehensive Cancer 
Center

    In 1999, BRMC submitted an application to offer cardiac surgery 
services. While a need appeared to exist in the area, the Authority 
denied this request because BRMC was not able to show that it would be 
able to attract a sufficient number of patients without working with 
other area hospitals, namely PCH. On January 23, 2003, BRMC, Charleston 
Area Medical Center, and PCH submitted a joint application for a CON to 
establish cardiac surgery services to be located at BRMC. This 
application was initially contested by Richard Lindsay, M.D., the West 
Virginia Consumer Advocate (hereinafter ``WVCA''), and the West 
Virginia Public Employees Insurance Agency (hereinafter ``WVPEIA''). 
WVCA and WVPEIA subsequently withdrew their requests for hearing and 
the Authority found that Richard D. Lindsay did not qualify as an 
affected party. On August 1, 2003, the applicants were granted a CON.
    On July 15, 2003, PCH and BRMC filed a letter of intent to develop 
a freestanding Community Hospital Comprehensive Cancer Center facility 
to be located at PCH. PCH proposed acquiring existing radiation therapy 
equipment from BRMC and submitted a CON application on July 30, 2003. 
Several parties requested affected party status and requested that a 
hearing be conducted with respect to this application. This matter was 
scheduled for hearing and ultimately cancelled. To date, the matter has 
never been heard and is still on hold.

D. BRMC and PCH Entered Into Agreements Regarding Their CON 
Applications Which Were Subsequently Investigated by the Department of 
Justice

    The Department of Justice (hereinafter ``DOJ'') sent letters to 
BRMC and PCH inquiring about agreements the hospitals entered into on 
January 30, 2003 (hereinafter called ``cardiac surgery and cancer 
center agreements''). The agreements applied to PCH's provision of 
certain cancer center services and the cardiac surgery agreement 
concerned BRMC's plan to establish and offer cardiac surgery services. 
The term of the agreements was for five years after the first cardiac 
surgery is performed at BRMC or the first cancer patient is treated at 
PCH, whichever is later. By their terms, the cardiac surgery and cancer 
center agreements applied to the following West Virginia counties: 
McDowell, Mercer, Monroe, Raleigh, Summers and Wyoming; and the 
following Virginia counties: Bland, Giles, and Tazwell.
    The DOJ contends that the cardiac surgery and cancer center 
agreements violate Section 1 of the Sherman Act, 15 U.S.C. 1 and ``have 
the effect of unreasonably restraining competition and allocating 
markets for cancer and cardiac surgery services to the detriment of 
consumers.'' (Complaint filed by DOJ on March 21, 2005 at ] 1.) The DOJ 
requested the following relief in its complaint: that the Court declare 
the cardiac surgery and cancer center agreements violate Section 1 of 
the Sherman Act, 15 U.S.C. 1 and that the Court enjoin the defendants 
from enforcing the agreements and to further prohibit the parties from 
entering into additional agreements to allocate cancer or cardiac 
surgery services. (Complaint at ] 30.)

II. ANALYSIS OF LAW

A. Applicable Law

    The United States Supreme Court case Parker v.  Brown, 317 U.S. 341 
(1943), serves as the legal foundation of the state action antitrust 
defense. This ``state action doctrine'' immunizes anticompetitve acts 
if taken pursuant to state policy. The Court later refined this 
doctrine in a series of cases.
    For example, in California Retail Liquor Dealers Ass'n v. Midcal 
Aluminum Inc., 445 U.S. 97 (1980) the United States Supreme Court 
articulated two criteria to be established before a party may qualify 
for immunity under the state action doctrine. First, there must be a 
clear articulation of the state policy in question. Second, the Court 
determined that the action in question must be actively supervised by 
the state.
    With respect to the clear articulation prong, the Court held that a 
private party seeking Sherman Act immunity under the state action 
doctrine need not point to a specific detailed legislative 
authorization for its challenged conduct as long as the state clearly 
intends to displace competition in a particular field. Southern Motor 
Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 64 
(1985). With respect to the active supervision prong, the Court has 
indicated that the state's supervision cannot be minimal. Patrick v. 
Burget 486 U.S. 94 (1988). Rather, the state officials must exercise 
ultimate control over the challenged anticompetitive conduct. Id at 
101.

[[Page 40060]]

B. Application of Existing Law to BRMC and PCH

    Courts have liberally applied the state action doctrine over the 
years.\2\ This has caused both the FTC and DOJ to challenge the 
applicability of the state action doctrine. For example, in September 
2003, the FTC issued a report analyzing the applicability of the state 
action doctrine.\3\ This report concluded that ``overly broad 
interpretations of the state action doctrine could potentially impede 
national competition policy goals.'' Id at p. 2. Recently, the DOJ and 
FTC issued a report which criticized state CON programs as promoting 
anticompetitive markets.\4\
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    \2\ See e.g., Askew v. DCH Regional Healthcare Authority, 995 
F.2d 1033 (11th Cir. 1994) and FTC v. Hospital Board of Directors of 
Lee County, 38 F.3d 1184 (11th Cir. 1994).
    \3\ Report of the State Action Task Force (Sept. 2003) available 
at http://www.ftc.gov/OS/2003/09/stateactionreport.pdf.
    \4\ Improving Health Care: A Dose of Competition, (July, 2004) 
available at http://www.ftc.gov/reports/healthcare/040723healthcarept.pdf.
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    Based upon comments contained in the Competitive Impact Statement, 
it appears that the DOJ has attempted to re-define the criteria for 
determining when the state action doctrine applies. However, this 
Competitive Impact Statement does not negate approximately fifty years 
of United States Supreme Court precedent. Existing law clearly provides 
that the actions of BRMC and PCH should qualify for immunity under the 
state action doctrine.
    With respect to the clear articulation prong of the two part test, 
the Authority was clearly created to control health care costs and to 
prevent the unnecessary duplication of services. W.Va Code Sec.  16-
29B-1. At their core, all CON programs control the development of 
services, or the health care market, in order to keep costs down.\5\ 
This is especially important in West Virginia, which has a high rate of 
uninsured individuals who already face difficulties in accessing health 
care.
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    \5\ W.Va. Code Sec.  16-29B-26 provides state antitrust immunity 
for the actions of health care providers under the Authority's 
jurisdiction, when such actions are made in compliance with orders, 
directives, rules or regulations issued or promulgated by the 
Authority's Board.
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    Therefore, the Authority controls the health care market by 
regulating entry into the market through its laws and regulations. 
W.Va. 16-2D-1, et seq.; 65 C.S.R. 7. For example, in order to be 
approved for a CON, the service must be needed and consistent with the 
State Health Plan. W.Va. Code Sec.  16-2D-9(b); Princeton Community 
Hospital v. State Health Planning and Development Agency, 328 S.E.2d 
164 (W.Va. 1985). In order to demonstrate the need for a service, a 
party often must conduct an analysis of the level of services being 
offered by existing providers and project the amount of services that 
will be needed in the future. If existing providers are not serving the 
population, then an unmet need exists. At a fundamental level this 
controls the market and allows only those providers that can establish 
need to enter the market. Thus, the West Virginia health care market is 
regulated and growth is controlled.
    In addition, the Authority has determined that in order to have a 
high volume, quality cardiac surgery project in Southern West Virginia, 
hospitals must coordinate their efforts. In the newly revised State 
Health Plan cardiac Surgery Standards, the Authority gave preference to 
joint applicants in this geographic area. BRMC and PCH filed a joint 
application for the development of cardiac surgery services which was 
ultimately approved. Previously, an individual application filed by 
BRMC was denied. The recently newly approved joint application will 
allow residents in Southern West Virginia to benefit from a quality 
program in close proximity to their homes.
    With respect to the active supervision prong, the Authority clearly 
has on-going supervision of West Virginia acute care hospitals. For 
example, the Authority establishes, on a yearly basis, the average 
charge per nongovernmental discharge that all acute care hospitals in 
the state may charge. The Authority has the power to impose significant 
penalties on those hospitals that do not comply with the Authority's 
established rates. The Authority has the power to collect financial 
disclosure from all covered entities, which includes acute care 
hospitals, in West Virginia on a yearly basis. In addition, the 
Authority has the right to approve or deny a CON for new institutional 
health services. The Authority's CON powers are very broad. Even after 
the CON is issued, parties must submit progress reports and request 
substantial compliance before a file may be closed. Further, the 
Authority retains oversight of a CON for at least three years after it 
is issued. In this regulatory environment, oversight clearly does 
exist.
    Rather than contend with the total picture, the DOJ narrowed its 
focus to only the written cardiac surgery and cancer center agreements. 
Although the Authority does not have standing to enforce the actual 
agreements, these agreements served as the basis for the CON 
applications submitted and filed by both parties. The Authority 
certainly has the power to regulate the CON process as well as oversee 
the hospital's rates.

III. Conclusion

    The Authority realizes that both PCH and BRMC have decided to enter 
into a consent decree to resolve the DOJ's investigation. The 
Authority's purpose in filing these comments is not to prevent this 
judgment from being entered, but rather is to clarify its statutory 
powers and set forth its opinion regarding the state action doctrine.

    United States of America, Plaintiff, v. Bluefield Regional 
Medical Center, Inc., and Princeton Community Hospital Association, 
Inc., Defendants.
    Civil Action No. 1:05-CV-00234.

Plaintiff United States Response to Public Comment

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h) (``APPA'' or ``Tunney Act''), the 
United States hereby responds to the one public comment received 
regarding the proposed Final Judgment in this case. After careful 
consideration of the comment, the United States continues to believe 
that the proposed Final Judgment will provide an effective and 
appropriate remedy for the antitrust violation alleged in the 
Complaint. The United States will move the Court for entry of the 
proposed Final Judgment after the public comment and this Response have 
been published in the Federal Register, pursuant to 15 U.S.C. 16(d).
    On March 21, 2005, the United States filed a Complaint alleging 
that Bluefield Regional Medical Center, Inc., (BRMC) and Princeton 
Community Hospital Association, Inc., (PCH) violated section 1 of the 
Sherman Act (15 U.S.C. 1) by entering into two agreements on January 
30, 2003, in which BRMC agreed not to offer many cancer services and 
PCH agreed not to offer cardiac-surgery services. At the same time the 
Complaint was filed, the United States also filed a proposed Final 
Judgment and a Stipulation signed by the United States and defendants 
consenting to the entry of the proposed Final Judgment after compliance 
with the requirements of the Tunney Act. Pursuant to those 
requirements, the United States filed a Competitive Impact Statement 
(``CIS'') with this Court on March 21, 2005; published the proposed 
Final Judgment, Stipulation, and CIS in the Federal Register on April 
4, 2005, see 70 FR 17117 (2005); and published a summary of the terms 
of the proposed Final Judgments and CIS, together with directions for 
the submission of written

[[Page 40061]]

comments relating to the proposed Final Judgment, in the Washington 
Post for seven days beginning on April 1, 2005 and continuing on 
consecutive days through April 7, 2005, and the Charleston Gazette, a 
newspaper of general circulation in the Southern District of West 
Virginia, beginning on April 4, 2005 and continuing on consecutive days 
through April 9, 2005, and on April 11, 2005. The 60-day period for 
public comments ended on June 5, 2005, and the United States received 
one comment as described below and attached hereto.

I. Background

    As explained more fully in the Complaint and CIS, the defendants' 
cancer and open-heart agreements effectively allocated markets for 
cancer and cardiac-surgery services and restrained competition to the 
detriment of consumers in violation of section 1 of the Sherman Act. 
The proposed Final Judgment will restore competition by annulling the 
BRMC-PCH agreements and prohibiting BRMC and PCH from taking actions 
that would reduce competition between the two hospitals for patients 
needing cancer and cardiac-surgery services. Entry of the proposed 
Final Judgment would terminate this action, except that the Court would 
retain jurisdiction to construe, modify, or enforce the provisions of 
the proposed Final Judgment and to punish violations thereof.

II. Legal Standard Governing the Court's Public Interest Determination

    Upon the publication of the public comment and this Response, the 
United States will have fully complied with the Tunney Act and will 
move the Court for entry of the proposed Final Judgment as being ``in 
the public interest.'' \1\ The Court, in making its public interest 
determination, shall consider:
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    \1\ 15 U.S.C. 16(e).

    (A) the competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.\2\
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    \2\ 15 U.S.C. 16(e)(1).

As the U.S. Court of Appeals for the District of Columbia Circuit has 
held, the Tunney Act permits a court to consider, among other things, 
the relationship between the remedy secured and the specific 
allegations set forth in the government's complaint, whether the 
proposed Final Judgment is sufficiently clear, whether enforcement 
mechanisms are sufficient, and whether the proposed Final Judgment may 
positively harm third parties.\3\
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    \3\ See United States v. Microsoft Corp., 56 F.3d 1448, 1458-62 
(D.C. Cir. 1995).
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    With respect to the adequacy of the relief secured by the proposed 
Final Judgment, courts have held that:

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.\4\
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    \4\ Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981) (emphasis 
added) (citations omitted). Cf. United States v. BNS Inc., 858 F.2d 
456, 464 (9th Cir. 1988) (holding that the court's ``ultimate 
authority under the [Tunney Act] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass''); see generally Microsoft, 56 F.3d at 1461 
(discussing whether ``the remedies [obtained in the decree are] so 
inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest' '').
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    ``[A] decree must be approved even if it falls short of the remedy 
the court would impose onits own, as long as it falls within the range 
of acceptability or is `witnin the reaches of public interest.' '' \5\ 
Furthermore,
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    \5\ United States v. AT&T Corp., 552 F. Supp. 131, 151 (D.D.C. 
1982) (citations omitted)(quoting Gillette, 406 F. Supp. at 716), 
aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see 
also United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 
(W.D. Ky. 1985) (approving the consent judgment even though the 
court would have imposed a greater remedy).

[a]bsent a showing of corrupt failure of the government to discharge 
its duty, the Court, in making its public interest funding, should * 
* * carefully consider the explanations of the government in the 
competitive impact statement and its responses to comments in order 
to determine whether those explanations are reasonable under the 
circumstances.\6\
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    \6\ United States v. Mid-America Dairymen, Inc., 1977-1 Trade 
Cas. (CCH) ] 61,508, at ] 71,980 (W.D. Mo. 1977).
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III. Summary of Public Comments and the United States' Response

    During the 60-day public comment period, the United States received 
one comment, from the West Virginia Health Care Authority (WVHCA), 
which is attached hereto. The WVHCA, among other duties, is responsible 
for administering West Virginia's certificate of need (``CON'') program 
and establishing hospital rates for non-governmental payors, such as 
private insurers, in West Virginia.
    The WVHCA does not seek to prevent entry of the proposed Final 
Judgment. Rather, the WVHCA states that its purpose is to ``set forth 
the Authority's analysis of the state action doctrine and to clarify 
the statutory powers conferred upon the Authroity by the West Virginia 
Legislature.'' (WVHCA Comment, p. 1). The state-action doctrine 
provides immunity from federal antitrust library when a defendant has 
satisfied a two-part test by first showing that the challenged 
restraint is one clearly articulated and affirmatively expressed as 
state policy and then showing that the restraint is actively supervised 
by the state.\7\ The WVHCA believes that the defendants' actions 
qualify for immunity under the state-action doctrine. (WVHCA Comment, 
p. 8).
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    \7\ California Retail Liquor Dealers Ass'n v. Midcal Aluminum, 
445 U.S. 97, 105 (1980).
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    As an initial matter, the Court need not rule on whether the state-
action doctrine provides federal antitrust immunity to the challenged 
agreements. The Court's role under the Tunney Act is limited to 
reviewing the remedy in relationship to the violations that the United 
States has alleged in its Complaint. The Tunney Act does not authorize 
the Court to construct a ``hypothetical case adn then evaluate the 
decree against that case.'' Microsoft, 56 F.3d at 1459. Indeed, the 
WVHCA does not argue that the proposed Final Judgment is not ``within 
the reaches of public interest'' or that the remedy secured does not 
fit the violations alleged. Nor does the WVHCA assert that any public 
or private interest would be harmed by the entry of the judgment, or 
that the judgment inadequately or improperly preserves the role of 
competition in the relevant markets within the regulatory framework 
established by the Commonwealth of

[[Page 40062]]

West Virginia.\8\ In short, the WVHCA has provided no argument against 
entry of the proposed Final Judgment and does not object to its entry. 
Consequently, the WVHCA's comment does not support disapproving the 
proposed Final Judgment.
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    \8\ The question of state-action immunity may not properly be 
before the Court. State-action immunity is essentially an 
affirmative defense with the party claiming state-action immunity 
bearing the burden of proof in establishing the defense. Ticor 
Title, 504 U.S. at 625; town of Hallie v. City of Eau Claire, 471 
U.S. 34, 37-39 (1985); Yeager's Fuel v. Pennsylvania Power & Light, 
22 F.3d 1260, 1267 (3d Cir. 1994); Nugget Hydroelectric, L.P. v. 
Pacific Gas & Elec. Co., 981 F.2d 429, 434 (9th Cir. 1992). In the 
present matter, the defendants have chosen not to assert a state-
action defense but instead to stipulate that the Court may enter the 
proposed Final Judgement.
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    Even if the Court were to consider the applicability of the state 
action doctrine, the WVHCA's comment does not demonstrate that the 
doctrine should apply in this case. With regard to the first part of 
the state-action test, the comment discusses the WVHCA's powers over 
West Virginia's CON program. (WVHCA Comment, pp. 8-10). But the comment 
does not discuss whether those powers allow the WVHCA to authorize 
market-allocation agreements between private parties such as the ones 
challenged in the Complaint. In fact, the WVHCA's CON powers do not 
allow it to authorize such agreements.\9\ Rather the West Virginia 
legislature empowered the WVHCA to administer West Virginia's CON 
program only according to legislatively established procedures, 
consisting principally of granting or denying CONs to firms wishing to 
compete.\10\ Because the West Virginia legislature did not empower the 
WVHCA to authorize private market-allocation agreements, the 
defendants' cancer and open-heart agreements do not qualify for state-
action immunity.
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    \9\ See W. Va. Code Sec.  16-2D-1 et seq., W. Va. Code St. R. 
Sec.  65-7-1 et seq., W. Va. Code Sec.  16-29b-1 et seq.
    \10\ W. Va. Code Sec.  16-2D-1 et seq., W. Va. Code St. R. Sec.  
65-7-1 et seq., W. Va. Code Sec.  16-29B-1 et seq. See also CIS, pp. 
8-10.
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    With regard to the second part of the state-action test, the 
comment states that the WVHCA ``clearly has on-going supervision of 
West Virginia acute care hospitals'' through West Virginia's CON 
program and regulation of hospital rates for non-governmental payors. 
(WVHCA Comment, p. 10). However, the active-supervision requirement of 
the state-action doctrine requires that the State actively supervise 
and exercise ultimate control over the challenged anticompetitive 
conduct.\11\ So the relevant question for determining whether state-
action immunity exists is not whether the WVHCA actively supervises 
some aspects of hospital regulation in West Virginia, but whether the 
WVHCA is empowered to supervise and has actively supervised the 
defendants' agreements.
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    \11\ Midcal, 445 U.S. at 105, Patrick v. Burget, 486 U.S. 94, 
100-101 (1988).
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    The WVHCA does not have such powers and has not actively supervised 
the defendants' agreements. The West Virginia legislature has not 
empowered the WVHCA to require parties to private agreements to 
maintain, alter, or abandon their agreements. Thus, the WVHCA has no 
power to exercise active supervision or control over private agreements 
such as the cancer and open-heart agreements. Moreover, the WVHCA has 
not purported to actively supervise the cancer and open-heart 
agreements, as it did not (1) develop a factual record concerning the 
initial or ongoing nature and effect of the agreements, (2) issue a 
written decision approving the agreements, or (3) assess whether the 
agreements further criteria established by the West Virginia 
legislatures.\12\
---------------------------------------------------------------------------

    \12\ See FTC v. Ticor Title Ins. Co., 504 U.S. 621, 637-639 
(1992).
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    The WVHCA's rate-regulation responsibilities do not satisfy the 
active-supervision requirement because the challenged anticompetitive 
conduct in this matter is not the prices charged by the hospitals to 
non-governmental payors, but rather the terms of the cancer and open-
heart agreements. the WVHCA's rice regulation activities do not 
directly address market-allocation issues or the potential 
anticompetitive effects of such allocations as rate regulation may fail 
to ensure that the hospitals charge rates equal to those rates that 
would have prevailed in a competitive market and fails to address 
decreases in quality of service, innovation, and consumer choice that 
result from an agreement not to compete.
    The WVHCA comment also does not address the fact that the 
defendants' agreements allocated markets for cancer and cardiac surgery 
in the three Virginia counties. As the WVHCA is not vested with any 
power concerning matters in the Commonwealth of Virginia, the powers 
and actions of the WVHCA cannot create state-action immunity for an 
agreement not to complete in Virginia.

IV. Conclusion

    After careful consideration of the WVHCA comment, the United States 
still concludes that entry of the proposed Final Judgment will provide 
an effective and appropriate remedy for the antitrust violation alleged 
in the Complaint and is, therefore, in the public interest. Pursuant to 
Section 16(d) of the Tunney Act, the United States is submitting the 
public comments and its Response to the Federal Register for 
publication. After the comments and its Response are published in the 
Federal Register, the United States will move this court to enter the 
proposed Final Judgment.

    Dated: June ----, 2005

    Respectfully submitted,

For Plaintiff United States:
Kasey Warner,

United States Attorney.
By: Fred B. Westfall,

Assistant United States Attorney.

Peter J. Mucchetti,
Joan S. Huggler,
Mitchell H. Glende,

Attorneys for the United States, Antitrust Division.

United States Department of Justice, 1401 H Street, NW., Suite 4000, 
Washington, DC 20530.

[FR Doc. 05-13533 Filed 7-11-05; 8:45 am]
BILLING CODE 4410-11-M