[Federal Register: July 12, 2005 (Volume 70, Number 132)]
[Notices]
[Page 40058-40062]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jy05-98]
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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\
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\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