FOR IMMEDIATE RELEASE                                          AT
WEDNESDAY, NOVEMBER 13, 1996                       (202) 616-2771
                                               TDD (202) 514-1888

                                 
         JUSTICE DEPARTMENT WILL NOT CHALLENGE FORMATION
              OF RURAL HOSPITAL NETWORK IN WISCONSIN


     WASHINGTON, D.C. -- The Department of Justice today said that
it would not challenge a proposal by 21 small, rural hospitals in
Wisconsin to form a network to contract with managed care plans and
other third-party payers.

     The Department's Antitrust Division said the network, as
proposed, would pose no threat to competition in the areas served
by the members of the network.  The Department's position was stated
in a business review letter from Joel I. Klein, Acting Assistant
Attorney General for the Antitrust Division, to counsel for the
hospitals.

     The network, to be called RWHC Network, Inc. ("the Network"),
would be formed by hospitals that own and operate the Rural
Wisconsin Health Care Cooperative ("the Cooperative"), which was
formed in 1979 as a shared-services corporation and advocate for
rural health services.  The hospitals range in size from 8 to 78
beds, with an average size of 38 beds.

     According to counsel for the Network, the individual members
of the Network do not compete with each other, but rather with
outmigration.  That is, the alternative to using a local rural
hospital is to travel to a larger, more sophisticated, regional
medical center.  The creation of the Network will allow these small
local hospitals to contract more efficiently with health plans and
other third party payers through a single agent.

     The Network will employ a third party administrator, probably
the Cooperative, to collect and analyze data from each hospital and
aggregate this information in order to recommend contracting terms
to the members.  The administrator will initially negotiate
contracts with payers based on a discounted fee for service
schedule, but the goal of the Network is to eventually be able to
enter into risk-sharing arrangements such as capitated fees. 
Members will be free to contract individually and to join other
networks.
  
     "The existence of the Network will allow managed care plans to
contract with the 21 rural hospitals in an efficient and cost-
effective manner, thus ensuring that hospital services will
continue to be available to consumers in rural areas," said Klein. 

     The letter states that the Department accepts the Network's
contention that members do not compete, and thus their joint
contracting efforts should not harm competition.  In addition, they
have taken steps to aggregate sensitive financial information so
that no individual member will have access to any other member's
costs or prices.

     Under the Department's Business Review Procedure, an
organization may submit a proposed course of action to the
Antitrust Division and receive a statement as to whether the
Division will challenge the activity under the antitrust laws.

     A file containing the business review request and the
Department's response may be examined in the Legal Procedure Unit
of the Antitrust Division, Room 215 North, Liberty Place,
Department of Justice, Washington, D.C. 20530.  After a 30-day
waiting period, the documents supporting the business review will
be added to the file, unless confidentiality had been requested
pursuant to paragraph 10(c) of the Business Review Procedure.
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96-548