Division and State of Michigan Sue to Stop Anticompetitive Agreement to Limit Advertising

Division Update Spring 2016

The Antitrust Division and the Michigan Attorney General filed suit on June 25, 2015, challenging agreements among four health systems located in the state of Michigan not to advertise in each other’s local geographic areas. The potential impact on competition is significant—executives from the hospitals acknowledged that marketing is an important tool that the hospitals use to compete for patients. Advertising, direct mailings, and outreach to physicians and employers are all ways that hospitals traditionally try to increase market share; many times, these efforts include free medical services, such as health screenings, physician seminars, and health fairs.

Four Michigan Health Systems’ Anticompetitive Agreement to Limit Advertising

Three hospital systems—Hillsdale Community Health Center; Community Health Center of Branch County; and ProMedica Health System—all agreed to settle the case. Those hospital systems agreed to consent decrees designed to stop similar anticompetitive agreements in the future, including implementing strict compliance programs. A fourth hospital system, Allegiance Health, opted to contest the litigation. The case against Allegiance is scheduled to go to trial in April 2017.

An investigation by the Division and Michigan Attorney General uncovered substantial evidence of illegal agreements between Hillsdale and Allegiance, ProMedica, and Branch, respectively. Internal Allegiance documents noted that “Hillsdale does not permit [Allegiance] to conduct free vascular screens as they periodically charge for screenings” and in 2014, Allegiance discouraged a newly hired physician from giving a seminar close to Hillsdale about competing services. As one Allegiance executive asked: “Who do you think is the best person to explain to [the doctor] our restrictions in Hillsdale? We’re happy to do so but often our docs find it hard to believe and want a higher authority to confirm.”

Other hospitals engaged in similar misbehavior. ProMedica asked Hillsdale’s permission to market oncology services to physicians near the latter’s hospital. Hillsdale objected and ProMedica demurred. And Community Health of Branch County established press release guidelines instructing staff not to send releases to the Hillsdale Daily News because of the hospital’s “gentleman’s agreement” with Hillsdale.

By agreeing not to compete with each other for patients, the defendants deprived patients and physicians of the information needed to make informed healthcare decisions, as well as free medical services (health screenings, physician seminars) that they would have otherwise received had healthy competition existed.

Updated April 11, 2016

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