Hospitals in Utah ended two of the country's most prominent healthcare antitrust cases last week as they settled federal charges of conspiring to fix nurse salaries and divide the inpatient pediatric market.
In the first case, the Utah Hospital Association and nine other defendants, including Intermountain Health Care, settled charges that they conspired to fix the salaries of nurses to avoid a compensation war in Salt Lake County.
In the other case, two of the hospitals settled separate charges that they attempted to divide the inpatient pediatric market in Salt Lake City.
The U.S. Justice Department issued consent agreements in all of the cases last week. They bring to a close a controversial three-year antitrust probe by the government that Utah hospitals frequently characterized as a costly witch hunt. The investigation included a federal grand jury probe that considered but later rejected criminal charges against several hospitals.
The lingering ill-will generated by the probe was evident in many of the statements made by hospitals in response to the settlements. For example, Richard Kinnersley, president of the Utah Hospital Association, said, "It appears to us that the federal government, after having conducted a costly investigation, feels compelled to obtain some concessions to justify this enormous waste of time and resources in Utah."
The cases date back to August 1991, when the grand jury subpoenaed Primary Children's Medical Center, the University of Utah Hospitals and Clinics and Pediatric Faculty Physicians, a group of 90 physicians who provided pediatric services at both Salt Lake City hospitals. Intermountain, the Salt Lake City-based not-for-profit hospital system, owns Primary Children's, which relocated to the university hospital campus in 1990.
The government was looking into allegations that the physicians attempted to restrain the trade of third-party payers by collectively negotiating managed-care contracts even though the physicians were competitors outside of the group. In the face of the probe, the university hospital and physicians dissolved the group in July 1992.
The government also was looking into allegations that the two hospitals attempted to split up the inpatient pediatric market in Salt Lake City by shifting general pediatric and neonatal intensive-care services to the new Primary Children's facility from the university hospital facility (Sept. 9, 1991, p. 17).
A year later, the grand jury widened its probe to consider whether hospitals in Utah and in Salt Lake County conspired to fix nursing salaries by sharing nurse compensation information among themselves and through annual compensation surveys conducted by the Utah Hospital Association and the Utah Society for Healthcare Human Resources Administration (Aug. 24, 1992, p. 8).
However, in July 1993, the Justice Department dismissed the grand jury and downgraded the probe to a civil investigation from a criminal inquiry.
To resolve the pediatric allegations, the university hospital agreed not to unlawfully allocate healthcare services with any other facility. The pact also bars the hospital from having a medical director from a competing hospital approve the staff privileges of any university physician. In addition, the hospital is barred from discussing or negotiating third-party payments with any non-employed university physician.
Intermountain said it also settled the pediatric allegations, but a copy of the settlement was unavailable at deadline.
Meanwhile, both the university hospital, Intermountain and eight other defendants settled the price-fixing charges. In a draft complaint accompanying the consent agreements, the Justice Department said the two associations and eight hospitals conspired from January 1984 through June 1992 to stabilize entry-level nurse wages. They did that, according to the government, by agreeing to exchange non-public information about overall budgets, nursing budgets and entry-level nurse wages.
Under the settlement, the defendants admit to no violation of federal law. They agreed not to enter into any agreements with other hospitals to fix, limit or maintain nurse compensation. The human resources society agreed not to conduct such exchanges of information, and the hospital association agreed to the same condition.
The settlement doesn't bar the society or association from conducting salary surveys or the hospitals from participating in salary surveys. However, the surveys must be conducted in such a way as to prevent hospitals from using the information to fix salaries.
In new antitrust enforcement guidelines for healthcare providers issued last fall, the Justice Department and Federal Trade Commission created an antitrust "safety zone" for hospital compensation surveys that meet certain conditions (Sept. 20, 1993, p. 3).