Two hospitals in Poughkeepsie, N.Y., have commenced settlement talks with the New York attorney general, who alleged their joint operating agreement is little more than a price-fixing sham.
A settlement might involve the hospitals agreeing to restructure their joint operating company and how it deals with payers.
The state sued the hospitals-317-bed Saint Francis and 257-bed Vassar Brothers-for alleged antitrust violations in February (Feb. 16, p. 3).
In that complaint, the attorney general alleged that Saint Francis and Vassar Brothers, the only two acute-care hospitals in Poughkeepsie, were violating state and federal antitrust laws by negotiating as one organization with third-party payers.
At issue is the structure of the operating company. The state claimed that the two hospitals are not financially or clinically integrated enough to be considered a "single economic entity." Under antitrust law, such an organization cannot conspire with itself to fix prices.
The attorney general agreed last month to the hospitals' request to put the case on hold while they work up a proposed settlement. The hospitals' motion to dismiss the case, filed in April, also is on hold.
"It's always healthy when the parties talk," said Robert Wild, the attorney representing both the hospitals and their parent company, Mid-Hudson Health. "These are delicate and difficult matters, and they will take a while (to resolve). But we are very hopeful."
If no settlement is reached, the court proceedings could resume as early as the fall, Wild said. No date has been set for a report back to the federal judge handling the case in U.S. District Court in White Plains, N.Y.
"If they can't work out our differences, we've still got a lawsuit out there," said Chris McKenna, a spokesman for New York Attorney General Dennis Vacco. "We're not backing down."
The hospitals could be angling to restructure their 6-year-old joint operating agreement, in the hopes of staving off the lawsuit.
It is unlikely the hospitals would completely unravel their arrangement, some antitrust attorneys said. If anything, the two would consider further integration or a full-assets merger.
"You have to start going forward, because you can't go back," said Roxanne Busey, an antitrust attorney with Gardner, Carton & Douglas in Chicago. "It might get complex. They may have to have more integration at the board level, or at least put more power into the (joint operating) company and less into the hospitals."