Two Florida hospital systems will pay fines totaling almost $500,000 for sharing sensitive pricing and managed-care information in violation of a 1994 antitrust settlement.
The fines, outlined in an enforcement order announced last week, resolve what federal and state antitrust enforcers called "repeated and widespread violations" of the consent decree that allowed for creation of the now four-hospital Morton Plant Mease Health Care in Dunedin, Fla.
That consent decree barred the Morton Plant Hospital Association, Clearwater, Fla.; 258-bed Mease Hospital Dunedin; and 100-bed Mease Countryside Hospital, Safety Harbor, Fla., from merging. But it allowed them to partner on some clinical and administrative services, including outpatient services, information systems and other ancillary services.
However, the decree specifically prohibited the two systems from using their partnership to share pricing and other information related to managed-care contracting.
The intent of the decree was to allow the systems to consolidate some services while remaining competitors.
In addition to the Mease hospitals, Morton Plant Mease includes 742-bed Morton Plant Hospital, Clearwater, and 122-bed North Bay Hospital, New Port Richey, Fla., which the Morton Plant Hospital Association acquired 15 months ago for $30 million from Santa Barbara, Calif.-based Tenet Healthcare Corp.
The consent decree, which expires in 2004, resolved a lawsuit filed against the systems by the U.S. Justice Department and the state of Florida. The lawsuit, filed in May 1994 in U.S. District Court in Tampa, Fla., said a merger of the two systems would violate Section 7 of the Clayton Act, which bars deals that reduce competition. Combined, the two systems control 34% of the acute-care beds in Pinellas County, data from the American Hospital Association show.
The consent decree was hailed by the Justice Department as a trend-setting way to settle the lawsuit, giving the hospitals some, but not all, of what they wanted.
In last week's order, the hospitals admit to violating some of the terms of the 1994 agreement.
"I think it's fair to say it was an unintentional misinterpretation of the consent decree," said Phil Beauchamp, president and chief executive officer of Morton Plant Mease. "We thought we understood it. We thought we were following the spirit of it."
In documents filed July 12 in U.S. District Court in Tampa, federal and state officials said the systems began violating the consent decree "starting shortly after its entry in late 1994."
"The hospitals' repeated violations of the 1994 consent decree are unacceptable," Joel Klein, assistant attorney general in charge of the Justice Department's antitrust division, said in a written statement.
Last week's order brings to an end an 18-month investigation by federal and state officials that began after Morton Plant Mease in 1998 asked to end its consent decree so the systems could move forward with a full merger.
The order prohibits the systems from even considering a full merger for three years.
The systems violated their consent decree by jointly selling outpatient services to managed-care plans, coordinating their managed-care contracting and sharing pricing information, according to the settlement documents.
The order requires that both Morton Plant and Mease give some payers the opportunity to cancel contracts. The hospitals also will have to change the way they contract with health plans and discontinue joint ownership in some outpatient facilities.
The systems must pay $196,000 to reimburse the federal and state governments for the cost of their investigations. Also, a $300,000 civil penalty will be paid to three Clearwater community groups. Morton Plant will make 60% of all payments and Mease will pay 40%.