The competition among for-profit hospitals in Salt Lake City just got a little nastier.
Iasis Healthcare, a relative newcomer to the scene, kicked off a legal skirmish last week when one of its hospitals filed an antitrust lawsuit against a competing hospital owned by HCA-The Healthcare Co. for allegedly shutting it out of managed-care networks. Both parent companies are based in the Nashville area.
Iasis-owned, 120-bed Rocky Mountain Medical Center filed the lawsuit against 229-bed St. Mark's Hospital last week in the third judicial district court of Salt Lake County. The complaint alleges St. Mark's forced managed-care companies to agree to contract provisions requiring them to pay a penalty if they contracted with Rocky Mountain. The insurers include UnitedHealth Group, Altius Health Plans and Cigna Corp.
Such a penalty amounts to an illegal group boycott under the Utah Antitrust Act, the complaint alleges. None of the insurers contracts with Rocky Mountain for services.
The lawsuit is the most recent example of a growing trend of hospital turning against hospital to address financial losses and competitive issues.
"People are fighting now because they don't see they have any choice," said William Kopit, an antitrust attorney with Epstein Becker & Green in Washington and one of several representing Iasis in the lawsuit. "My speculation is that it's largely market-driven; it's largely people who economically feel they have no choice because they're being put upon by someone with clout who's forcing them into some huge competitive disadvantage."
In the Salt Lake City area, which is dominated by Intermountain Health Care, a not-for-profit system that owns four hospitals there and 20 overall in Utah, the antitrust lawsuit shows how tough the competition has grown between the for-profit providers that must split up the remaining marketshare.
Built in the mid-1990s, Rocky Mountain is the newest hospital in the area. Iasis bought the facility last fall from Paracelsus Healthcare Corp. for about $40 million. It is one of five hospitals Iasis purchased in the Salt Lake City area from Paracelsus, which is contemplating bankruptcy. Rocky Mountain, which is about 10 minutes from St. Mark's, had been closed and vacant until Iasis reopened it in April.
The company has committed $30 million to equip and update the facility, only to lose about $1 million per month since April. The hospital estimates that it is losing $1 million per month because of St. Mark's alleged anticompetitive actions, Iasis spokeswoman Eve Hutcherson said.
According to the complaint, Cigna, for example, agreed to contract with Rocky Mountain and then in May withdrew its agreement based on a fear of the penalty St. Mark's would demand.
"This is a strategy for addressing what we view as a violation of antitrust," Hutcherson said. "We feel like we pursued every avenue very aggressively to resolve this issue before we had to resort to taking this step."
Deborah Reiner, a spokeswoman for St. Mark's, declined to discuss specific contract provisions but said the hospital plans to fight the allegations.
"We're confident that our managed-care contracting and all of our business practices are in line and legal," she said.
HCA owns six hospitals in Utah. St. Mark's is the only one in Salt Lake City.
The suit claims Intermountain squeezes the market, leaving few enrollees for other plans and providers.
About 80% of Salt Lake City's residents have health insurance through an HMO, according to the complaint, which contends that Intermountain's plans cover half of those enrollees.
On a statewise basis, at least, that assertion appears valid. IHC Health Plans, Intermountain's HMO and PPO products, cover 475,000 people in Utah, more than half of the 764,100 people covered by HMOs in the state, according to the Utah Department of Insurance.
IHC Health Plans does not contract with Rocky Mountain.
Intermountain spokesman Daron Cowley said he did not know much about the lawsuit.
"It's just a very competitive market here," he said.
Iasis has asked for a preliminary injunction against St. Mark's to make the hospital stop enforcing the alleged penalty provisions; a hearing has been scheduled for Sept. 11.
Salt Lake City is not the first market to witness such a court battle. In Atlanta, 346-bed Saint Joseph's Hospital filed a suit in Fulton County Superior Court last May against 444-bed Northside Hospital, just across the street. Saint Joseph's alleged that Northside illegally used its dominance in obstetrics to cut it (Saint Joseph's) out of lucrative managed-care contracts (June 26, p. 32). This case remains in litigation.
And in Florida, Wuesthoff Health Systems, based in Rockledge, filed an antitrust lawsuit against rival Health First in a state court in July 1999, accusing Health First of providing steep discounts to illegally coerce insurers to exclude Wuesthoff from networks (Aug. 2, 1999, p. 26). This case is still in litigation as well.
More recently, Tenet Healthcare Corp. sued 395-bed St. Joseph Hospital in Orange, Calif., arguing that the hospital failed to fully reimburse Tenet's hospitals when health plan enrollees assigned to St. Joseph were referred to Tenet facilities.
Salt Lake City Area Chamber of Commerce President Larry Mankin said it's too early to determine the ultimate impact of the lawsuit on healthcare in the Salt Lake community.
"Rocky Mountain is so new it hasn't had an opportunity to develop its brand or its customer base," he said.
Thomas Atchison, president of Atchison Consulting Group, an organizational development consulting firm in Oak Park, Ill., said hospital-vs.-hospital lawsuits like this can either galvanize a hospital's workforce or alternatively cause fear, uncertainty and doubt about the hospital's future.
The public also might view this as a battle between two greedy chains and turn to not-for-profit systems like Intermountain, he said.
"It could have a huge backlash against for-profit healthcare in Utah, too," he said. "These people could really be shooting themselves in the foot."