Florida antitrust regulators have a message: Just because a state agency encouraged providers to settle a certificate-of-need dispute doesn't mean they can stop competing on each others' turf.
The Florida attorney general's office won a settlement last month that nullifies some anticompetitive aspects of a 1998 CON agreement between HCA and the Cleveland Clinic. Along with some recent stances taken by the U.S. Justice Department, the Florida case could be a signal that regulators are trying to narrow an antitrust safe harbor related to government actions, health lawyers said.
Under the 1998 agreement, HCA dropped its CON application to build a hospital that would have competed in Collier County with a hospital the Cleveland Clinic was building and agreed not to open a hospital there for three years; 70-bed Cleveland Clinic Florida Naples opened in 2001.
In return, the clinic rescinded its CON application for an open-heart surgery center in Broward County, where HCA owned four hospitals in 1998. It also agreed not to perform open-heart surgeries at its Broward facilities for three years and not to open facilities in seven other Florida counties-where Nashville-based HCA does business-for seven years.
Both providers denied any wrongdoing in the settlement, which was approved April 23 by a judge in U.S. District Court, Fort Myers, Fla. Each provider will pay $100,000 to Florida healthcare charities and $20,000 to cover the costs of the suit, filed by the Florida attorney general's office April 18.
The 1998 agreement was not approved by Florida's Agency for Health Care Administration, but the agency was aware of it and had encouraged the talks, HCA spokesman Jeffrey Prescott said.
It's that link to a government action that constituted a safe harbor, providing immunity from federal antitrust laws, said Bill Kopit, a healthcare lawyer with Epstein Becker & Green, Washington. Several precedent-setting cases used the First Amendment right to petition the government to create a safe harbor when competitors join together to do the petitioning, Kopit said. As defined by the courts, petitioning includes settlements of lawsuits by competing businesses, although the classic case involves a trade association lobbying for a bill that would hurt a competing industry, he said.
Tom Campbell, a healthcare lawyer with Gardner Carton & Douglas in Chicago, said he expects antitrust regulators to closely scrutinize the type of CON settlement that HCA and the Cleveland Clinic agreed to. Campbell said he also expects regulators to challenge a broader range of litigation between competitors that results in anticompetitive agreements.
As an example, Campbell said, the Justice Department has been taking a hard line on settlements of patent-infringement cases that the department says restrain competition. Regulators are saying that the "window dressing of settling a lawsuit" doesn't allow ostensibly competing drugmakers to sign agreements that divide markets between them, Campbell said.
Florida regulators have been studying CON agreements for a couple of years now, but this is the first enforcement action they have taken, said Patricia Conners, chief of the antitrust section of the attorney general's office. The agreements were common in Florida from 1999 to 2001, but their use has tapered off since then, Conners said. "We're trying to put this on the radar screen for lawyers who practice CON law," she said.
Campbell noted that some dispute settlements that restrain competition could be legal if the restraints are a byproduct of a legitimate business purpose, such as a noncompete clause in an agreement to sell a hospital.
Kopit said he sees fewer implications outside of fast-growing Florida. "They've done it with nursing homes, and they're doing it with hospitals," he said of the attorney general's office. "It's important in any place where there's CON and a lot of building going on. A lot of the states that have CON are not gaining population."
HCA's Prescott said the agreement with the Cleveland Clinic followed a strategy of settling CON disputes that is common in the industry. A statement from the clinic noted that its Naples hospital is now providing competition in the market, competition that would have been delayed without the agreement.
Collier County competition is going to heat up even more. Naples-based Health Management Associates has received preliminary CON approval to build 100-bed Collier Regional Medical Center. Competing Naples Community Hospital is appealing that approval.