An old attack is back, sort of, for a one-hospital system in Canton, Ohio, that a few years ago faced a lawsuit alleging it paid bounties to brokers who delivered group clients to its subsidiaries managed-care plans.
That time, the attack against Aultman Health Foundation came from a third-party claims administrator. Now a rival hospital, 352-bed Mercy Medical Center, also in Canton, is arguing the payments to brokers are intended to monopolize the delivery of hospital care, a reminder of how the vertical integration that proliferated in the 1990s continues to trip antitrust wires, whether real or imagined. Particularly in concentrated markets with relatively few players, it is somewhat of a minefield to compete in all segments of the market, both delivery and insurance, said antitrust lawyer David Marx, a partner in McDermott Will & Emery in Chicago.
Cantons Mercy Medical Center filed the complaint Dec. 27, 2007, in the Stark County Court of Common Pleas, mapping out a scheme involving secret contracts intended to destroy competition and achieve monopoly power in general hospital care in Stark County and tertiary care in the five-county region around Canton.
Aultmans health plans are offered through a subsidiary called AultCare, both as an insurer and a third-party plan administrator. Mercy and Aultman are the only hospitals in Canton, a town of about 80,000, and are the only tertiary-care providers in the surrounding five-county region, which is served by several insurers, including Aetna, Anthem Blue Cross and Blue Shield, SummaCare and UnitedHealthcare.
The payments to brokers$200 per managed-care life, according to Mercys complaintallowed Aultman to convert hundreds of thousands of individual healthcare customers to insurance plans that provided in-network reimbursement rates for services at Aultman Hospital.
Aultman considers Mercys lawsuit frivolous because it mischaracterizes the program and the agreements as illegal, spokeswoman Leslee Dennis said in a written statement. The Ohio Department of Insurance looked in detail at our broker compensation plan in 2005, and without taking any action, subsequently notified us in January 2006 that it was closing its file on the matter.
A Mercy spokeswoman, meanwhile, said the hospital would not comment on the litigation and deferred to the text of the lawsuit, which echoes an earlier legal action. In 2005, a judge declined to throw out an antitrust lawsuit against Aultman brought by third-party administrator Professional Claims Management, or PCM, but the allegations described in it never made it to a courtroom (Nov. 7, 2005, p. 17). During mediation days before the case went to trial, Aultman bought PCM and the lawsuit evaporated.
Mercy has retained the same law firm that presented PCMs case, Tzangas, Plakas, Mannos & Raies of Akron and Canton, and the new complaint in several places cites documents and testimony apparently gathered for PCM, including samples of the contracts stipulating that the brokers must keep the agreements confidential in order for them to be valid. Lead attorney Lee Plakas did not return a call seeking comment.
Aultman, in Dennis statement, called those contracts old, genuine and perfectly legal, while Mercys lawsuit called them bribery and alleged they raised prices for consumers and deprived Mercy of patients.
McDermott Will & Emerys Marx said Mercy can argue that secretly luring brokers to serve two masters shows Aultmans anti-competitive intent. The critical issue will be whether (Mercy) is being foreclosed from so much of the potential marketplace that it will be (unable to compete). Thats a pretty high burden to meet, Marx said.