Notice2021-19800
United States v. Evangelical Community Hospital, et ano; Response to Public Comments
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 14, 2021
Issuing agencies
Justice DepartmentAntitrust Division
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<title>Federal Register, Volume 86 Issue 175 (Tuesday, September 14, 2021)</title>
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[Federal Register Volume 86, Number 175 (Tuesday, September 14, 2021)]
[Notices]
[Pages 51183-51196]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-19800]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Evangelical Community Hospital, et ano; Response
to Public Comments
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b)-(h), the United States hereby publishes below the Response to
Public Comments on the Proposed Final in United States v. Evangelical
Community Hospital and Geisinger Health, Civil Action No. 4:20-cv-
01383-MWB, which was filed in the United States District Court for the
Middle District of Pennsylvania on August 31, 2021, together with a
copy of the five comments received by the United States.
A copy of the comments and the United States' response to the
comments is available at <a href="https://www.justice.gov/atr/case/us-v-geisinger-health-and-evangelical-community-hospital">https://www.justice.gov/atr/case/us-v-geisinger-health-and-evangelical-community-hospital</a>. Copies of the
comments and the United States' response are available for inspection
at the Office of the Clerk of the United States District Court for the
Middle District of Pennsylvania. Copies of these materials may also be
obtained from the Antitrust Division upon request and payment of the
copying fee set by Department of Justice regulations.
Suzanne Morris,
Chief, Premerger and Division Statistics, Antitrust Division.
United States District Court for the Middle District of Pennsylvania
United States of America, Plaintiff, v. Evangelical Community
Hospital and Geisinger Health, Defendants.
Civil Action No.: 4:20-cv-01383-MWB
Response of Plaintiff United States
To Public Comments on the Proposed Final Judgment
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act (the ``APPA'' or ``Tunney Act''), 15 U.S.C. 16(b)-(h),
the United States submits this response to the five public
[[Page 51184]]
comments received regarding the proposed Final Judgment, as amended, in
this case. After carefully considering the submitted comments, the
United States continues to believe that the amended proposed Final
Judgment will provide an effective and appropriate remedy for the
antitrust violations alleged in the Complaint and is therefore in the
public interest. The United States will move the Court for entry of the
amended proposed Final Judgment (Dkt. 51-1) after the public comments
and this response have been published pursuant to 15 U.S.C. 16(d).
I. Procedural History
On February 1, 2019, Defendant Geisinger Health (``Geisinger'') and
Defendant Evangelical Community Hospital (``Evangelical'') entered into
a partial-acquisition agreement (the ``Collaboration Agreement'')
pursuant to which Geisinger would, among other things, acquire 30% of
Evangelical. After a thorough and comprehensive investigation, the
United States filed a civil antitrust Complaint (Dkt. 1) on August 5,
2020, seeking to rescind and enjoin the Collaboration Agreement, which
Defendants had twice amended before the United States filed its
Complaint.
On March 3, 2021, the United States filed a proposed Final Judgment
(Dkt. 45-2) and a Stipulation and Order (Dkt. 45-1), signed by the
parties, that consents to entry of the proposed Final Judgment after
compliance with the requirements of the APPA. At the same time, the
United States filed a Competitive Impact Statement, describing the
transaction and the proposed Final Judgment (Dkt. 46). The Court
entered the Stipulation and Order on March 10, 2021 (Dkt. 47).
On March 10, 2021, the United States published the Complaint,
proposed Final Judgment, and Competitive Impact Statement in the
Federal Register, see 15 U.S.C. 16(b)-(c); 86 FR 13,735 (March 10,
2021), and caused notice regarding the same, together with directions
for the submission of written comments relating to the proposed Final
Judgment, to be published in the Washington Post on March 8-14 and in
The Daily Item on March 9-14 and March 16.
On May 17, 2021, the United States and Defendants filed a Joint
Notice of Amended Proposed Final Judgment (the ``Joint Notice''),
attaching an amended proposed Final Judgment (Dkts. 51, 51-1). As
stated in the Joint Notice, the amended proposed Final Judgment removed
provisions from the Collaboration Agreement (including its attachments)
that did not conform with the proposed Final Judgment and corrected
typographical errors in those documents. The amended proposed Final
Judgment is identical in all respects to the original proposed Final
Judgment except for a change to the definition of the ``Amended and
Restated Collaboration Agreement'' to reflect the date of execution and
title of the revised, updated agreement--the Second Amended and
Restated Collaboration Agreement (the ``Amended Agreement'').
The 60-day period for public comment ended on May 17, 2021. The
United States determined that it would consider any additional comments
that were received by June 7, 2021, in order to afford the public time
to review the Joint Notice and the amended proposed Final Judgment. The
United States received five comments. As required by the APPA, the
comments, with the authors' addresses removed, and this response will
be published in the Federal Register.
II. Standard of Judicial Review
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a 60-day comment period, after which the Court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the Court, in accordance with the statute as amended in 2004, is
required to consider:
(A) The competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative
remedies actually considered, whether its terms are ambiguous, and
any other competitive considerations bearing upon the adequacy of
such judgment that the court deems necessary to a determination of
whether the consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory factors,
the Court's inquiry is necessarily a limited one as the government is
entitled to ``broad discretion to settle with the defendant within the
reaches of the public interest.'' United States v. Microsoft Corp., 56
F.3d 1448, 1461 (D.C. Cir. 1995); United States v. U.S. Airways Grp.,
Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (explaining that the
``court's inquiry is limited'' in APPA settlements); United States v.
InBev N.V./S.A., No. 08-1965 (JR), 2009 U.S. Dist. LEXIS 84787, at *3
(D.D.C. Aug. 11, 2009) (noting that a court's review of a consent
judgment is limited and only inquires ``into whether the government's
determination that the proposed remedies will cure the antitrust
violations alleged in the complaint was reasonable, and whether the
mechanism to enforce the final judgment are clear and manageable'').
As the U.S. Court of Appeals for the District of Columbia Circuit
has held, under the APPA a court considers, among other things, the
relationship between the remedy secured and the specific allegations in
the government's complaint, whether the proposed Final Judgment is
sufficiently clear, whether its enforcement mechanisms are sufficient,
and whether it may positively harm third parties. See Microsoft, 56
F.3d at 1458-62. With respect to the adequacy of the relief secured by
the proposed Final Judgment, a court may not ``make de novo
determination of facts and issues.'' United States v. W. Elec. Co., 993
F.2d 1572, 1577 (D.C. Cir. 1993) (quotation marks omitted); see also
Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 F.
Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 F.
Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, at
*3. Instead, ``[t]he balancing of competing social and political
interests affected by a proposed antitrust consent decree must be left,
in the first instance, to the discretion of the Attorney General.'' W.
Elec. Co., 993 F.2d at 1577 (quotation marks omitted). ``The court
should bear in mind the flexibility of the public interest inquiry: The
court's function is not to determine whether the resulting array of
rights and liabilities is one that will best serve society, but only to
confirm that the resulting settlement is within the reaches of the
public interest.'' Microsoft, 56 F.3d at 1460 (quotation marks
omitted); see also United States v. Deutsche Telekom AG, No. 19-2232
(TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). More demanding
requirements would ``have enormous practical consequences for the
government's ability to negotiate future settlements,'' contrary to
congressional intent. Microsoft, 56 F.3d at 1456. ``The Tunney Act was
not intended to create a disincentive to the use of the consent
decree.'' Id.
The United States' predictions about the efficacy of the remedy are
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at
1461 (recognizing courts should give ``due
[[Page 51185]]
respect to the Justice Department's . . . view of the nature of its
case''); United States v. Iron Mountain, Inc., 217 F. Supp. 3d 146,
152-53 (D.D.C. 2016) (``In evaluating objections to settlement
agreements under the Tunney Act, a court must be mindful that [t]he
government need not prove that the settlements will perfectly remedy
the alleged antitrust harms[;] it need only provide a factual basis for
concluding that the settlements are reasonably adequate remedies for
the alleged harms.'' (internal citations omitted)); United States v.
Republic Servs., Inc., 723 F. Supp. 2d 157, 160 (D.D.C. 2010) (noting
``the deferential review to which the government's proposed remedy is
accorded''); United States v. Archer-Daniels-Midland Co., 272 F. Supp.
2d 1, 6 (D.D.C. 2003) (``A district court must accord due respect to
the government's prediction as to the effect of proposed remedies, its
perception of the market structure, and its view of the nature of the
case.''). The ultimate question is whether ``the remedies [obtained by
the Final Judgment are] so inconsonant with the allegations charged as
to fall outside of the `reaches of the public interest.' '' Microsoft,
56 F.3d at 1461 (quoting W. Elec. Co., 900 F.2d at 309).
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its complaint, and does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways,
38 F. Supp. 3d at 75 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``[T]he
`public interest' is not to be measured by comparing the violations
alleged in the complaint against those the court believes could have,
or even should have, been alleged.''). Because the ``court's authority
to review the decree depends entirely on the government's exercising
its prosecutorial discretion by bringing a case in the first place,''
it follows that ``the court is only authorized to review the decree
itself,'' and not to ``effectively redraft the complaint'' to inquire
into other matters that the United States did not pursue. Microsoft, 56
F.3d at 1459-60.
In its 2004 amendments to the APPA, Congress made clear its intent
to preserve the practical benefits of using consent judgments proposed
by the United States in antitrust enforcement, Public Law 108-237, 221,
and added the unambiguous instruction that ``[n]othing in this section
shall be construed to require the court to conduct an evidentiary
hearing or to require the court to permit anyone to intervene,'' 15
U.S.C. 16(e)(2); see also U.S. Airways, 38 F. Supp. 3d at 76
(indicating that a court is not required to hold an evidentiary hearing
or to permit intervenors as part of its review under the APPA). This
language explicitly wrote into the statute what Congress intended when
it first enacted the APPA in 1974. As Senator Tunney explained: ``[t]he
court is nowhere compelled to go to trial or to engage in extended
proceedings which might have the effect of vitiating the benefits of
prompt and less costly settlement through the consent decree process.''
119 Cong. Rec. 24,598 (1973) (statement of Sen. Tunney). ``A court can
make its public interest determination based on the competitive impact
statement and response to public comments alone.'' U.S. Airways, 38 F.
Supp. 3d at 76 (citing Enova Corp., 107 F. Supp. 2d at 17).
III. The Harm Alleged in the Complaint and the Amended Proposed Final
Judgment
The amended proposed Final Judgment is the culmination of a
thorough, comprehensive investigation conducted by the Antitrust
Division of the United States Department of Justice. Based on the
evidence gathered during the investigation, the United States concluded
that the likely effect of Geisinger's partial acquisition of
Evangelical resulting from the Collaboration Agreement would be to
substantially lessen competition and unreasonably restrain trade in the
market for the provision of inpatient general acute-care services in a
six-county region in central Pennsylvania. The partial acquisition was
not a passive investment by Geisinger. The Collaboration Agreement
created certain entanglements between Defendants that provided
opportunities for Geisinger to influence Evangelical, which would
likely lead to higher prices, lower quality, and reduced access to
inpatient general acute-care services in central Pennsylvania.
Accordingly, the United States filed a civil antitrust lawsuit that
alleged that certain features of the Collaboration Agreement, taken
together, were likely to substantially lessen competition between
Defendants, and sought to rescind and enjoin the Collaboration
Agreement because it violated Section 1 of the Sherman Act, 15 U.S.C.
1, and Section 7 of the Clayton Act, 15 U.S.C. 18.
The amended proposed Final Judgment provides an effective and
appropriate remedy for the likely competitive harm the United States
alleges would result from the Collaboration Agreement and maintains
Evangelical's independence as a competitor in the market for inpatient
general acute-care services in central Pennsylvania. The amended
proposed Final Judgment restores competition by: (1) Capping
Geisinger's ownership interest in Evangelical; (2) preventing Geisinger
from exerting control or influence over Evangelical through the
mechanisms alleged in the Complaint; and (3) requiring an antitrust
compliance program and prohibiting Geisinger and Evangelical from
sharing competitively sensitive information--all of which restore
Defendants' incentives to compete with each other on quality, access,
and price. At the same time, the amended proposed Final Judgment
permits Evangelical to use Geisinger's passive investment to fund
specific projects that will benefit patients and the community.
A. Reduction of Ownership Interest and Investment
The amended proposed Final Judgment caps Geisinger's ownership
interest in Evangelical to a 7.5% passive investment and prohibits
Geisinger from increasing its ownership interest in Evangelical.\1\ The
amended proposed Final Judgment permits Evangelical to spend the money
that it has already received from Geisinger only on two specific
projects that will benefit patients in central Pennsylvania: (1)
Improving Evangelical's patient rooms and (2) sponsoring a local
recreation and wellness center.\2\ It also prohibits Geisinger from
making any loan, providing any line of credit, or providing a guaranty
to Evangelical against any financial loss.\3\ These provisions of the
amended proposed Final Judgment, along with the others described below,
eliminate mechanisms for Geisinger to influence Evangelical through its
investment and restore the incentives of both hospitals to compete with
each other for the benefit of patients and health insurers.
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\1\ Amended proposed Final Judgment ] IV.B.2.
\2\ Amended proposed Final Judgment ] V.A.
\3\ Amended proposed Final Judgment ]] IV.B.3, 6.
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B. Prohibitions Against Geisinger's Influence and Control Over
Evangelical
The amended proposed Final Judgment maintains Evangelical's
independence as a competitor in the relevant market because it prevents
Geisinger from exercising influence over
[[Page 51186]]
Evangelical through participation in Evangelical's governance,
management, or strategic decision-making. For example, the amended
proposed Final Judgment prohibits Geisinger from appointing any
directors to Evangelical's board of directors and prohibits Geisinger
from obtaining any management or leadership position with Evangelical
that would provide Geisinger with the ability to influence its
strategic or competitive decision-making.\4\ In addition, it prohibits
Geisinger from controlling Evangelical's expenditure of funds.\5\ The
amended proposed Final Judgment also prevents Geisinger from having any
right of first offer or first refusal regarding any proposal or offer
made to Evangelical, such as proposals to enter into future joint
ventures with other entities or to enter into competitively significant
asset sales.\6\ In addition, the amended proposed Final Judgment
prohibits Defendants from entering into joint ventures with each other
or making changes to the Amended Agreement without obtaining the
approval of the United States.\7\ The amended proposed Final Judgment
also prohibits Geisinger from licensing its information technology
systems to Evangelical without the consent of the United States, except
as expressly permitted in the amended proposed Final Judgment.\8\
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\4\ Amended proposed Final Judgment ]] IV.B.1, 4.
\5\ Amended proposed Final Judgment ] IV.B.6.
\6\ Amended proposed Final Judgment ] IV.B.5.
\7\ Amended proposed Final Judgment ]] IV.E, F.
\8\ Amended proposed Final Judgment ] IV.B.7.
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C. Compliance Program and Prohibitions Against Sharing Competitively
Sensitive Information
The amended proposed Final Judgment eliminates the provisions of
the Collaboration Agreement that would have provided Geisinger with the
ability to access Evangelical's competitively sensitive information and
prohibits Defendants from providing each other with non-public
information, including information about strategic projects being
considered by either Defendant.\9\ It also prevents Defendants from
having access to each other's financial records and requires that
Defendants implement and maintain a firewall to prevent them from
sharing competitively sensitive information.\10\
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\9\ Amended proposed Final Judgment ] IV.G.
\10\ Amended proposed Final Judgment ] IV.G, VII.A.
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In addition, the amended proposed Final Judgment requires
Defendants to institute a robust antitrust compliance program.\11\
Finally, the amended proposed Final Judgment provides the United States
with the ability to investigate Defendants' compliance with the Final
Judgment and expressly retains and reserves all rights for the United
States to enforce provisions of the Final Judgment. \12\
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\11\ Amended proposed Final Judgment Sec. VI.
\12\ Amended proposed Final Judgment Sec. Sec. VIII, XI.
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In sum, the amended proposed Final Judgment prevents Geisinger from
increasing its ownership interest in Evangelical, eliminates the
anticompetitive portions of the Collaboration Agreement that were
challenged in the Complaint, and prevents Defendants from reinstituting
those anticompetitive provisions. It restores Defendants' incentives to
compete with each other on quality, access, and price, and maintains
Evangelical as an independent competitor for inpatient general acute-
care services in central Pennsylvania.
IV. Summary of Public Comments and the United States' Response
The United States received five public comments. Four comments are
from community members who live in central Pennsylvania. The fifth
comment is from a competitor to Geisinger and Evangelical, the
University of Pittsburgh Medical Center (``UPMC''). UPMC is an
integrated healthcare system that operates two hospitals and UPMC
Health Plan, an insurance company that sells commercial health
insurance in competition with a Geisinger-operated insurance company,
Geisinger Health Plan, in central Pennsylvania.
The United States summarizes the comments and responds below. The
comments do not support a finding that the amended proposed Final
Judgment is not in the public interest, and the modifications that UPMC
proposes to the amended proposed Final Judgment are not necessary or
appropriate to address the loss of competition alleged in the
Complaint.
A. The Amended Proposed Final Judgment Resolves the Concerns Expressed
by Four Community Members
Four community members express concern that, if Geisinger were
allowed to control Evangelical, it could negatively affect patient care
and reduce choices for consumers. One commenter states that
``Evangelical can give patients the best care by remaining an
independent community hospital.'' \13\ Another commenter states that
she has ``all of [her] care given at Evangelical,'' and ``would hate to
have that spoiled'' by having Evangelical controlled by Geisinger, and
believes that they should not merge.\14\ Another commenter notes that
prior mergers in the area left the community with ``few options [for]
quality and affordable healthcare'' and urges the United States ``to
make sure [that] people looking for good affordable health care have
that choice.'' \15\ The United States agrees with these commenters that
consumers are best served by preserving Evangelical's independence,
which is why the United States initiated this litigation and has
required Geisinger to relinquish its ability to influence or control
Evangelical through the terms of the amended proposed Final Judgment.
Because the amended proposed Final Judgment preserves Evangelical's
independence, and prohibits Geisinger from acquiring Evangelical, it
fully addresses these commenters' concerns. These comments, therefore,
provide no basis to conclude that the amended proposed Final Judgment
is not in the public interest.
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\13\ Comment from Sandy Young, attached as Exhibit E.
\14\ Comment from Carol Barsh, attached as Exhibit A.
\15\ Comment from Keith Young, attached as Exhibit D.
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One of the community members expresses concern about Geisinger's
7.5% interest in Evangelical and raises questions about Evangelical's
financial circumstances. The commenter also notes that the settlement
addresses harm the United States alleged with respect to inpatient
services and asks what would prevent Geisinger from expanding
outpatient services to compete with those offered by Evangelical.\16\
This commenter does not ask the Court to reject the proposed remedy and
does not propose any specific measures to be incorporated into the
amended proposed Final Judgment.
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\16\ Comment from Dr. Steve Karp, attached as Exhibit B. Dr.
Karp's comment also raised questions about Evangelical's receiving
financial support for information technology systems from Geisinger.
This concern was also raised by UPMC and is discussed in Section
IV.B.2, infra.
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This comment likewise provides no basis to conclude that the
amended proposed Final Judgment is not in the public interest. First,
as discussed above, the amended proposed Final Judgment ensures that
Evangelical will remain an independent competitor by capping
Geisinger's interest in Evangelical and stripping Geisinger of the
ability to influence or control Evangelical. Second, the proposed
remedy does not place Evangelical on insecure financial footing as
Evangelical was in a strong financial position before it executed the
agreement with Geisinger (see Complaint ] 65), and nothing in the
amended proposed Final Judgment changes its financial status.
[[Page 51187]]
Third, the commenter's concern about Geisinger expanding in the
outpatient market is outside the scope of this Court's review under the
APPA as the United States did not allege harm in an outpatient services
market. See Microsoft, 56 F.3d at 1459; U.S. Airways, 38 F. Supp. 3d at
76. It is also misplaced as the proposed remedy maintains Evangelical's
independence and preserves Defendants' incentives to compete for both
inpatient and outpatient services. Indeed, if Geisinger expands
outpatient services to compete with those offered by Evangelical, that
would increase competition and benefit patients in central
Pennsylvania.
B. UPMC's Comment Provides No Basis To Conclude That the Amended
Proposed Final Judgment Is Not in the Public Interest
UPMC's comment raises concerns regarding two aspects of the Amended
Agreement.\17\ First, UPMC questions provisions that establish the
terms under which Evangelical, a small community hospital, provides
medical services to patients insured by Geisinger Health Plan
(``GHP''), a health insurance company owned by Geisinger. UPMC claims
these provisions will reduce competition between Evangelical and
Geisinger to provide medical and hospital services and create an
incentive for Evangelical to charge higher prices to third-party
insurance companies such as UPMC Health plan (UPMC, like Geisinger, is
vertically integrated, offering both health insurance and hospital
services). Second, UPMC expresses concerns about Geisinger's providing
subsidized electronic medical records systems and associated support to
Evangelical, as permitted in Paragraph V.B of the amended proposed
Final Judgment (the ``IT Subsidy''). As discussed below, these
provisions do not undermine the remedy in the amended proposed Final
Judgment.
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\17\ UPMC Comment, attached as Exhibit C.
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1. The Margin Guarantee
UPMC questions provisions that establish the terms under which
Evangelical provides hospital and medical services to patients insured
by GHP. Specifically, Evangelical and GHP have agreed that Evangelical
will lower its prices to GHP for treating GHP insured patients, and GHP
will, in return, place Evangelical in the most favorable tier of its
fully insured, tiered commercial insurance plans. This sort of
arrangement is common in the healthcare industry. By placing
Evangelical in the most favorable tier, the expectation is that more
GHP members will seek treatment from Evangelical, allowing Evangelical
to maintain or increase its profit on these patients notwithstanding
its lower prices. To further guarantee that Evangelical's lower prices
will not reduce Evangelical's profits from treating GHP members, GHP
has committed that Evangelical's profit (in dollars) on GHP's fully
insured commercial business will remain the same or increase during the
time that Evangelical provides these lower prices to GHP.\18\ This
``Margin Guarantee'' thus protects Evangelical, a small hospital, from
losing money as a result of offering GHP lower prices. UPMC, however,
claims these provisions will reduce competition between Evangelical and
Geisinger and create an incentive for Evangelical to charge higher
prices to third-party insurance companies such as UPMC Health Plan.
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\18\ Second Amended and Restated Collaboration Agreement (Dkt.
51-3) at Exh. D. If the volume of GHP insured patients is not
sufficient on its own to maintain Evangelical's current level of
profitability, GHP, under the Margin Guarantee, will adjust the
rates it pays Evangelical to reach this threshold, which will not
impact Evangelical's preferred tier status.
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In its Complaint, the United States did not allege competitive harm
resulting from the Margin Guarantee.\19\ Therefore, UPMC's concerns
regarding the Margin Guarantee are outside the scope of the Court's
review under the APPA. See Microsoft, 56 F.3d at 1459; U.S. Airways, 38
F. Supp. 3d at 76. Moreover, UPMC's concerns regarding the Margin
Guarantee are unfounded for the following reasons. First, UPMC argues
that the Margin Guarantee reduces competition between Evangelical and
Geisinger because, absent the Margin Guarantee, GHP would have tried to
steer patients toward Geisinger hospitals and physicians, while the
Margin Guarantee gives GHP an incentive to have more patients treated
at Evangelical. UPMC's argument, however, would apply to any
arrangement that made Evangelical a more attractive or lower cost
option for patients who are commercially insured by GHP. Under UPMC's
reasoning, arrangements that are standard in the health insurance
industry, such as a tiered network arrangement with a health insurance
company that places Evangelical in the most favorable tier, would be
improper, which is not the case. The Margin Guarantee simply ensures
that Evangelical's profitability on GHP patients will not decrease as a
result of offering GHP lower prices; at the same time, this arrangement
is designed to save GHP money and benefit its members (e.g., through
lower copays). Additionally, the amended proposed Final Judgment
ensures that Geisinger and Evangelical will remain independent, and
will thus have the incentive to compete against one another.
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\19\ The only allegation in the Complaint that relates to the
Margin Guarantee is that ``Evangelical's placement in the most
favored tier of Geisinger Health Plan's commercial insurance
products does not require the partial-acquisition agreement.''
Complaint ] 66.
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Second, UPMC speculates that the Margin Guarantee gives Evangelical
the incentive to raise rates to third-party insurers like UPMC Health
Plan. If anything, however, the Margin Guarantee is likely to
incentivize Evangelical to maximize the share of its patients that are
insured by third-party insurers such as UPMC Health Plan, rather than
incentivize it to increase prices to these entities. This is because
any profit from third-party insurers would be in addition to the profit
that Evangelical is already guaranteed to earn from GHP. UPMC argues
that Evangelical's increasing the number of patients it sees from
third-party insurers would violate the ``spirit'' of the Amended
Agreement,\20\ but this is incorrect because the amended proposed Final
Judgment maintains Evangelical's independence, preventing Geisinger
from controlling or influencing Evangelical's negotiations with third-
party insurers.
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\20\ UPMC Comment at 10.
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Finally, to the extent UPMC raises concerns about potential
information sharing between Evangelical and Geisinger relating to the
Margin Guarantee, those concerns are unwarranted. Integrated insurer-
hospital systems like Geisinger and UPMC routinely obtain sensitive
information from insurer negotiations with third-party hospital systems
like Evangelical and must assure those hospital systems that the
information will not be shared more broadly throughout the integrated
organization. To the extent that UPMC is concerned that Evangelical
will share sensitive information about the UPMC-Evangelical contract
with GHP, UPMC, a large, sophisticated hospital system, can protect
itself through its contract with Evangelical. Moreover, in this
instance, the amended proposed Final Judgment requires Defendants to
implement a firewall to prevent competitively sensitive information
from being disclosed between Geisinger and Evangelical, providing an
additional level of protection to prevent such improper disclosure.\21\
Should Defendants bypass the firewall and share competitively sensitive
[[Page 51188]]
information, the United States can seek relief from the Court under the
Final Judgment or through antitrust laws that will continue to apply to
Defendants.
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\21\ Amended proposed Final Judgment ] VII.A.
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UPMC's concerns as to the Margin Guarantee, which go beyond the
allegations in the Complaint and thus are beyond the scope of the
Court's APPA review, do not undermine the amended proposed Final
Judgment. Moreover, UPMC's request, in connection with the Margin
Guarantee, to modify the amended proposed Final Judgment to have the
Court mandate specific contractual practices between Defendants, or to
have the United States oversee contractual negotiations between them,
is unnecessary and would involve the Court and the United States
inappropriately in private contractual negotiations.\22\
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\22\ See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S.
477, 488 (1977) (``[A]ntitrust laws . . . were enacted for the
protection of competition not competitors.'') (internal quotation
marks removed).
---------------------------------------------------------------------------
2. The IT Subsidy
UPMC also objects to Paragraph V.B of the amended proposed Final
Judgment, under which Geisinger may provide Evangelical with electronic
medical records systems and support at a subsidized cost--the IT
Subsidy.\23\
---------------------------------------------------------------------------
\23\ Amended proposed Final Judgment ] V.B.
---------------------------------------------------------------------------
The IT Subsidy will enable Evangelical to adopt health information
technology to improve the delivery of care to patients in central
Pennsylvania. Indeed, as UPMC acknowledges, Defendants' sharing of
electronic medical records software is likely to improve the experience
for patients who receive care at both Geisinger and Evangelical. Even
if UPMC is correct that having Geisinger and Evangelical on an
integrated platform would increase interoperability by making patient
records easier to access, patient scheduling more fluid, and patient
referrals easier across the organizations,\24\ those features will
benefit patients without harming competition. Moreover, it is not
uncommon in the health care industry for large health care systems to
offer to subsidize a portion of the costs for smaller health care
organizations to acquire electronic health records systems.\25\
---------------------------------------------------------------------------
\24\ UPMC Comment at 15.
\25\ Office of the Nat'l Coordinator for Health Info. Tech.
(part of the U.S. Department of Health and Human Services), EHR
Contracts Untangled: Selecting Wisely, Negotiating Terms, and
Understanding the Fine Print 6 (2016), <a href="https://www.healthit.gov/sites/default/files/EHR_Contracts_Untangled.pdf">https://www.healthit.gov/sites/default/files/EHR_Contracts_Untangled.pdf</a>.
---------------------------------------------------------------------------
UPMC appears to object to the IT Subsidy because it may increase
Evangelical's independence and, by virtue of meeting its business
needs, may make Evangelical less likely to partner with others in the
market, such as UPMC. This outcome, however, would not harm
competition.
Finally, UPMC's attempt to analogize the IT Subsidy to so-called
``reverse payment'' cases is misplaced, as the IT Subsidy lacks an
essential component of an agreement to delay competition. In a typical
``reverse payment'' case, a pharmaceutical company that manufactures a
brand-name drug settles a claim of patent infringement with a generic
competitor by agreeing to pay the generic competitor in exchange for
the generic competitor's agreement to delay launching a competing
generic drug. Here, by contrast, there is no agreement between
Defendants to delay or restrain competition. UPMC's comment thus
provides no reason for concluding that the amended proposed Final
Judgment is not in the public interest.
V. Conclusion
After carefully reviewing the public comments, the United States
continues to believe that the amended proposed Final Judgment provides
an effective and appropriate remedy for the antitrust violations
alleged in the Complaint and is therefore in the public interest. The
United States will move this Court to enter the Final Judgment after
the comments and this response are published as required by 15 U.S.C.
16(d).
Dated: August 31, 2021
Respectfully submitted,
FOR PLAINTIFF UNITED STATES OF AMERICA
/s/David M. Stoltzfus
DAVID M. STOLTZFUS
NATALIE MELADA
CHRIS HONG
DAVID C. KELLY
GARRETT LISKEY
Attorneys for the United States
U.S. Department of Justice, Antitrust Division, 450 Fifth Street NW,
Suite 4100, Washington, DC 20530, Tel: (202) 598-2978, Email:
<a href="/cdn-cgi/l/email-protection#8eeaeff8e7eaa0fdfae1e2faf4e8fbfdcefbfdeae1e4a0e9e1f8"><span class="__cf_email__" data-cfemail="e98d889f808dc79a9d86859d938f9c9aa99c9a8d8683c78e869f">[email protected]</span></a>
[REDACTED]
March 8, 2021
U.S. Dept of Justice, 450 Fifth St. NW, Suite 4100, Washington, DC
20530
Dear Mr. Welsh,
I am commenting about the settlement between Geisinger and
Evangelical Hospital I agree with your conclusion that they do not
merge because of the monopoly the Geisinger will have and all the
bad effects that will occur.
I live in Danville, one mile from the Geisinger but have all of
my care given at Evangelical. I would hate to have that spoiled.
Sincerely,
Carol A. Barsh
Eric Welsh, Chief
Healthcare and Consumer Products Section
Antitrust Division
U.S. Department of Justice
450 Fifth St. NW
Suite 4100
Washington, DC 20530
Mr. Welsh:
I am writing to express my concerns regarding the DOJ's recent
proposed settlement for the partial acquisition of Evangelical
Community Hospital by Geisinger Health.
As it stands, the settlement limits Geisinger's ownership
interest in Evangelical to 7.5%, described as passive. Additionally,
loans/lines of credit to Evangelical are forbidden, as is exerting
any control over Evangelical's expenditures. Kendra Aucker,
Evangelical's CEO, has stated that Evangelical will use Geisinger's
financial support to fund facilities, technology and services while
simultaneously describing Evangelical Hospital as ``independent''.
From this, arise the following questions and issues:
How is Evangelical independent if it depends upon Geisinger's
7.5% involvement without which we must assume Evangelical could not
fund upgrades to what Ms. Aucker describes as facilities, technology
and services?
What benefit does Geisinger obtain in the arrangement proposed
by the DOJ since it represents only a fraction of what Geisinger
sought in both monetary interest and strategic control? It appears
that had Geisinger walked away from the proposed settlement it would
have made plain their strategy of assuming sufficient control of a
competitor without an outright takeover. This strategy was long
evident to some of us in the community as ``why take over outright
what you can control by other means''. Hospital competition in the
area is presently limited due to Geisinger's acquisition of Shamokin
Area Hospital, Bloomsburg Hospital and the closure of Sunbury
hospital. With only Evangelical Hospital remaining the strategy
almost worked. So is it now about Geisinger saving face or is there
another agenda afoot?
The proposed settlement is framed in terms of both hospital's
competition for `inpatient general acute-care hospital services''
however there's much revenue to be made from outpatient services.
What is to prevent Geisinger from expanding services into
Evangelical's outpatient market thereby negating the cap imposed on
the inpatient services, thus causing further financial strain on
Evangelical?
Evangelical hospital recently completed construction of a $70
million PRIME (Patient Room Improvement, Modernization, and
Enhancement) project. With an annual revenue of about $260 million,
it is reasonable to enquire about the financing and terms that were
obtained, what was used as collateral and if there was a co-signer.
The facility was advertised as allowing access to
[[Page 51189]]
leading-edge technology not found at other community hospitals. Was
this project planned prior to Geisinger's attempted acquisition? Was
failure the plan? Without Geisinger's hoped for depth of financial
involvement what will this mean for Evangelical's future finances?
If Evangelical does not anticipate an adverse financial impact
from the DOJ's agreement, despite Geisinger's significantly reduced
financial involvement, why did Evangelical originally accede to
Geisinger's partnership with such onerous terms unless it was
needed?
If Evangelical seeks a revisiting of the DOJ's settlement due to
future financial shortcomings, does the DOJ currently have an
opinion on what it may need to propose? In other words, did the DOJ
review, and if not, will it review why Evangelical was seeking to
expand services beyond what is found in a community hospital,
services it apparently could not afford without giving up financial
and strategic control of its hospital? Structuring an agreement that
on the surface would not appear to be an antitrust violation gives
an indication in my mind as to the mindset of the parties.
Regarding Evangelical's acquisition of IT systems and support
from Geisinger, will this be at fair market value? Is there a
mechanism to ensure that the price for support will not make up for
the denied opportunity of partial hospital ownership and the service
lines that Geisinger planned to develop?
In summary, what benefit does Geisinger derive from passive
involvement in Evangelical, what is the endgame of each
organization, and at what cost is there to the community, given the
ever shrinking choices available to the public?
Thank You,
Steve Karp, MD
[REDACTED]
AXINN, Richard B. Dagen
1901 L Street NW
Washington, DC 20036
202.721.5418
<a href="/cdn-cgi/l/email-protection#e0b2a4a1a7a5aea0a1b8a9aeaecea3afad"><span class="__cf_email__" data-cfemail="7f2d3b3e383a313f3e27363131513c3032">[email protected]</span></a>
June 3, 2021
Via Electronic Mail
Eric D. Welsh, Esq.
Chief, Healthcare and Consumer Products Section
Antitrust Division, Department of Justice
450 Fifth Street NW, Suite 4100
Washington, DC 20530
Re: United States v. Evangelical Community Hospital and Geisinger
Health, Civil Action No. 4:20-cv-01383-MWB (M.D. Pa.)
Dear Mr. Welsh:
On behalf of our client UPMC, a Pennsylvania nonprofit non-stock
corporation, we submit these comments suggesting modifications to
the Proposed Final Judgment (``PFJ'') \1\ in the above- referenced
case.
---------------------------------------------------------------------------
\1\ ECF No. 51-1.
---------------------------------------------------------------------------
UPMC recently entered the general market region involved in this
case to invigorate competition on both the provider and the insurer
side. Like Geisinger Health (``Geisinger''), UPMC itself is both a
provider and payer, or Integrated Delivery and Finance System
(``IDFS''). And to attempt to increase competition in the very
region at issue, UPMC engaged in talks with Evangelical Community
Hospital (``Evangelical'') regarding potential collaboration. The
combination of these facts puts UPMC in a unique position from which
to comment on the PFJ.
After a lengthy investigation, the Department of Justice
(``DOJ'') properly concluded that the initial proposed Collaboration
Agreement between Geisinger and Evangelical would ``substantially
lessen competition and unreasonably restrain trade . . . .''
Complaint at 1, United States v. Geisinger Health, No. 4:20-cv-
01383-MWB (M.D. Pa. 2020) (hereinafter ``Compl.'').\2\ From the
outset, the DOJ correctly alleged that ``the substantial financial
entanglements between these two close competitors . . . reduces both
hospitals' incentives to compete aggressively.'' Id. The Complaint
further explains that Geisinger's motivation to acquire and
collaborate with Evangelical was to eliminate its central fear--that
an Evangelical ``strategic partnership'' with UPMC would create a
``more effective competitor [that] could put Geisinger's revenues at
risk.'' Id. ] 3.
---------------------------------------------------------------------------
\2\ ECF No. 1.
---------------------------------------------------------------------------
Rather than litigate to enjoin the acquisition, on March 3,
2021, the DOJ and the defendants stipulated to the PFJ.\3\ This
remedy was aimed at preserving Evangelical's competitive
independence, and prohibiting Geisinger and Evangelical from sharing
competitively sensitive information. Indeed, the PFJ was intended to
require the parties to ``eliminate other entanglements between them
that would allow Geisinger to influence Evangelical.'' Competitive
Impact Statement (``CIS''), ECF No. 46 at 2. After the publication
of the PFJ on March 3, 2021, however, UPMC alerted the DOJ--and the
DOJ acknowledged--that several problematic provisions contained in
the original ``Collaboration Agreement'' \4\ between Geisinger and
Evangelical had not been addressed in the PFJ or Amended and
Restated Collaboration Agreement (``Amended Collaboration
Agreement''). ECF No. 45-2; 46-2. These legacy issues--if left in
place--would harm competition, and they only make sense in the light
of the original, improper collaboration.
---------------------------------------------------------------------------
\3\ ECF No. 45-1 (Stipulation and Order to the first proposed
Final Judgment filed on March 3, 2021, ECF No. 45-2).
\4\ ECF No. 46-1.
---------------------------------------------------------------------------
DOJ has since corrected only some of the legacy issues. On May
17, 2021, it filed a Joint Notice of Amended Proposed Final
Judgment, attaching a revised PFJ and Second Amended and Restated
Collaboration Agreement (``Second Amended Collaboration
Agreement''). See ECF No. 51, 51-1, 51-3. According to the Joint
Notice, ``[a]fter filing the proposed Final Judgment, it was
discovered that the Amended and Restated Collaboration Agreement and
its attachments inadvertently included legacy provisions that did
not conform to the proposed Final Judgment.'' ECF No. 51. Still,
despite these corrections, additional legacy issues that harm
competition remain unaddressed.
Two critical legacy issues create anticompetitive financial
entanglements that undermine the objective to preserve and protect
competition in the relevant market. These two principal
entanglements involve: (1) Geisinger's margin guarantees to
Evangelical, found in the Addendum to Geisinger's Hospital Services
Agreement with Evangelical and the Addendum to the Physician
Services agreement, both included as Exhibit D to the Second Amended
Collaboration Agreement (ECF No. 51-3 at 55-56, 60-61) (``Margin
Guarantee''); \5\ and (2) Geisinger's subsidization of Evangelical's
information technology (``IT'') expenses, as well as Geisinger's
ongoing entanglement in those IT services, both referenced in the
PFJ at V.B.1-3 (ECF No. 51-1 at 7) and 6.5 of the Second Amended
Collaboration Agreement (ECF No. 51-3 at 9) (``IT Entanglement'').
These entanglements also involve substantial improper information
sharing not resolved by the PFJ.
---------------------------------------------------------------------------
\5\ The Margin Guarantee was also included in Exhibit D to the
Amended Collaboration Agreement. ECF No. 46-2 at 54, 60-61.
---------------------------------------------------------------------------
Whether viewed independently or together, these provisions
enable Geisinger and Evangelical to achieve precisely those
anticompetitive effects of the transaction that the DOJ strongly
urged should be eliminated. Permitting these legacy provisions to
survive will reduce the incentives of Geisinger and Evangelical to
compete. See Compl. ] 6. In fact, in addition to the reduction in
competition from a stand-alone Evangelical, these surviving
entanglements will reduce the threat to Geisinger that Evangelical
will become a stronger competitor through collaboration with UPMC
(or another entity). See id. ] 3. As the Complaint and Competitive
Impact Statement make plain, those two anticompetitive goals
motivated the original Collaboration Agreement, and that purpose is
still accomplished through the Margin Guarantee and the IT
Entanglement.
The key to unraveling the purpose and effect of these provisions
is to ``follow the money.'' Here, as in reverse payment cases where
a branded pharmaceutical pays a generic to eliminate a competitive
threat to its market position, the flow of money from Geisinger to
Evangelical under the Margin Guarantee and IT Entanglement is most
consistent with anticompetitive intent and effects. For example,
under the PFJ, Geisinger is permitted to provide heavy subsidies on
IT-- discounts of 85%, presumably worth tens of millions of
dollars--to its ``closest competitor.'' Compl. ] 18. Further,
contrary to the expected outcome between a payer and a provider,
Geisinger's Margin Guarantee can lead to Geisinger paying more when
it sends additional volume to Evangelical. See ECF No. 51-3 at 59,
64. Finally, under the terms of PFJ, Evangelical gets to keep
approximately $20.3 million from Geisinger, while Geisinger obtains
a 7.5% interest in a non-profit that will entitle it to that 7.5%
value only upon sale of Evangelical, liquidation, or termination of
the agreement. See CIS at 10-11; ECF No. 51-3 at 10-11.
[[Page 51190]]
Why would Geisinger bestow such largess on its closest
competitor? After all, Geisinger--which despite its position in the
relevant market refuses to enter provider contracts with any of
UPMC's health plans--knows how to compete. The DOJ has already
properly rejected any suggestion that Geisinger was offering funds
``altruistically.'' Compl. ] 6. Instead, Geisinger is providing and
guaranteeing this money, and Evangelical is accepting it, because
``as a result of this transaction, both Defendants have the
incentive to pull their competitive punches--incentives that would
not exist in the absence of the agreement.'' Compl. ] 32. Geisinger
achieves a dependent Evangelical, and perhaps more importantly,
keeps UPMC at bay. Indeed, if permitted, the entanglement created by
the remaining provisions could allow Geisinger to influence
Evangelical to cut off its relationship with UPMC as well, further
threatening competition for health plans in the market.
This outcome should not be permitted, particularly where the DOJ
has already acknowledged there are no procompetitive benefits in the
transaction to weigh against these harms,\6\ and ``Evangelical's
placement in the most favored tier of Geisinger Health Plan's
commercial insurance products does not require the partial-
acquisition agreement.'' Compl. ] 66. These legacy provisions, like
those the DOJ has excised, were designed to further the
anticompetitive ``spirit and intent of the ECH-Geisinger
Collaboration Agreement.'' ECF No. 46-2 at 54, 60. Because there is
no pro-competitive collaboration which outweighs the likely
anticompetitive effects, the PFJ should be modified to eliminate
these last impactful vestiges of the original Collaboration
Agreement.
---------------------------------------------------------------------------
\6\ Compl. ] 67 (``there are no transaction-specific
efficiencies to weigh against the harm'').
---------------------------------------------------------------------------
Background
Evangelical and Geisinger are each other's closest competitors
in a six-county area of Central Pennsylvania. Compl. ]] 18, 56, 65;
CIS at 4-5. Together they account for at least 70% of the inpatient
general acute-care services in this area. CIS at 4. As an
independent community hospital with annual revenue of approximately
$260 million, Evangelical knew it was vulnerable to competition from
Geisinger, the largest provider in the relevant market, with annual
revenue above $7 billion. See Compl. ]] 19, 21; CIS at 2-3.
Meanwhile, Geisinger ``had long feared that Evangelical could
partner with a hospital system or insurer to compete even more
intensely'' against Geisinger. Compl. ] 3.
Geisinger's concern was heightened in 2017 when Evangelical
announced it was looking for a strategic partner. Compl. ] 22. This
occurred just after Susquehanna Health System joined UPMC in 2016,
having rejected overtures from Geisinger. To avoid a potential
repeat whereby a nearby competitor became stronger, Geisinger
intended to create ``an indefinite partnership'' to ensure that
``Evangelical is 'tied to us' so `they don't go to a competitor.' ''
Compl. ] 30. The stage was set for a merger or collaboration that
would solve both Geisinger's and Evangelical's troubles. And since
the defendants knew they could not merge outright, they ``concocted
the complicated partial-acquisition agreement . . . to avoid
antitrust scrutiny.'' Compl. ] 24.
Even now after several revisions (both pre- and post-challenge),
the Second Amended Collaboration Agreement still maintains certain
anticompetitive features that generate the same financial and other
entanglements condemned in the DOJ's Complaint. These provisions
negatively impact the incentives for Geisinger and Evangelical to
compete with one another, incentivize higher prices to payers, and
substantially reduce the likelihood that Evangelical would partner
with UPMC or any other entity in a way that could better compete
against Geisinger. Indeed, Paragraph 6 of the Complaint aptly
summarizes the results:
The $100 million pledge, however, was not made altruistically
and is certainly not without strings. The partial-acquisition
agreement ties Geisinger and Evangelical together in a number of
ways, fundamentally altering their relationship as competitors and
curtailing their incentives to compete independently for patients.
Patients and other purchasers of healthcare in central Pennsylvania
likely will be harmed as a result of this diminished competition.
The relief already obtained by the DOJ disentangles the parties
in some important ways, such as severing Geisinger's ability to
appoint directors and control certain Evangelical actions. The DOJ
also capped Geisinger's ownership interest in Evangelical to attempt
to preserve each company's respective incentives to compete.
Unfortunately, the surviving entanglements between Geisinger and
Evangelical--now ostensibly blessed by the PFJ--effectively negate
to a substantial degree the potential positive effects of the
proposed relief. The Margin Guarantee and IT Entanglement were
negotiated in connection with, and are inextricably linked to, the
original Collaboration Agreement. So too was the payment of $20
million. There is no reason to pick and choose between the various
provisions as to which can survive. Given the existence of a hold-
separate agreement in this case, voiding the Second Amended
Collaboration Agreement in its entirety is the best option to
achieve the relief described in the Complaint and claimed in the
Competitive Impact Statement. Short of total elimination, at a
minimum, the provisions discussed herein should be voided. In the
event that the first two options are rejected, some additional
alternatives are presented that might lessen the magnitude of the
harm.
We explain in more detail below why the legacy provisions
regarding the Margin Guarantee and IT Entanglement maintain the
competitive harms identified in the Complaint and why the PFJ should
be modified to promote the public interest. The PJF simply does not
fall ``within the range of acceptability or `within the reaches of
the public interest.' '' \7\
---------------------------------------------------------------------------
\7\ United States v. Am. Tel. & Tel. Co., 552 F. Supp. 131, 151
(D.D.C. 1982) (citations and subsequent history omitted).
---------------------------------------------------------------------------
Legal Standard in Tunney Act Proceedings
The DOJ will file comments and its response with the Court in
compliance with the Tunney Act, which states, the Court ``shall
determine that the entry of [the PFJ] is in the public interest.''
\8\ ``[C]ourts compare the complaint filed by the government with
the proposed consent decree and determine whether the remedies
negotiated between the parties and proposed by the Justice
Department clearly and effectively address the anticompetitive harms
initially identified.'' \9\ Proposed remedies should ``effectively
open[] the relevant markets to competition . . . . '' \10\ Although
courts owe deference to the DOJ, the exercise is not ``a mere
formality'' \11\ nor ``merely a `judicial rubber stamp.' '' \12\ In
this regard, when making its public interest determination, a court
must ``make an independent determination.'' \13\ As the D.C. Circuit
has explained, ``If, for example, a proposed consent `decree is
ambiguous, or the district judge can foresee difficulties in
implementation,' the decree should not be entered until the problems
are fixed.'' \14\ Further, courts are not obliged to accept a
consent ``if third parties contend they would be positively injured
by the decree.'' \15\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 16(b), (d), (e)(1).
\9\ United States v. Thomson Corp., 949 F. Supp. 907, 913
(D.D.C. 1996). None of the relief proposed here exceeds the scope of
the Complaint allegations. Cf. United States v. Microsoft Corp., 56
F.3d 1448, 1462 (D.C. Cir. 1995).
\10\ AT&T, 552 F. Supp. at 153.
\11\ United States v. CVS Health Corp., 407 F. Supp. 3d 45, 52
(D.D.C. 2019).
\12\ Thomson Corp., 949 F. Supp. at 914.
\13\ Id. (internal quotations and citations removed). Here, the
court declined to approve the Proposed Final Judgment until it
included a provision that would require the defendants to provide
anyone a free license to a copyright upon request or another
suitable remedy to resolve the court's concerns about barriers to
entry. Id. at 930-31.
\14\ CVS Health, 407 F. Supp. 3d at 52 (citing Microsoft, 56
F.3d at 1462).
\15\ Microsoft, 56 F.3d at 1462.
---------------------------------------------------------------------------
When, after reviewing the DOJ's response that nothing in the
public comments alters the DOJ's original conclusions, a court
disagrees and concludes that a Proposed Final Judgment does not meet
the public interest standard, courts have taken a variety of steps.
Those have included requiring the parties to substantially modify
the proposed consent decree before approving it,\16\ ordering that
the parties file annual reports with the court regarding the status
of certain requirements in the Final Judgment,\17\ and holding
annual hearings ``to ensure that the Final Judgment does, and
continues to, satisfy the public interest.'' \18\ As in another
[[Page 51191]]
recent matter involving the health care industry, ``with so much at
stake, the congressionally mandated public interest inquiry must be
thorough.'' \19\
---------------------------------------------------------------------------
\16\ AT&T, 552 F. Supp. at 214; Thomson, 949 F. Supp. at 931.
\17\ United States v. Comcast Corp., 808 F. Supp. 2d 145, 149-
150 (D.D.C. 2011). The court indicated that ``despite the
Government's assurances that 'this Court retains jurisdiction to
issue orders and directions necessary and appropriate to carry out
or construe any provision of the Final Judgment,' and `to enforce
compliance, and to punish violations of its provisions,' I am not
completely certain that these safeguards, alone, will sufficiently
protect the public interest in the years ahead.'' Id. at 149
(citations omitted).
\18\ Comcast Corp., 808 F. Supp. 2d at 150.
\19\ CVS Health, 407 F. Supp. 3d at 48.
---------------------------------------------------------------------------
Margin Guarantees in the Collaboration Agreement Addenda
Exhibit D to the Second Amended Collaboration Agreement \20\
incorporates Margin Guarantee provisions that create incentives for
Geisinger and Evangelical not to compete. As detailed more fully
below, under the Margin Guarantee, Geisinger ensures that
Evangelical obtains equal or larger Geisinger Health Plan revenues
throughout the term of the agreement. In addition to reducing head-
to-head competition, this Margin Guarantee creates incentives for
Evangelical to raise provider rates to UPMC and other health plans,
increasing costs to consumers and heavily favoring Geisinger in the
relevant market. These Addenda were part of the original
Collaboration Agreement,\21\ and their practical effects are only
understood in that context. With no pro- competitive collaboration
or integration to offset the likely anticompetitive effects, these
Addenda should be stricken along with the other disincentives to
compete still embedded in the Second Amended Collaboration
Agreement.
---------------------------------------------------------------------------
\20\ See Addendum to the Agreement to Provide Hospital Services
by and among Geisinger Health Plan, Geisinger Indemnity Insurance
Company, Geisinger Quality Options, Inc., and Evangelical Community
Hospital, ECF No. 51-3 at 55; Addendum to the Agreement to Provide
Primary and Specialty Medical Services by and among Geisinger Health
Plan, Geisinger Indemnity Insurance Company, Geisinger Quality
Options, Inc., and Evangelical Medical Service Organization, ECF No.
51-3 at 60.
\21\ See ECF No. 46-1 at 129-140.
---------------------------------------------------------------------------
Although the CIS does not mention the Margin Guarantee, the DOJ
apparently views the Margin Guarantee as a ``typical'' contract
between a payer and a provider with a guarantee that Evangelical
will achieve guaranteed revenue in exchange for lower rates. But
this view ignores the reality reflected throughout the Complaint
that Geisinger is not a typical payer, but is vertically integrated,
providing both health care services and health plans.
Given the uncertain nature of healthcare costs, a typical payer-
provider contract does not contain 10-plus-year margin guarantees.
UPMC is both a provider and an insurer, and is not aware of the
existence of any agreement with a similar Margin Guarantee in any
other context. The concept is rife with anticompetitive potential
and several such effects are likely to unnecessarily eviscerate a
substantial portion of the relief sought in the PFJ.
The Addenda consist of two main parts. First, Geisinger commits
that Evangelical's hospital and other provider services will be
included in the highest tier (Tier 1) of Geisinger's health
plans.\22\ This provision is not generally problematic; a health
plan often attempts to steer increased patient traffic to a provider
in exchange for lower reimbursement rates.
---------------------------------------------------------------------------
\22\ See ECF No. 51-3, at 56 (Sec. B.2), at 61 (Sec. B.2).
---------------------------------------------------------------------------
Second, however, the Addenda contains an unusual and plainly
anticompetitive Margin Guarantee,\23\ that (while somewhat difficult
to parse and perhaps intentionally vague as to details) appears to
provide for the following:
---------------------------------------------------------------------------
\23\ See ECF No. 51-3, at 55-56 (Sec. B.1), at 60-61 (Sec.
B.1).
---------------------------------------------------------------------------
<bullet> In each year of the ten-year agreement, Geisinger
guarantees that Evangelical will receive the same or a larger amount
of total margin dollars (called a ``Margin Threshold'') starting
from a certain base.\24\
---------------------------------------------------------------------------
\24\ See ECF No. 51-3, at 55-56 (Sec. Sec. A, B.1), at 60-61
(Sec. Sec. A, B.1).
---------------------------------------------------------------------------
<bullet> If the margin dollars decrease, Geisinger will make it
up to Evangelical with (i) a retroactive payment; and (ii) higher
reimbursement rates to Evangelical going forward.\25\
---------------------------------------------------------------------------
\25\ See ECF No. 51-3, at 55-57 (Sec. Sec. B.1, B.3, B.6, B.7);
id. at 59 (Exhibit A); at 60-63 (Sec. Sec. B.1, B.3, B.6, B.7); id.
at 64 (Exhibit A).
---------------------------------------------------------------------------
<bullet> If the margin dollars increase, Evangelical pays
Geisinger a retroactive payment and Geisinger's rates go down.\26\
---------------------------------------------------------------------------
\26\ See ECF No. 51-3, at 55-57 (Sec. Sec. B.1, B.3, B.6, B.7);
id. at 59 (Exhibit A); at 60-62 (Sec. Sec. B.1, B.3, B.6, B.7); id.
at 64 (Exhibit A).
---------------------------------------------------------------------------
<bullet> Geisinger and Evangelical share highly competitively
sensitive information to effectuate the agreement on a monthly basis
(discussed further below).\27\
---------------------------------------------------------------------------
\27\ See ECF No. 51-3, at 56-57 (Sec. Sec. B.6, B.7), at 61-62
(Sec. Sec. B.6, B.7).
---------------------------------------------------------------------------
Illustrations of how this framework is to operate in practice
are attached to the Addenda as Exhibit A, and they produce highly
surprising and competitively suspect results.\28\
---------------------------------------------------------------------------
\28\ See ECF No. 51-3, at 59 (Exhibit A), at 64 (Exhibit A).
---------------------------------------------------------------------------
First, recall that Evangelical feared competition from
Geisinger. Absent this Margin Guarantee for the next ten years,
Geisinger would have tried to steer patients away from Evangelical
providers and toward Geisinger providers. But Geisinger's Margin
Guarantee has reduced Evangelical's fear of losing patients by
setting up a penalty to discourage Geisinger from engaging in such
activity. With the Margin Guarantee, Evangelical is immunized
against loss of margin. And if Geisinger is to entice a patient to a
Geisinger hospital, Geisinger not only has to offer better terms to
the patient, but also has to make up revenue lost by Evangelical. By
design, the incentive to compete between Geisinger and Evangelical
has decreased, the very same effect that the DOJ decried in the
Complaint regarding the Collaboration Agreement.
Why would Geisinger offer to make payments to compensate
Evangelical for patients it lures away? \29\ Because the penalty
benefits Geisinger; Evangelical no longer fears competition from
Geisinger, and therefore Geisinger has less reason to fear that
Evangelical would partner with UPMC (or another entity) and become
``a more effective competitor.'' Simply put, the Margin Guarantee
achieves Geisinger's main objective from the collaboration:
``[d]efensive positioning against expansion by [UPMC] and/or
affiliation with [another] competitor.'' Compl. ] 22 (brackets in
original).
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\29\ The 7.5% interest retained by Geisinger does not entitle it
to receive any cash flow. ECF 51-3, at 8 (Sec. 6.2) (``Evangelical
shall not make, nor be required to make, any distributions or other
payments with respect to Geisinger's membership interest in
Evangelical.'').
---------------------------------------------------------------------------
Also by design, this reduction of competition from Geisinger
gives Evangelical the freedom and incentive to raise provider rates
to other payers (like UPMC), which have much smaller subscriber
bases and direct lower patient volume to Evangelical than can
Geisinger. As Evangelical raises rates for medical services,
Geisinger providers are then also in a position to raise rates.
Indeed, economic theory predicts that no actual payments even have
to trade hands for market rates to be successfully increased. This
is a classic example of game theory involving an enforceable pre-
commitment.\30\
---------------------------------------------------------------------------
\30\ Cf. Jonathan Baker, Two Sherman Act Section 1 Dilemmas:
Parallel Pricing, the Oligopoly Problem, and Contemporary Economic
Theory, 38 ANTITRUST BULLETIN 143, 158 (``Firms can deter rivals
from cheating by guaranteeing that when the time comes to carry
through a punishment, they will find the punishment behavior
attractive. They do so by tying their own hands . . . .''); Ian
Ayres, How Cartels Punish: A Structural Theory of Self- Enforcing
Collusion, 87 COLUMBIA L. REV. 295, 317 (1987) (``Once a super-
competitive cartel price is established, an MFN [most-favored-
nation] clause also acts to increase the costs of prices cuts.
Unlike an MCC [meeting competition clause], where the rivals are
committed to punishing, the MFN clause is a credible commitment to
self-punishment '').
---------------------------------------------------------------------------
The Exhibit A to the Addenda also reveal a second mechanism
incenting Evangelical to raise payer rates. If Geisinger Health Plan
competes for and captures an existing Evangelical patient from
another insurer that pays Evangelical higher reimbursement rates
than does Geisinger, then Geisinger must make up the revenue loss to
Evangelical. In effect, this could result in Geisinger paying higher
rates to Evangelical even when Geisinger's volume to Evangelical
increases. Several crucial implications fall out from this odd
result.
It is axiomatic that higher payer patient volumes predictably
lead to lower reimbursement rates. Geisinger has by far the largest
insurance market share in the relevant area. Therefore, one would
expect that most payers, if not all, are like the insurer referred
to in Exhibit A as ``Payer A,'' paying higher provider rates than
Geisinger to Evangelical. In this example, when Geisinger's Health
Plan takes a current Evangelical patient from ``Payer A''--which
pays Evangelical higher rates than would Geisinger for the same
medical services--Geisinger has promised to reimburse Evangelical
for lost margin through a retroactive payment and higher rates going
forward. And the greater the difference in rates, the more money
Geisinger has promised to pay to make Evangelical whole.
Why does it follow that Evangelical has the incentive to raise
rates to UPMC or another similarly-situated Payer A? First of all,
that's what Geisinger wants--and it is willing to pay Evangelical to
get it. Moreover, Evangelical will raise rates because it can
profitably do so. As Evangelical increases provider rates to UPMC
two possibilities can
[[Page 51192]]
occur: In one scenario, UPMC accepts those rate increases and pays
more, passing those additional costs on to its insured employers and
employees. This in turn increases the cost of UPMC's health plans,
making UPMC less competitive against Geisinger's plans. If UPMC is
able to retain its employer clients in the face of the price
increase, Evangelical's price increase is successful, and it gets
more revenue. Alternatively, if UPMC's employer clients refuse the
price increase, the most likely insurer alternative is Geisinger.
Geisinger, as discussed above, would then have to pay Evangelical to
make up for any lost margin, but it gains new subscribers that
offset the payment to Evangelical. In short, Evangelical is
protected against any loss of profit from raising rates to UPMC or
another ``Payer A,'' and will gain revenue under many likely
circumstances.\31\
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\31\ In the ``but for'' world without the Margin Guarantee,
assuming that Evangelical raises rates to UPMC and UPMC loses
employers to Geisinger, if Geisinger's reimbursement rates are
lower, Evangelical would lose revenue. With the Margin Guarantee,
Evangelical no longer has to consider that potential revenue loss
from the rate increase to UPMC or another similarly situated payer.
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The illustration above raises another particularly unusual
question that should give an antitrust enforcer pause: As Geisinger
Health Plan wins new patients and its volume increases at
Evangelical, why would Geisinger commit to paying a higher rate to
Evangelical? In light of the motivation for the Collaboration
Agreement as a whole, the best answer is to think of the Margin
Guarantee as Geisinger paying Evangelical to raise rates to UPMC.
That benefits Geisinger because employers that are not willing to
accept the price increase will simply switch to Geisinger.
Additionally, on the provider side, if patients leave Evangelical as
a result of the higher prices, Geisinger's providers are again the
most likely alternative: Geisinger has more than 50% of the relevant
market, and we understand that the diversion ratio from Evangelical
to Geisinger is around 70%. In short, the Margin Guarantee is a new
method to ``raise rivals' costs,'' and gain additional market share,
whether it occurs on the provider or payer side.\32\
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\32\ See PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW:
AN ANALYSIS OF ANTITRUST PRINCIPLES AND
THEIR APPLICATION ] 651b5 (4th and 5th ed. 2013-20) (``Several
anticompetitive actions by dominant firms are best explained as
efforts to limit rivals' market access by increasing their costs.
Such strategies may succeed where more aggressive ones involving the
complete destruction of rivals might not. Once rivals' costs have
been increased, the dominant firm can raise its own price or
increase its market share at the rivals' expense.''); Thomas G.
Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising
Rivals' Costs to Achieve Power over Price, 96 YALE L.J. 209 (1986).
---------------------------------------------------------------------------
We understand the DOJ's belief is that instead of increasing
provider rates to UPMC and other payers, Evangelical will be
incentivized to lower rates to other health plans with the
expectation that these smaller payers will win Geisinger-insured
patients and still preserve its margin from Geisinger under the
Margin Guarantee. But this is unlikely for several reasons. The
Addenda is supposed to further the collaboration between the two, to
the benefit of both parties. If Evangelical opportunistically
reduced rates to other payers to take advantage of the Margin
Guarantee, Geisinger would likely have a claim for breach of
contract because of the implied covenant of good faith and fair
dealing. The Second Amended Collaboration Agreement allows Geisinger
to provide approximately $20 million to Evangelical in exchange for
a 7.5% ownership interest. If Evangelical substantially lowered
rates to other providers, that would not be in the spirit of
contract.\33\
---------------------------------------------------------------------------
\33\ See Alpha Upsilon Chapter of Fraternity of Beta Theta Pi,
Inc. v. Pennsylvania State Univ., No. 4:19-cv-01061, 2019 WL
5892764, at *10-11 (M.D. Pa. Nov. 12, 2019) (denying motion to
dismiss claim for breach of the implied covenant of good faith and
fair dealing); Somers v. Somers, 613 A.2d 1211, 1213 (Pa. Super.
1992) (``certain strains of bad faith which include: ``e''vasion of
the spirit of the bargain'').
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Additionally, because of the payment mechanism and the
information sharing in the Margin Guarantee, there is no doubt that
Geisinger would learn of any discounting to UPMC or others. As a
result, Evangelical would be further dissuaded from lowering prices
to UPMC in fear that Geisinger might retaliate, for example, through
additional capital expenditures in Evangelical's backyard. Compl. ]
19 (``in considering capital expenditures for certain improvements
to its facilities in 2018, Geisinger cited Evangelical's competitive
activities.''). Further, a rate decrease to UPMC (or other payers)
would have the almost certain effect of reducing revenue for all
current volume, balanced against an uncertain hope that UPMC (or
other payers) would send additional volume to Evangelical. Lower
rates then would require the unlikely belief by Evangelical that the
uncertain incremental revenue would surpass the predictable loss
from revenue of current patients. For all the above reasons,
incentives point towards Evangelical raising provider reimbursement
rates to non-Geisinger payers.
It bears repeating that the Margin Guarantee was created to
better align incentives in furtherance of a joint profit maximizing
collaboration. Moreover, any thoughts that past competition would
predict future competition between Evangelical and Geisinger is
dispelled by the DOJ's compelling recitation of ``the history of
picking and choosing when to compete with each other.'' See Compl.
]] 40-42. In fact, the DOJ found:
<bullet> Although Geisinger and Evangelical are competitors for
patients in central Pennsylvania, they have previously engaged in
coordinated behavior, picking and choosing when to compete and when
not to compete. This tendency to coordinate their competitive
behavior is reflected by Evangelical's CEO's view of ``co-opetition.
<bullet> Defendants' prior acts of coordination, which are
beneficial only to themselves, reinforce their dominant position for
inpatient general acute- care services in central Pennsylvania.
Defendants' coordination comes at the expense of greater competition
and has taken various forms:
[cir] Leaders from Defendants have had ``regular touch base
meetings,'' in which they discussed a variety of topics, including
strategic growth options.
[cir] Geisinger has shared with Evangelical the terms of its
loan forgiveness agreement, which Geisinger uses as an important
tool to recruit physicians.
[cir] Geisinger and Evangelical established a co-branded urgent-
care center in Lewisburg that included a non-compete clause. As
Evangelical's head of marketing explained to the board, the venture
allowed Evangelical ``to build volume to our urgent care with
Geisinger as a partner rather than potentially as a competitor.
<bullet> More concerning, senior executives of Defendants
entered into an agreement not to recruit each other's employees--a
so-called no-poach agreement. Defendants' no-poach agreement--an
agreement between competitors, reached through verbal exchanges and
confirmed by email from senior executives-- reduces competition
between them to hire hospital personnel and therefore directly harms
healthcare workers seeking competitive pay and working conditions.
Defendants have monitored each other's compliance with this unlawful
agreement, and deviations have been called out in an effort to
enforce compliance. . . .
The DOJ's conclusion to this section is particularly relevant
here:
This history of coordination between Defendants increases the
risk that the additional entanglements created by the partial-
acquisition agreement will lead Geisinger and Evangelical to
coordinate even more closely at the expense of consumers when it is
beneficial for them to do so. Moreover, this history makes clear
that Defendants' self-serving representations about their intent to
continue to compete going forward--despite all of the entanglements
created by the partial- acquisition agreement--cannot be trusted.
Compl. ] 43 (emphasis added).
Even without this history, the entanglements raise unjustifiable
antitrust risks. With this history, the result is even more certain.
These entities are not entitled to the benefit of the doubt at the
expense of consumers.
Finally, the Margin Guarantee has nothing to do with, and is
severable from, the tiering provision in the Addendum. As Paragraph
66 of the Complaint recognizes:
Evangelical's placement in the most favored tier of Geisinger
Health Plan's commercial insurance products does not require the
partial-acquisition agreement. To the contrary, agreements between
hospitals and insurers that offer favorable placement in commercial
insurance products in exchange for favorable rates are common and do
not require the entanglements created by the partial-acquisition
agreement.
This logic also applies to the Margin Guarantee. This entanglement
is not necessary to effectuate tiering. The Margin Guarantee was
part and parcel of the original, anticompetitive Collaboration
Agreement, designed to foster collaboration, not competition.
Recall, the parties' preferred outcome was a complete merger. Compl.
[[Page 51193]]
] 23. The Margin Guarantee, like all the other provisions, was
drafted (i.e., ``concocted'') to replicate that goal as much as
feasible.
Evangelical and Geisinger should not be permitted to maintain
``additional entanglements created by the partial acquisition
agreement.''
It Subsidy and Entanglement by Horizontal Competitor
Another key anticompetitive legacy issue from the original
Collaboration Agreement remains: Geisinger's extraordinary subsidy
of and entanglement in its main competitor's IT systems. The IT
Entanglement was part of the original Collaboration Agreement
because Geisinger and Evangelical expected to cease (or at least
substantially reduce) mutual competition. The CIS summarily
concludes that ``the provision of upgraded health records software
and other support software is unlikely to prevent Evangelical from
collaborating with other healthcare providers.'' CIS at 16. But the
DOJ does not have ``a crystal ball to forecast'' how this IT
Entanglement will work, and lacks experience with this unique
situation.\34\ For the reasons below, the DOJ conjecture is likely
incorrect. As a result, the IT Entanglement should also be
reconsidered and eliminated.
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\34\ Cf. Comcast Corp., 808 F. Supp. 2d at 149; CVS Health, 407
F. Supp. 3d at 50-51 (rejecting DOJ conclusion that foreclosure ``is
unlikely to occur,'' because absent supporting evidence and
explanation, the response is ``little more than a bald assertion
that it is right and the AMA is wrong'').
---------------------------------------------------------------------------
The Complaint recognizes that Evangelical had the financial
ability to improve its IT without this collaboration.\35\ And, as
the DOJ has pointed out, Geisinger's outlays to Evangelical are not
for altruistic purposes. See Compl. ] 6. If not for altruism, then
why would Geisinger assist its main competitor to become even
marginally more competitive? The answer, once again, is that
Geisinger has its eye on the prize--ensuring its dominant
competitive position in the market by reducing Evangelical's
independence and the likelihood that Evangelical would collaborate
with another entity to become a significantly more effective
competitor. UPMC is well aware that independent community hospitals
cherish their independence, and collaborate only when necessary. By
effectively taking Evangelical's IT expenses off the table,
Geisinger achieves its objective. Furthermore, Geisinger is not just
subsidizing IT; rather, Geisinger is entangling itself within the
Evangelical IT system.\36\ This entanglement will give Geisinger,
the dominant provider and payer in the market, a further advantage
over any other competition, of which there already is very
little.\37\
---------------------------------------------------------------------------
\35\ Compl. ]] 64-65.
\36\ There are two means by which a ``donor'' under the Stark
Act might provide IT subsidies. The first involves the donee dealing
directly with the EMR. The other puts the donor between the EMR and
the donee, which involves more entanglement. The Agreement here
seems to contemplate the latter.
\37\ The Complaint alleges that UPMC has approximately 27% of
the relevant market. But this substantially overstates UPMC's
position. The DOJ's estimated share is an artifact of the reality
that Evangelical's service area stretches as far north as
Williamsport, home of a major UPMC hospital. This artificially
boosts the apparent competitive significance of UPMC. In fact, there
are very few zip codes where any material overlap between UPMC and
Evangelical exists. Geisinger and Evangelical are the only two
significant competitors in the vast majority of Evangelical's
service area.
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As before, the IT Entanglement should be examined, not in a
vacuum, but informed by the anticompetitive purpose of the original
Collaboration Agreement. And the big picture is clear. Prior to the
deal, Evangelical was in a ``strong financial position, had been
profitable for the last five years,'' and had the financial ability
to fund capital improvement projects. Compl. ] 65. Meanwhile,
Evangelical was considering a partnership with UPMC or others. The
Complaint alleges that Geisinger was aware of that threat, and
wanted to prevent it. This motive leads to the following
alternative, yet realistic, view of the but for world:
<bullet> Geisinger believed that Evangelical was considering
partnering with UPMC. Compl. ] 22. Geisinger knew that such a
partnership would increase competition and be unfavorable for
Geisinger's dominant position. Compl. ] 3. Geisinger believed that
it needed to prevent a UPMC-Evangelical collaboration. Compl. ] 30.
<bullet> Geisinger would have preferred a full acquisition of
Evangelical, but also soon realized that such a transaction would be
blocked on antitrust grounds. Compl. ] 23.
<bullet> As a fallback, Geisinger and Evangelical sought to
``concoct'' a partial acquisition, Compl.] 24, but that arrangement
too might be blocked.
<bullet> As a further attempt to prevent a relationship between
UPMC and Evangelical, Geisinger decided to offer an arrangement
whereby Evangelical remains technically independent, but will become
entangled and collaborate closely with Geisinger.
<bullet> Geisinger offers to pay the vast majority of
Evangelical's significant IT expenses, requiring Evangelical's
dependence on Geisinger for technology licenses and operational
support, as well as significant information sharing over the course
of a decade.
This is essentially the state of the world. Geisinger should
have no incentive to assist its main adversary. So why do it? To
reduce the risk of Evangelical partnering with UPMC or another
entity that might pose an increased competitive threat to Geisinger.
Prior to the negotiations over the original Collaboration Agreement,
the parties were negotiating an IT license. The value of the IT
license to Geisinger was estimated at $10 million alone; \38\ thus,
the Second Amended Collaboration Agreement will reduce that revenue
to only $1.5 million, a windfall of $8.5 million for Evangelical (in
addition to the $20.3 million). It is unlikely that this IT
Entanglement represents an arms-length transaction between
competitors; Geisinger expects Evangelical to hold up its end of the
deal, and these provisions provide assurances that this will occur.
---------------------------------------------------------------------------
\38\ Compl. ] 29.
---------------------------------------------------------------------------
This is another anticompetitive ``win-win'' for Geisinger and
Evangelical, which nominally maintains Evangelical's independence
while becoming dependent on Geisinger's largesse, thereby reducing
its threat to Geisinger's dominance. But it is a significant loss
for health care consumers in the region, who might have benefitted
from more vigorous competition to Geisinger's stronghold on both
medical services and insurance in the relevant market.
With respect to the likely anticompetitive effects, the most
appropriate analogy to the substantial IT discounts provided by
Geisinger to Evangelical involves the branded-generic pharmaceutical
reverse payment cases.\39\ As the courts now recognize, the large
and unjustified flow of anything of value from a dominant firm to a
competitor in the wrong direction is suspect. See King Drug Co. of
Florence, Inc. v. SmithKline Beecham Corp., 791 F.3d 388, 404 (3d
Cir. 2015) (stating ``reverse payments are problematic because of
their potential to negatively impact consumer welfare by preventing
the risk of competition'' and recognizing that certain non-cash
transfers ``are likely to present the same types of problems as
reverse payments of cash.''). Here, Geisinger is effectively
transferring substantial revenue to a competitor to avoid a threat
of increased competition.\40\ As in the pay-for-delay cases, finding
a valid business reason for such a flow of consideration is not
easy, and the DOJ did not suggest any justification in its
Competitive Impact Statement.\41\ Bestowing millions of dollars of
discounts on Evangelical should evoke as much suspicion as above
market sales, particularly when the discounts are born from an
anticompetitive collaboration.
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\39\ King Drug Co. of Florence, Inc. v. SmithKline Beecham
Corp., 791 F.3d 388, 402 (3d Cir. 2015) (quoting FTC v. Actavis,
Inc., 570 U.S. 136, 140-41 (2013)) (``In a reverse payment
settlement, the patentee ``pays money . . . purely so [the alleged
infringer] will give up the patent fight.'' These payments are said
to flow in `reverse' because `a party with no claim for damages
(something that is usually true of a paragraph IV litigation
defendant) walks away with money simply so it will stay away from
the patentee's market.' '').
\40\ While it is true that the consideration in Actavis resulted
in express contractual commitments not to compete, that distinction
is not material in this context; rather the consideration (part of
the partial collaboration) results in the same anticompetitive
effects- reduced competition in the relevant market.
\41\ Cf. In re High Fructose Corn Syrup Antitrust Litig., 295
F.3d 651, 659 (7th Cir. 2002) (emphasis in original) (when one
competitor sources from another competitor at a higher cost than
internal production, this could signify that the conduct ``is a way
of shoring up a sellers' cartel by protecting the market share of
each seller.''); In re Titanium Dioxide Antitrust Litig., 959 F.
Supp. 2d 799, 815 (D. Md. 2013) (``Instead of competing for
Millenium's customers, DuPont appears to have provided help to
Millennium, selling titanium dioxide at a rate lower than that on
the market.''); In re Ethylene Propylene Diene Monomer (EPDM)
Antitrust Litig., 681 F. Supp. 2d 141 (D. Conn. 2009) (holding that
selling to a competitor at below market prices created an inference
of a price-fixing conspiracy).
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The example of Susquehanna Health, now UPMC Susquehanna, is
instructive here. As mentioned above, Susquehanna joined UPMC in
2016, after rebuffing advances from Geisinger similar to those made
to Evangelical. Geisinger had offered to provide for all of
Susquehanna's needed IT expenditures, which were valued at tens of
[[Page 51194]]
millions of dollars. Had Susquehanna received that money from
Geisinger, or a subsidy like that contemplated here, Susquehanna's
incentive to join UPMC would have been reduced. And even if it had
remained technically ``independent,'' it would have become dependent
on Geisinger's aid, to the detriment of consumers in the region. The
same is true here.
Leaving aside Geisinger's interference with Evangelical's path
toward becoming a stronger competitor to Geisinger, the IT
arrangement thoroughly entangles Geisinger with Evangelical.
Evangelical will become dependent on Geisinger to provide and manage
the key IT systems required for the successful management of
Evangelical's health care operations and patient care. And aside
from dependency on Geisinger's subsidies, the difficulty and cost of
potentially having to uproot and integrate a new IT system in the
future will make Evangelical even more hesitant to cross Geisinger
for fear that its infrastructure may also be at risk. This will
further reduce competition in the market. The Complaint repeatedly
references the fact that the entanglements between Evangelical and
Geisinger bode ill for consumers. Although DOJ has accomplished a
number of disentanglements, the IT Entanglement, like the Margin
Guarantee discussed above, still remain and create unnecessary
competitive risks.
As any healthcare provider understands, today's healthcare
delivery is heavily dependent on the utilization of a modern
Electronic Medical Record (``EMR'') system, which impacts boththe
physician and patient. The Second Amended Collaboration Agreement at
issue outlines the IT Entanglement as follows:
<bullet> Geisinger ``will provide its electronic medical system
records systems (EPIC and related embedded clinical systems,
including a license to the embedded Geisinger intellectual property)
at an 85% discount'' to Evangelical;
<bullet> Geisinger will provide support for such systems at an
85% discount to Evangelical; and
<bullet> The parties will enter an IT sharing agreement, whereby
Geisinger will provide additional back office systems to Evangelical
at commercially reasonable rates.\42\
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\42\ See Second Amended Collaboration Agreement, Sec. 6.5, ECF
No. 51-3, at 9.
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Every EMR system is different; in fact, an EMR provided by Epic
Systems at two different hospitals will often be different from one
another in meaningful ways, which can limit their interoperability.
The goal for EMRs is to allow providers to exchange information and
seamlessly integrate it into their own systems.\43\ Laws,
regulations, and standards establish some EMR interoperability
requirements, but actual true, complete, and seamless
interoperability between different EMR's is dependent on
implementation.\44\
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\43\ U.S. GOV'T ACCOUNTABILITY OFF., GAO-15-817, ELECTRONIC
HEALTH RECORDS NONFEDERAL EFFORTS TO HELP ACHIEVE HEALTH INFORMATION
INTEROPERABILITY 4 (2015) [hereinafter GAO INTEROPERABILITY REPORT],
<a href="https://www.gao.gov/assets/gao-15-817.pdf">https://www.gao.gov/assets/gao-15-817.pdf</a>.
\44\ See Lucia Savage, Martin Gaynor, and Julia Adler-Milstein,
Digital Health Data and Information Sharing: A New Frontier for
Health Care Competition?, 82 ANTITRUST L. J., 593, 604 (2019)
[hereinafter Health Care Competition?]; GAO INTEROPERABILITY REPORT
1-2; 12 (``Stakeholders and representatives from the selected EHR
initiatives described five key challenges to achieving EHR
interoperability; (1) insufficiencies in standards for EHR
interoperability, (2) variation in state privacy rules, (3)
accurately matching patients' health records, (4) costs associated
with interoperability, and (5) need for governance and trust among
entities.''). See also id. at 596 (``Whether these provisions will
be sufficiently strong to overcome firms' incentives to engage in
information blocking remains an open question.'').
---------------------------------------------------------------------------
Under the Second Amended Collaboration Agreement, like the
original version, Evangelical will be brought into Geisinger's
version of Epic, meaning that Geisinger and Evangelical will be on
an integrated EMR infrastructure. Patient referrals between
Evangelical and Geisinger will be easier within the integrated
platform. Patient records will be easier to access across
Evangelical and Geisinger. Patient scheduling will be fluid between
Evangelical and Geisinger provider facilities.
In the abstract, one might conclude these are unambiguously
procompetitive efficiencies, but the reality is that Evangelical
could achieve any such efficiencies either on its own or with
``affiliation with a partner other than its primary competitor.''
\45\ As a result, likely anticompetitive effects outweigh any such
efficiencies. The IT Entanglement is inextricably linked to the
goals of the original collaboration: Bringing Evangelical into the
Geisinger fold and making it more difficult for others to compete
with the collaboration. Geisinger and Evangelical intended their IT
integration to be seamless; there is no suggestion they intended
that others share their outcome. Yet, the IT Entanglement remains
essentially unchanged. Other providers and payers will face more
friction when trying to work with Evangelical or compete for
patients. And in furtherance of the collaboration's goal to insulate
Geisinger and Evangelical from outside competition, they will likely
``make it harder than it needs to be (legally or technically) for
patients to take their data to other [health care organizations]
because this can inhibit patients or customers from moving their
business to competing providers.'' \46\
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\45\ Cf. FED. TRADE COMM'N, FED. TRADE COMM'N STAFF SUBMISSION
TO THE SOUTHWEST VIRGINIA HEALTH AUTHORITY AND VIRGINIA DEPARTMENT
OF HEALTH REGARDING COOPERATIVE AGREEMENT APPLICATION OF MOUNTAIN
STATES HEALTH ALLIANCE AND WELLMONTHEALTH SYSTEM 35 (2016), <a href="https://www.ftc.gov/system/files/documents/advocacy_documents/submission-ftc-staff-southwest-virginia-health-authority-virginia-department-health-regarding/160930wellmontswvastaffcomment.pdf">https://www.ftc.gov/system/files/documents/advocacy_documents/submission-ftc-staff-southwest-virginia-health-authority-virginia-department-health-regarding/160930wellmontswvastaffcomment.pdf</a>. FTC staff
concluded that many of the purported efficiencies were not
significant, and to the extent that they could be validated, were
achievable by less restrictive means. Id. at 34-36.
\46\ Id. at 604.
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Of particular interest here, the discussion of recent Medicare
Program amendments acknowledges that a prohibition on information
blocking was intended to ensure the ``policy goal of fully
interoperable health information systems and will not be misused to
steer business to the donor [hospital].'' \47\ While UPMC has no
reason to believe that total ``information blocking'' will occur,
UPMC is concerned that Geisinger will necessarily gain an unfair
competitive advantage through the IT Entanglement and subsequent
additional entanglements if those legacy provisions are not
eliminated from the Second Amended Collaboration Agreement.\48\
---------------------------------------------------------------------------
\47\ Medicare Program; Modernizing and Clarifying the Physician
Self-Referral Regulations, 85 FR 77492, 77611 (Dec. 2, 2020) (Final
Rule).
\48\ Health Care Competition? at 596 (short of an outright
information block, defendants still can ``engage[ ] in practices
that impede efficient access and use of the data by competitors or
other individuals or entities.'').
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As one example, because the agreement apparently anoints
Geisinger as Evangelical's IT gatekeeper, when the inevitable
technological glitch arises between UPMC (or United or Aetna) and
Evangelical, Geisinger apparently would be responsible for fixing
the problem.\49\ That alone should raise concerns. Similarly, the
Office of the National Coordinator for Health Information Technology
(``ONC'') explains that, under the Cures Act Final Rule:
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\49\ See Second Amended Collaboration Agreement, Sec. 6.5, ECF
No 51-3, at 9; EPIC SYSTEMS CORP., ONC Health IT Certification
Details, at 3 (May 18, 2021) (where ``[a]n Epic client extends
access to its EHR to a hospital . . . [t]he Epic client's IT staff
provide installation and ongoing support services.''), <a href="https://www.epic.com/docs/mucertification.pdf">https://www.epic.com/docs/mucertification.pdf</a>.
It will not be information blocking if an actor does not fulfill
a request to access, exchange, or use EHI due to the infeasibility
of the request, provided certain conditions are met.''
It will not be information blocking for an actor to charge fees,
including fees that result in a reasonable profit margin, for
accessing, exchanging, or using EHI, provided certain conditions are
met.\50\
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\50\ Information Blocking, ONC'S CURES ACT FINAL RULE, <a href="https://www.healthit.gov/curesrule/final-rule-policy/information-blocking">https://www.healthit.gov/curesrule/final-rule-policy/information-blocking</a>
(last visited May 30, 2021).
Geisinger and Evangelical also have other means at their
disposal to make patient transfers to other providers more
difficult. Those include making it difficult to match patients'
health records stored across different systems \51\ and making it
``challenging to establish the governance and trust'' related to
patient information exchange practices.\52\ By subsidizing,
supporting, and essentially controlling Evangelical's IT, the IT
Entanglement further solidifies the relationship between the two
[[Page 51195]]
largest providers in the market.\53\ How the entangled Geisinger-
Evangelical exercises potential discretionary acts to permit or
impede interoperability is critical to how competition plays out in
the region.\54\ There is no mechanism in the PFJ to assure that UPMC
and others are not disadvantaged. Given ``the history of
coordination between Defendants,'' and the fact that the IT
Entanglement, like the Margin Guarantee, was an integral part of the
original collaboration agreement, no ``self-serving representations
about their intent to continue to compete'' can overcome the logic
and intuition that this Entanglement is bad for consumers.
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\51\ GAO INTEROPERABILITY REPORT at 13.
\52\ Id. at 14 (``These governance practices can include
organizational policies related to privacy, information security,
data use, technical standards, and other issues that affect the
exchange of information across organizational boundaries. One
stakeholder noted that it is important to establish agreements to
ensure that entities share information openly with all other
participants in a network.'').
\53\ Cf. id. at 595 (``Holding on to data may allow market
participants to maintain, and in some cases enhance, their market
position.'').
\54\ Id. at 607 (``strateg[ies] for data holders to impede data
transfer and thwart competition . . . may be a version of the
strategy of raising rivals' costs to thwart competition.'').
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Further, once Evangelical is fully integrated into the Geisinger
technology ecosystem, this arrangement will give Geisinger
additional leverage over Evangelical, which will be dependent on
both the use of the EMR system and Geisinger's technical support to
operate it. UPMC is unaware of any other instance where a dominant
health system has subsidized an EMR system for its closest hospital
competitor. It is simply unheard of to fund--to the point of a near
giveaway--such a crucial resource in these circumstances. Geisinger
and Evangelical together already possess a ``dominant position'' in
the relevant inpatient general acute-care market, with a combined
share greater than 70%. Compl. ] 41, 64. And the existence of
significant barriers to entry, id. at ] 68, as well as their history
of ``co-opetiton''--``coordinat[ing] their activity to `find wins'
at the expense of robust competition,'' id. at ] 27--demonstrates
this subsidy will lead to further dominance of the relevant market.
Finally, as the DOJ recognized, there are less restrictive
alternatives available for Evangelical to upgrade its IT system. See
Compl. ] 65 (``Evangelical also could have obtained funds for
capital improvements from sources other than Geisinger, its closest
competitor.'').
The Second Amended Collaboration Agreement refers to ``an
existing Anti-Kickback and Stark Safe Harbor.'' See Second Amended
Collaboration Agreement at Section 6.5. Presumably it refers to
Stark Act exceptions (42 CFR 1001.952(y) and 42 CFR 411.357(w)),
which, under certain circumstances, permit institutions, like
hospitals or health plans, to subsidize IT upgrades to physicians
and physician practices. Because these relationships are primarily
vertical, the potential efficiencies are easily understood. Here,
however, the Complaint recognizes that the relationship between
Geisinger and Evangelical is also heavily horizontal--they are
competitors. Payments between horizontal competitors under these
circumstances have the risks identified above. And while 42 CFR
1001.952(y) and 42 CFR 411.357(w) may allow the provision of IT
systems in some circumstances, even if applicable here, they would
not convey any antitrust immunity on the parties. Cf. FTC v. Phoebe
Putney Health Sys., Inc., 568 U.S. 216, 228 (2013) (``while the Law
does allow the Authority to acquire hospitals, it does not clearly
articulate and affirmatively express a state policy empowering the
Authority to make acquisitions of existing hospitals that will
substantially lessen competition''). Similar to Phoebe, a hospital
might have authority to merge, but that does not provide the
hospital with the right to violate Section 7 of the Clayton Act or
Section 1 of the Sherman Act.
UPMC does not contend that an arms-length license between
Geisinger and Evangelical would be per se unlawful. As the Complaint
recognizes, ``Defendants were in discussion to do so long before
this transaction was under consideration.'' Compl. ] 64.
However, the terms likely would have been much different absent
the Margin Guarantees and the $20 million payment that Evangelical
is permitted to retain as part of this settlement. If this
transaction is voided, Evangelical loses the Margin Guarantee and
potentially has to pay back the $20 million. Without those side
payments, Evangelical might not be so quick to lock itself into
Geisinger's IT for the foreseeable future. The legality of such a
license need not be decided today; rather it is only necessary to
understand that the contemplated license, part of the original
Collaboration Agreement, was created in anticipation of, and has the
effect of, a reduction in competition.
Sharing Competitively Sensitive Information With a Horizontal
Competitor
Finally, the PFJ fails to resolve concerns raised in the
Complaint about the ability of Geisinger and Evangelical to exchange
competitively sensitive information under various provisions of the
Second Amended Collaboration Agreement. See CIS at 14-15.
As the DOJ and FTC's Antitrust Guidelines for Collaborations
Among Competitors state:
[T]he sharing of information related to a market in which the
collaboration operates or in which the participants are actual or
potential competitors may increase the likelihood of collusion on
matters such as price, output, or other competitively sensitive
variables. The competitive concern depends on the nature of the
information shared. Other things being equal, the sharing of
information relating to price, output, costs, or strategic planning
is more likely to raise competitive concern than the sharing of
information relating to less competitively sensitive variables.\55\
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\55\ DEP'T OF JUSTICE AND FED. TRADE COMM'N., ANTITRUST
GUIDELINES FOR COLLABORATIONS AMONG COMPETITORS 15 (2000) (emphasis
added), <a href="https://www.ftc.gov/sites/default/files/documents/public_events/joint-venture-hearings-antitrust-guidelines-collaboration-among-competitors/ftcdojguidelines-2.pdf">https://www.ftc.gov/sites/default/files/documents/public_events/joint-venture-hearings-antitrust-guidelines-collaboration-among-competitors/ftcdojguidelines-2.pdf</a>.
Here, Paragraph B.6 of the Addenda expressly requires Geisinger
and Evangelical to share some competitively sensitive information on
a monthly basis throughout the year as part of an annual review and
rate reset.\56\ The provision also calls for the parties to review
``relevant information . . . such as [Geisinger] Health Plan
commercial volume at [Evangelical], total revenue received by
[Evangelical] from [Geisinger] Health Plan commercial members,
[Evangelical] costs, case mix, etc.'' \57\
---------------------------------------------------------------------------
\56\ ECF No. 51-3, at 56 (Sec. B.6), at 61 (Sec. B.6).
\57\ Id.
---------------------------------------------------------------------------
Insurers do not receive cost information from providers as there
is simply no reason to give it. Even more problematic is the case
here, where a vertically integrated provider and health plan, such
as Geisinger, receives cost information from another provider--and
particularly its closest competitor. In fact, UPMC, which also
operates as a vertically integrated provider and health plan, has
never received cost information from competitive third-party
providers and UPMC does not share its cost structure with any
insurer. Information sharing raises red flags and could facilitate
collusion between competitive providers operating in the same
market.
The Addenda do not require installation of a firewall between
Geisinger Health Plan and Geisinger providers--nor would a firewall
be sufficient in this circumstance. Firewalls come with some risk of
circumvention. Therefore, firewalls are typically only used in
antitrust matters as a last resort to enable a procompetitive
benefit. But as the Complaint states, there are no procompetitive
benefits here. See Compl. ] 67. As a result, even if the PFJ were to
require a more comprehensive firewall regarding Evangelical's cost
data, the public would still bear the risks of competitive harm
without any corresponding benefit.
The public also bears risks associated with the information
Geisinger and Evangelical intend to share because the provisions in
this paragraph are vague and not fully defined. What type of
information do Geisinger and Evangelical intend to share through the
indeterminate term ``etc.'' ? In the event the Margin Guarantee
survives, UPMC encourages the DOJ to require Geisinger and
Evangelical to delete the term ``etc.'' and require Geisinger and
Evangelical to state exactly what information they have agreed to
share. The DOJ should then assess (or reassess) the potential for
anticompetitive harm from the information sharing.
The Addenda also raise additional concerns that Evangelical may
share rate information of other health plans, such as UPMC, with
Geisinger Health Plan. Although the Addenda state, ``[a]ctual payer
rates shall not be shared between the parties,'' \58\ the Margin
Guarantee scheme devised by Evangelical and Geisinger requires
comparison between the margins paid by Geisinger and other health
plans for Evangelical patients won by Geisinger. Even if rate
information is not shared directly, margin information supplied by
Evangelical, combined with Geisinger's payer- side knowledge, could
allow Geisinger to derive Evangelical's provider rates for other
health plans, including those of UPMC.
---------------------------------------------------------------------------
\58\ ECF No. 51-3 at 59, 64.
---------------------------------------------------------------------------
Exhibit A to the Addenda,\59\ illustrates how this happens. In
the example with ``decreased margin,'' Geisinger's rates with
Evangelical increase if it takes a patient
[[Page 51196]]
receiving care at Evangelical who is insured by a health plan that
has higher rates at Evangelical than does Geisinger. Likewise, in
the example with ``increased margin,'' Geisinger's rates with
Evangelical decrease if Geisinger takes a patient receiving care at
Evangelical who is insured by a health plan that has lower rates at
Evangelical than does Geisinger. And, of course, Geisinger knows its
own provider rates at Evangelical. With this information, a simple
comparison allows Geisinger to gain great insight into other health
plans' rates at Evangelical depending on whether Geisinger's rates
go up or down.
---------------------------------------------------------------------------
\59\ Id.
---------------------------------------------------------------------------
We have attempted to identify some of the potential competitive
harms that could arise if Geisinger Health Plan learns its
competitors' rates at Evangelical. Suffice it to say that this type
of information sharing is not in the public interest. We encourage
the DOJ to modify the PFJ to resolve this concern.
Requested Modifications
For the reasons detailed above, UPMC urges the total elimination
of the Second Amended Collaboration Agreement, including the Margin
Guarantee and IT Entanglement.\60\
---------------------------------------------------------------------------
\60\ Although the approximate $20 million payment helps
Geisinger achieve its objective of preventing Evangelical from
teaming up to become a stronger competitor, UPMC believes that (a)
requiring repayment would be unduly disruptive; and (b) the removal
of the other provisions will go a long way toward restoring the
status quo ante.
---------------------------------------------------------------------------
In the event that the DOJ declines that remedy, there are other
options that would improve the relief:
<bullet> Include a provision whereby the DOJ monitors
Evangelical's actions with respect to UPMC and other payers. This
should include maintaining authority to intervene for some period in
the event that Evangelical terminates provider contracts with UPMC
or others absent exigent circumstances, or imposes rate increases
out of line with commercial realities.
<bullet> As a condition of permitting the 7.5% ownership, Margin
Guarantee, and IT Entanglement provisions, require that Evangelical
enter into a 10-year contract with UPMC Health Plan on reasonable
terms and conditions.\61\
---------------------------------------------------------------------------
\61\ UPMC wishes to emphasize that this proposal relates only to
the partial acquisition, and is not relief that should be imposed on
Evangelical if the transaction is voided.
---------------------------------------------------------------------------
<bullet> Insofar as the Geisinger IT Entanglement will
effectively lock-in Evangelical to the whims of Geisinger, develop
and include provisions that ensure that Geisinger cannot use this
leverage to punish Evangelical for collaborating in any fashion with
UPMC or others. More generally, the DOJ should include a mechanism
whereby it can assure that other payers are not disadvantaged.\62\
---------------------------------------------------------------------------
\62\ See UNITED STATES DEP'T OF JUSTICE, ANTITRUST DIVISION
POLICY GUIDE TO MERGER REMEDIES 14-16 (2011) (discussion of use of
non-discrimination, transparency, and anti-retaliation provisions in
conduct remedies), <a href="https://www.justice.gov/sites/default/files/atr/legacy/2011/06/17/272350.pdf">https://www.justice.gov/sites/default/files/atr/legacy/2011/06/17/272350.pdf</a>.
---------------------------------------------------------------------------
<bullet> Impose stronger protections to ensure that payer
information obtained by Evangelical is not shared with Geisinger, in
the course of rate discussions pertaining to the Margin Guarantee or
otherwise, including in any form that could allow Geisinger to
derive price, cost, or margin information about other payers.
Conclusion
The risk of doing nothing here far exceeds the risk from taking
action. If UPMC is correct about the likely competitive harm of the
legacy provisions discussed, and nothing is done, a duopoly with a
pre-existing pattern of ``co-opetition'' becomes more intertwined,
and an already concentrated market becomes even less competitive.
Indeed, with Geisinger constantly in Evangelical's ear, it is
conceivable that Evangelical could follow Geisinger's example and
not provide UPMC Health Plan with a provider contract.\63\
Currently, Evangelical has no reason not to contract with UPMC.
However, if Geisinger persuades Evangelical to cancel the UPMC
contract, consumers would lose out on competition by UPMC for a
variety of health plans, including Medicare and Special Needs Plans
(``SNPs''), Medicaid, and Community Health Choices (``CNC'')
plans.\64\ A remedy for such an action would be difficult, and
Evangelical would argue that termination was in its independent
interest, given the incentives in the Second Amended Collaboration
Agreement provisions at issue.\65\
---------------------------------------------------------------------------
\63\ Also, if this case presents a false positive--that is,
assuming arguendo that the provisions are not actually
anticompetitive--the worst case ``harms'' are that Evangelical has
to purchase its IT at fair market value and continues with its
previous payer contract with Geisinger. These cannot really be
characterized as cognizable harms to competition.
\64\ The loss of competition would not be easily repaired. See
United States v. Aetna Inc., 240 F. Supp. 3d 1, 57 (D.D.C. 2017)
(regarding Medicare Advantage, ``the expert analysis and the other
evidence paint a picture of new entry not being particularly likely,
and the barriers to entry being high.'').
\65\ Cf. United States v. Phila. Nat. Bank, 374 U.S. 321, 362
(1963) (Section 7 of the Clayton Act ``was intended to arrest
anticompetitive tendencies in their `incipiency.' ''); H. Hovenkamp,
Prophylactic Merger Policy, 70 HASTINGS L. REV. 45, 48 (2018)
(``Incipiency tests for mergers are most valuable in cases where a
merger is likely to lead to conduct or behavior that is both
anticompetitive and also is difficult or impossible for antitrust
law to reach once the merger has occurred.'').
---------------------------------------------------------------------------
The best ``prediction of [these provision's] impact upon
competitive conditions in the future,'' \66\ absent additional
relief, is harm to consumers in the relevant market. Under such
conditions, the DOJ should take additional steps to ensure that the
remedy comports with the harms alleged in the Complaint.
---------------------------------------------------------------------------
\66\ FTC v. Penn State Hershey Med. Ctr., 838 F.3d 327, 344
(2016) (quoting Phila. Nat. Bank, 374 U.S. at 362).
---------------------------------------------------------------------------
Sincerely,
Richard B. Dagen
Keith Young
[REDACTED]
Eric Welsh
In regards to the decision to limit the scope of the Geisinger-
Evangelical Hospital merger. This idea was presented to the public
as a partnership, not a merger. While technically they are very
similar, to a layman such as I the word merger has a more ominous
sound. Thus merger was not used in the press releases.
Geisinger and its regional competitor UPMC have been
systematically purchasing small local community hospitals. In the
case of UPMC purchasing and then closing the Sunbury Comm. Hosp.
While this is a gain to their business structure the local citizenry
now has few options in find quality and affordable healthcare
I'm sure that what I see as a local issue you can see it on the
national stage and that is the fact that this countries medical
system is being taken over by conglomerates.
It is actually very similar to going to a supermarket. You see
endless choices until you look closer. You see Heinz Ketchup,
Nabisco cookies, Coke & Pepsi. They all have multiple varieties of
their own product but in reality, the consumer is locked into a
limited diversity of choices.
You have the power to make sure people looking for good
affordable health care have that choice.
Respectfully,
Keith A. Young
RE: Geisinger/Evangelical Merger
[REDACTED]
March 8, 2021
Dear Mr. Welsh,
I have been a patient at both Geisinger and Evangelical
facilities. Both are fine establishments, however, there is a huge
difference in atmosphere and friendliness as well as cost.
Evangelical is a community based, friendly hospital as opposed
to the giant Geisinger which has acquired many private practice
physician offices as well as Bloomsburg Hospital and Shamokin
Hospital. These were both small home-town hospitals prior to
Geisinger's acquisition.
We are located in a rural area that is being dominated by large
corporations where the profit comes before the patient.
The average income in this area is moderate and even with health
insurance, out-of-pocket expenses can be taxing to patients.
Patient care is of the essence. Evangelical can give patients
the best care by remaining an independent community hospital.
Competition is essential and Geisinger and UPMC are trying to
eliminate it.
Please do not let Geisinger acquire Evangelical Hospital.
Sincerely,
Sandy Young
[FR Doc. 2021-19800 Filed 9-13-21; 8:45 am]
BILLING CODE 4410-11-P
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