United States v. Health Choice of Northwest Missouri, Inc., et al.; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Health Choice of Northwest Missouri, Inc., et

al.; Proposed Final Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,

Stipulation, and a Competitive Impact Statement have been filed with

the United States District Court for the Western District of Missouri

in United States v. Health Choice of Northwest Missouri, Inc., et al.,

Civil No. 95-6171-CV-SJ-6 as to Health Choice of Northwest Missouri,

Inc., Heartland Health Systems, Inc. and St. Joseph Physicians, Inc.

The Complaint alleges that the defendants entered into an agreement

with the purpose and effect of restraining competition unreasonably, in

violation of Section 1 of the Sherman Act, 15 U.S.C. 1, by preventing

managed care plans from developing in Buchanan County, Missouri.

The proposed Final Judgment eliminates the continuance or

recurrence of Defendants' agreement to prevent or delay the development

of managed care in Buchanan County.

Public comment on the proposed Final Judgment is invited within the

statutory 60-day comment period. Such comments and responses thereto

will be published in the Federal Register and filed with the Court.

Comments should be directed to Gail Kursh, Chief; Professionals and

Intellectual Property Section/Health Care Task Force; United States

Department of Justice; Antitrust Division; 600 E Street, N.W.; Room

9300; Washington, D.C., 20530 (telephone: 202/307-5799.

Rebecca P. Dick,

Deputy Director of Operations.

United States District Court for the Western District of Missouri

In the matter of: United States or America, Plaintiff, vs.

Health Choice of Northwest Missouri, Inc., Heartland Health System,

Inc., and St. Joseph Physicians, Inc. Defendants Civil Action No.

95-6171-CV-SJ-6.

Stipulation

It is stipulated by and between the undersigned parties, by their

respective attorneys, that:

1. The Court has jurisdiction over the subject matter of this

action and over each of the parties hereto, and venue of this action is

proper in the Western District of Missouri;

2. The parties consent that a Final Judgment in the form hereto

attached may be filed and entered by the Court, upon the motion of any

party or upon the Court's own motion, at any time after compliance with

the requirements of the Antitrust Procedures and Penalties Act (15

U.S.C. 16), and without further notice to any party or other

proceedings, provided that plaintiff has not withdrawn its consent,

which it may do at any time before the entry of the proposed Final

Judgment by serving notice thereof on defendants and by filing that

notice with the Court; and

3. Defendants agree to be bound by the provisions of the proposed

Final Judgment pending its approval by the Court. If plaintiff

withdraws its consent, or if the proposed Final Judgment is not entered

pursuant to the terms of the Stipulation, this Stipulation shall be of

no effect whatsoever, and the making of this Stipulation shall be

without prejudice to any party in this or in any other proceeding.

[[Page 51809]]

For Plaintiff, United States of America:

Anne K. Bingaman,

Assistant Attorney General.

Rebecca P. Dick,

Deputy Director, Office of Operations.

Gail Kursh,

Chief, Professions & Intellectual Property Section, Antitrust Division,

U.S. Department of Justice.

For Defendant Health Choice of Northwest Missouri, Inc.:

510 Francis Avenue, St. Joseph, MO 64501.

For Defendant Heartland Health System, Inc.

Thomas D. Watkins,

Watkins, Boulware, Lucas Miner, Murphy & Taylor, 3101 Frederick Avenue,

St. Joseph, MO 64506.

For Defendant St. Joseph Physicians, Inc.

Richard D. Raskin,

Sidley & Austin, One First National Plaza, Chicago, IL 60603, (312)

853-2170.

Lawrence R. Fullerton,

Chief of Staff.

Edward D. Eliasberg, Jr.,

Dando B. Cellini,

Mark J. Botti,

John B. Arnett, Sr.,

Gregory S. Asciolla,

Attorneys, Antitrust Division, U.S. Dept. of Justice, 600 E Street,

NW., Room 9429, BICN Bldg., Washington, DC 20530, (202) 307-0808.

United States District Court for the Western District of Missouri

In the matter of: United States of America, Plaintiff, vs.

Health Choice of Northwest Missouri, Inc., Heartland Health System,

Inc., and St. Joseph Physicians, Inc., Defendants.

Final Judgment

Plaintiff, the United States of America, having filed its Complaint

on September 13, 1995, and plaintiff and defendants, by their

respective attorneys, having consented to the entry of this Final

Judgment without trial or adjudication of any issue of fact or law, and

without this Final Judgment constituting any evidence against or an

admission by any party with respect to any issue of fact or law;

And Whereas defendants have agreed to be bound by the provisions of

this Final Judgment pending its approval by the Court;

Now, therefore, before the taking of any testimony, and without

trial or adjudication of any issue of fact or law, and upon consent of

the parties, it is hereby ordered, adjudged, and decreed:

I

Jurisdiction

This Court has jurisdiction over the subject matter of and each of

the parties to this action. The Complaint states claims upon which

relief may be granted against the defendants under Section 1 of the

Sherman Act, 15 U.S.C. 1.

II

Definitions

As used in this Final Judgment:

(A) ``Ancillary services'' means home health care, hospice care,

outpatient rehabilitation services, and durable medical equipment.

(B) ``Competing physicians'' means physicians in the same relevant

physician market in separate medical practices.

(C) ``General adult primary care'' (``GAPC'') means family practice

and general internal medicine, whether or not physicians practicing in

these areas are Board certified or Board eligible.

(D) ``Health Choice'' means Health Choice of Northwest Missouri,

Inc., each organization controlled by or under common control with it,

and its directors, officers, agents, employees, and successors.

(E) ``Heartland'' means Heartland Health System, Inc., each

organization controlled by or under common control with it, and its

directors, officers, agents, employees, and successors, but does not

include Heartland Health Foundation.

(F) ``Messenger model'' means the use of an agent or third party to

convey to purchasers any information obtained from individual providers

about the fees which each provider is willing to accept from such

purchasers, and to convey to providers any contract offer made by a

purchaser, where (1) each provider makes a separate, independent, and

unilateral decision to accept or reject a purchaser's offer, (2) the

fee information conveyed to purchasers is obtained separately from each

individual provider, and (3) the agent or third party (a) does not

negotiate collectively for the providers, (b) does not disseminate to

any provider the agent's or third party's or any other provider's views

or intentions as to the proposal and (c) does not otherwise serve to

facilitate any agreement among providers on price or other significant

terms of competition.

(G) ``Non-Heartland physician'' means a physician who is not

employed by Heartland and whose practice is not owned by Heartland.

(H) ``Provider panel'' means those health care providers whom an

organization authorizes to provide care to its enrollees and whom

enrollees are given financial incentives to use.

(I) ``Qualified managed care plan'' means an organization that is

owned, in whole or in part, by any or all of the defendants and that

offers a provider panel. A qualified managed care plan must satisfy

each of the following criteria:

(1) Its owners or not-for-profit members (``members'') who compete

either with other owners or members or with providers participating on

the organizations' provider panel (a) share substantial financial risk

and (b) either directly or through ownership or membership in another

organization comprise no more than 30% of the physicians in any

relevant physician market, except that it may include Heartland, any

single physician, or any single physician practice group for each

relevant physician market,

(2) it has a provider panel that includes no more than 30% of the

physicians in any relevant physician market, unless, for those

subcontracting physicians whose participation increases the panel

beyond 30%, (a) there is a sufficient divergence of economic interest

between those physicians and the owners or members of the organization

so that the owners or members have the incentive to bargain down the

fees of the subcontracting physicians, (b) the organization does not

directly pass through to the payer substantial liability for making

payments to the subcontracting physicians, and (c) the organization

does not compensate those subcontracting physicians in a manner that

substantially replicates ownership in the organization, and

(3) it does not facilitate agreements between any subcontracting

physicians and the owners or members concerning charges to payors not

contracting with the organization.

Nothing herein shall be deemed to limit the ability of a qualified

managed care plan to create financial incentives for improved

performance goals for a provider or the organization or to shift risk

to a provider, consistent with this Paragraph.

(J) ``Relevant physician market'' means GAPC physicians,

pediatricians, obstetricians or gynecologists in Buchanan County,

Missouri, unless defendants obtain plaintiff's prior written approval

of a different definition for any or all of these markets, or any other

relevant market for physician services. This definition is for the sole

and limited purposes of this Final Judgment, and shall not constitute

an admission or agreement that the

[[Page 51810]]

relevant physician market for any other purpose is limited to Buchanan

County, Missouri.

(K) ``SJPI'' means St. Joseph Physicians, Inc., each organization

controlled by or under common control with it, and its directors,

officers, agents, employees, and successors.

(L) ``Subcontracting physician'' means any physician who provides

health care services to a qualified managed care plan, but does not

hold, directly or indirectly, any ownership interest in that plan.

(M) ``Substantial financial risk'' means financial risk such as

that achieved when an organization receives revenue through capitation

or payment of insurance premiums, or when the organization creates

significant financial incentives for providers to achieve specified

cost-containment goals, such as withholding a substantial amount of

their compensation, with distribution of that amount made only if the

cost-containment goals are met.

III

Applicability

This Final Judgment applies to Health Choice, Heartland, and SJPI,

and to all other persons who receive actual notice of this Final

Judgment by personal service or otherwise and then act or participate

in concert with any or all of the defendants.

IV

SJPI Injunctive Relief

SJPI is enjoined from:

(A) Requiring any physician to provide physician services

exclusively through SJPI, Health Choice, or any managed care plan in

which SJPI has an ownership interest, precluding any physician from

contracting with any payor or urging any physician not to contract with

another payor; provided that, nothing in this Final Judgment shall

prohibit SJPI from paying dividends to its owners;

(B) Disclosing to any physician any financial or price or similar

competitively sensitive business information about any competing

physician, except as is reasonably necessary for the operation of any

qualified managed care plan in which SJPI has an ownership interest, or

requiring any physician to disclose to SJPI any financial, price or

similar competitively sensitive business information about any

competitor of SJPI or managed care plan in which SJPI has an ownership

interest; provided that, nothing in this Final Judgment shall prohibit

the disclosure of information already generally available to the

medical community or the public;

(C) Setting the fees or other terms of reimbursement or negotiating

for competing physicians unless SJPI is a qualified managed care plan;

provided that, nothing in this Final Judgment shall prohibit SJPI from

using a messenger model, even if SJPI is not a qualified managed care

plan; and

(D) Owning an interest in any organization that sets fees or other

terms of reimbursement for, or negotiates for, competing physicians,

unless that organization is a qualified managed care plan and complies

with Paragraphs (A) and (B) of this Section IV of the Final Judgment as

if those Paragraphs applied to that organization; provided that,

nothing in this Final Judgment shall prohibit SJPI from owning an

interest in an organization that uses a messenger model, even if the

organization is not a qualified managed care plan.

Health Choice Injunctive Relief

Except as permitted in Section VIII, Health Choice is enjoined

from:

(A) Requiring any physician to provide physician services

exclusively through SJPI, Health Choice, or any managed care plan in

which Health Choice has an ownership interest, precluding any physician

from contracting with any payor, or urging any physician not to

contract with another payor;

(B) Disclosing to any physician any financial, price or similar

competitively sensitive business information about any competing

physician, except as is reasonably necessary for the operation of

Health Choice or any managed care plan in which Health Choice has an

ownership interest, or requiring any physician to disclose to Health

Choice any financial, price or similar competitively sensitive business

information about any competitor of Health Choice or any managed care

plan in which Health Choice has an ownership interest; provided that,

nothing in this Final Judgment shall probibit the disclosure of

information already generally available to the medical community or the

public;

(C) Setting the fees or other terms of reimbursement or negotiating

for competing physicians unless Health Choice is a qualified managed

care plan; provided that, nothing in this Final Judgment shall prohibit

Health Choice from using a messenger model, even if Health Choice is

not a qualified managed care plan; and

(D) Owning an interest in any organization that sets fees or other

terms of reimbursement for, or negotiates for, competing physicians,

unless that organization is a qualified managed care plan and complies

with Paragraphs (A) and (B) of this Section V of the Final Judgment as

if those Paragraphs applied to that organization; provided that,

nothing in this Final Judgment shall prohibit Health Choice from owning

an interest in an organization that uses a messenger model, even if the

organization is not a qualified managed care plan.

VI

Heartland Injunctive Relief

Except as permitted in Section VIII, Heartland is enjoined from:

(A) (1) Disclosing to any person directly responsible for pricing

physician or ancillary services of Heartland any price or, without

appropriate consent, other proprietary business information about any

other physician or ancillary services provider, except as is reasonably

necessary for the operation of any qualified managed care plan in which

Heartland has an ownership interest, and

(2) Disclosing to any competing physician or ancillary services

provider any price or, without appropriate consent, other proprietary

business information about any other physician or ancillary services

provider; provided that, nothing in this Final Judgment shall prohibit

the disclosure of information already generally available to the

medical community or the public;

(B) Owning an interest in any organization that sets fees or other

terms of reimbursement for, or negotiates for, competing physicians,

unless that organization is a qualified managed care plan and complies

with Paragraphs (A) and (B) of Section V of the Final Judgment as if

those Paragraphs applied to that organizaton; provided that, nothing in

this Final Judgment shall prohibit Heartland from owning an interest in

an organization that uses a messenger model, even if the organization

is not a qualified managed care plan;

(C) Agreeing with a competitor to allocate or divide the market

for, or set the price for, any competing service, except as is

reasonably necessary for the operation of any qualified managed care

plan or legitimate joint venture in which Heartland has an ownership

interest;

(D) Acquiring during the next five years:

(1) The practice of any non-Heartland physician who at the filing

of this Final Judgment has active staff privileges in family practice

or general internal medicine (diagnosticians excluding subspecialties

of internal medicine) or the practice of any physician who after

[[Page 51811]]

the filing of this Final Judgment establishes a practice and provides

services as a GAPC physician in Buchanan County, Missouri, without the

prior written approval of the plaintiff; and

(2) Any physician practice located in Buchanan County, Missouri

that has provided services in Buchanan County, Missouri within five

years prior to the date of the proposed acquisition, unless Heartland

provides plaintiff with 90 days' prior written notice of the proposed

acquisition; and

(E) Conditioning the provision of any inpatient hospital service to

patients of any competing managed care plan by making that service

available only if the competing managed care plan;

(1) Purchases or utilizes (a) Heartland's utilization review

program, (b) any Heartland managed care plan, or (c) Heartland's

ancillary or outpatient services or any physician's services, unless

such services are intrinsically related to the provision of acute

inpatient care, such as but not limited to where Heartland's provision

of inpatient care inherently gives rise to Heartland bearing

professional responsibility for such services, so long as Heartland

otherwise makes its inpatient services available to competing managed

care plans as set forth in this Paragraph; or

(2) Contracts with or deals with Health Choice, Community Health

Plan, or any other Heartland managed care plan.

This Paragraph (E) shall not apply to any contract with an

organization in which Heartland has a substantial financial risk.

This Paragraph (E) shall not limit Heartland's ability to condition

the provision of any inpatient hospital service on the purchase or

utilization of ancillary or outpatient services or physician's services

selected by Heartland, pursuant to any contract in which Heartland

bears financial risk, so long as Heartland otherwise makes its

inpatient services available to competing managed care plans as set

forth in this Paragraph.

VII

Additional Provisions

(A) Health Choice shall:

(1) Inform each physician on its provider panel annually in writing

that the physician is free to contract separately with any other

managed care plan on any terms; and

(2) Notify in writing each payor with which Health Choice has or is

negotiating a contract that each provider on Health Choice's provider

panel is free to contract separately with such payor on any terms,

without consultation with Health Choice; and

(B) Heartland shall:

(1) Observe the attached and incorporated Heartland Referral Policy

relating to the provision of ancillary services;

(2) File with plaintiff each year on the anniversary of the filing

of the Complaint in this action a written report disclosing the rates,

terms, and conditions for inpatient hospital services Heartland

provides to any managed care plan or hospice program, including those

affiliated with Heartland. Plaintiff agrees not to disclose this

information unless in connection with a proceeding to enforce this

Final Judgment or pursuant to court or Congressional order; and

(3) Give plaintiff reasonable access to its credentialing files for

the purpose of determining if Heartland used its credentialing

authority to deny hospital privileges to physicians employed by or

otherwise affiliated with a competing managed care plan, provided

Heartland is given all necessary authorizations for the release of such

records.

VIII

Heartland Permitted Activities

Notwithstanding any of the prohibitions or requirements of Sections

IV through VII of this Final Judgment, Heartland may:

(A) Own 100% of an organization that includes competing physicians

on its provider panel and either uses a messenger model or sets fees or

other terms of reimbursement or negotiates for physicians so long as

the organization complies with Paragraphs (A) and (B) of Section V of

the Final Judgment as if those Paragraphs applied to that organization,

and with the subcontracting requirements of a qualified managed care

plan;

(B) Employ or acquire the practice of any physician not located in

Buchanan County, Missouri, who derived less than 20% of his or her

practice revenues from patients residing within Buchanan County,

Missouri, in the year before the employment or acquisition;

(C) If Plaintiff does not disapprove under the procedures set out

in this Paragraph (C), employ or acquire the practice of any GAPC

physician so long as Heartland incurs substantial costs recruiting such

physician for the purpose of beginning the offering of GAPC services in

Buchanan County, Missouri, or gives either substantial financial

support or an income guarantee to such physician to induce that

physician to begin offering GAPC services in Buchanan County, Missouri,

and employs the physician or acquires the practice within two years of

the physician first offering GAPC services in Buchanan County,

Missouri. Heartland must give the plaintiff an opportunity to

disapprove, by giving plaintiff 30 days prior written notice and such

information in Heartland's possession as is necessary to determine

whether the above criteria have been met. Plaintiff shall not

disapprove if these criteria are met. If plaintiff disapproves,

plaintiff will set forth the reasons for disapproval. If plaintiff

fails to disapprove within 30 days of receipt of the requisite

information, the criteria shall be deemed to have been met, and

Heartland may employ or acquire the practice of the GAPC physician; and

(D) With plaintiff's prior written approval, employ or acquire the

practice of any physician who will cease to be a GAPC physician in

Buchanan County, Missouri, unless Heartland acquires the practice or

employs the physician.

IX

Judgment Modification

In the event that any of the provisions of this Final Judgment

proves impracticable as to any defendant or in the event of a

significant change in fact or law, that defendant may move for, and

plaintiff will reasonably consider, an appropriate modification of this

Final Judgment. Nothing in this Section limits the right of any

defendant to seek any modification of this Final Judgment it deems

appropriate.

X

Compliance Program

Each defendant shall maintain a judgment compliance program, which

shall include:

(A) Distributing within 60 days from the entry of this Final

Judgment, a copy of the Final Judgment and Competitive Impact Statement

to all senior administrative officers and directors;

(B) Distributing in a timely manner a copy of the Final Judgment

and Competitive Impact Statement to any person who succeeds to a

position described in Paragraph (A) of this Section X;

(C) Briefing annually those persons designated in Paragraphs (A)

and (B) of this Section X on the meaning and requirements of this Final

Judgment and the antitrust laws, including penalties for violation

thereof;

(D) Obtaining from those persons designated in Paragraphs (A) and

(B) of this Section X annual written certifications that they (1) have

read, understand, and agree to abide by this

[[Page 51812]]

Final Judgment, (2) understand that their noncompliance with this Final

Judgment may result in conviction for criminal contempt of court and

imprisonment and/or fine, and (3) have reported any violation of this

Final Judgment of which they are aware to counsel for the respective

defendant; and

(E) Maintaining for inspection by plaintiff a record of recipients

to whom this Final Judgment and Competitive Impact Statement have been

distributed and from whom annual written certifications regarding this

Final Judgment have been received.

XI

Certifications

(A) Within 75 days after entry of this Final Judgment, each

defendant shall certify to plaintiff that it has made the distribution

of the Final Judgment and Competitive Impact Statement as required by

Paragraph (A) of Section X above;

(B) For five years after the entry of this Final Judgment, on or

before its anniversary date, each defendant shall certify annually to

plaintiff whether it has complied with the provisions of Section X

above applicable to it; and

(C) Each defendant shall provide written notice to plaintiff if at

any time during the period that this Final Judgment is in effect (1)

that defendant owns an interest in a qualified managed care plan, (2)

that qualified managed care plan includes among its owners or members

any single physician practice group which comprises more than 30% of

the physicians in any relevant physician market, and (3) that single

physician practice group adds additional physicians.

XII

Plaintiff's Access

For the sole purpose of determining or securing compliance with

this Final Judgment, and subject to any recognized privilege,

authorized representatives of the United States Department of Justice,

upon written request of the Assistant Attorney General in charge of the

Antitrust Division, shall on reasonable notice be permitted during the

term of this Final Judgment:

(A) Access during regular business hours of any defendant to

inspect and copy all records and documents in the possession or under

the control of that defendant relating to any matters contained in this

Final Judgment;

(B) To interview officers, directors, employees, and agents of any

defendant, who may have counsel present, concerning such matters; and

(C) To obtain written reports from any defendant, under oath if

requested, relating to any matters contained in this Final Judgment.

XIII

Notifications

To the extent that it may affect compliance obligations arising out

of this Final Judgment, each defendant shall notify the plaintiff at

least 30 days prior to any proposed (1) dissolution, (2) sale or

assignment of claims or assets of that defendant resulting in the

emergence of a successor corporation, or (3) change in corporate

structure of that defendant.

XIV

Jurisdiction Retained

This Court retains jurisdiction to enable any of the parties to

this Final Judgment, but no other person, to apply to this Court at any

time for further orders and directions as may be necessary or

appropriate to carry out or construe this Final Judgment, to modify or

terminate any of its provisions, to enforce compliance, and to punish

violations of its provisions.

XV

Expiration of Final Judgment

This Final Judgment shall expire five (5) years from the date of

entry; provided that, before the expiration of this Final Judgment,

plaintiff, after consultation with defendants and in plaintiff's sole

discretion, may extend the judgment, except for Section VI(D), for an

additional five years.

XVI

Public Interest Determination

Entry of this Final Judgment is in the public interest.

Dated:.----------------------------------------------------------------

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United States District Judge.

Referral Policy

I. General Statement

After a patient or the patient's family or other appropriate

person (collectively ``patient'') has been identified (via

screening, assessment, discharge planning, staff, family, physician,

or other means) as being in need of appropriate home health care,

hospice, DME, or outpatient rehabilitation services (referred to

collectively as ``Ancillary Service''), and, if necessary, a

physician's order has been obtained, the following procedures will

be used by a referring person when connecting patients to the

appropriate Ancillary Service. Our focus is on patient choice.

II. Ancillary Service Referrals

A. If a physician orders an Ancillary Service and specifies the

provider to be used (whether specifically written in the chart or

other written notification), then a referring person shall contact

the patient indicating that the physician has ordered an Ancillary

Service and has ordered that a particular provider be used. The

patient should be asked whether this is acceptable, and if so,

referred to that provider. (If the patient does not wish that

provider, see subsection B below.)

B. If a physician orders an Ancillary Service, but does not

specify the provider to use, then the patient shall contacted and

informed that his physician has ordered an Ancillary Service, and

shall be asked if he has a preference as to which provider to use:

1. If the patient has a preference, that preference shall

honored.

2. If the patient has no preference, a referring person shall

indicate that Heartland has an excellent, fully accredited Ancillary

Service that is available to the patient, and the appropriate

Heartland brochure may be given. If the patient accepts, then the

referral shall be made to Heartland's Ancillary Service.

3. If the patient has not accepted Heartland's Ancillary Service

(see subsection B(2) above), or asks what other providers are

available, a referring person shall state that there are other

providers in the community that offer the Ancillary Service;

however, the referring person cannot make a recommendation as to

these other providers, but there is a listing of them in the

telephone book. [PATIENT SHALL BE GIVEN A REASONABLE AMOUNT OF TIME

TO INVESTIGATE OTHER OPTIONS] If the patient at this point chooses a

provider, that choice is to be honored. However, if the patient

again requests that a referring person provide them with the names

of other providers, the social worker should indicate that Heartland

has done no independent review or evaluation of these providers and

cannot speak to the quality of care they provide, and then verbally

name these providers. The patient's choice shall be honored.

In the United States District Court for the Western District of

Missouri

In the matter of: United States of America, Plaintiff, vs.

Health Choice of Northwest Missouri, Inc., Heartland Health System,

Inc., and St. Joseph Physicians, Inc., Defendants. [Case No. 95-

6171-CV-SJ-6.]

Competitive Impact Statement

Pursuant to Section 2(b) of the Antitrust Procedures and Penalties

Act, 15 U.S.C. 16(b)-(h) (``APPA''), the United States files this

Competitive Impact Statement relating to the proposed Final Judgment

submitted for entry in this civil antitrust proceeding.

I

Nature and Purpose of the Proceeding

On September 13, 1995, the United States filed a civil antitrust

Complaint

[[Page 51813]]

alleging that defendant Health Choice of Northwest Missouri, Inc.

(``Health Choice''), defendant Heartland Health System, Inc.

(``Heartland''), and defendant St. Joseph Physicians, Inc. (``SJPI''),

with others not named as defendants, entered into an agreement, the

purpose and effect of which was to restrain competition unreasonably by

preventing or delaying the development of managed care in Buchanan

County, Missouri (``Buchanan County''), in violation of Section 1 of

the Sherman Act, 15 U.S.C. 1. The Complaint seeks injunctive relief to

enjoin continuance or recurrence of the violation.

The United States filed with the Complaint a proposed Final

Judgment intended to settle this matter. Entry of the proposed Final

Judgment by the Court will terminate this action, except that the Court

will retain jurisdiction over the matter for further proceedings that

may be required to interpret, enforce, or modify the Judgment, or to

punish violations of any of its provisions.

Plaintiff and all defendants have stipulated that the Court may

enter the proposed Final Judgment after compliance with the Antitrust

Procedures and Penalties Act, 15 U.S.C. Sec. 16(b)-(h) (``APPA''),

unless prior to entry plaintiff has withdrawn its consent. The proposed

Final Judgment provides that its entry does not constitute any evidence

against, or admission by, any party concerning any issue of fact or

law.

The present proceeding is designed to ensure full compliance with

the public notice and other requirements of the APPA. In the

Stipulation to the proposed Final Judgment, defendants have also agreed

to be bound by the provisions of the proposed Final Judgment pending

its entry by the Court.

II

Practices Giving Rise to the Alleged Violations

SJPI is a Missouri for-profit corporation, with its principal place

of business in St. Joseph, Missouri (``St. Joseph'').\1\ SJPI was

incorporated in April 1986 by roughly 85 percent of the approximately

130 physicians practicing or living in Buchanan County. The physicians

who own SJPI have never integrated their separate, individual medical

practices or shared substantial financial risk for SJPI's failure to

achieve predetermined cost containment goals.

\1\St. Joseph is the county seat of Buchanan County, which has a

population of about 72,000 and is located about 55 miles northwest

of Kansas City, Missouri.

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SJPI was formed primarily to negotiate collectively about fees and

other contract terms with managed care plans seeking to enter Buchanan

County. Managed care is a type of health care financing and delivery

that seeks to contain costs through using administrative procedures and

granting financial incentives to providers and patients. Typically,

under such an approach, individual health care providers either are

paid one set, predetermined fee for meeting all or nearly all of an

enrollee's health care needs, regardless of the frequency or severity

of the needed services, or are subject to a substantially discounted

fee schedule and rigorous utilization review (i.e., assessment of the

necessity and appropriateness of treatment). Beginning almost

immediately after its incorporation, SJPI entered into fee negotiations

collectively on behalf of its physicians with various managed care

plans attempting to enter Buchanan County.

Heartland operates the only acute care hospital in the three-county

area of Buchanan and Andrew Counties, Missouri, and Doniphan County,

Kansas.\2\ On several occasions before January 1990, Heartland

supported SJPI's efforts to deal collectively with managed care plans

seeking to enter Buchanan County, and, in at least one instance,

represented SJPI in such dealings. Between April 1986 and December

1989, no managed care plan was able to obtain a contract with SJPI or

with any individual SJPI physician.

\2\Heartland also provides home health care, hospice,

rehabilitation, and other ``ancillary'' health care services in

Buchanan County. There was some evidence that Heartland may have

used its market power in inpatient hospital services to gain a

competitive advantage in various ancillary health care services.

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In January 1990, SJPI and Heartland formed Health Choice, a for-

profit Missouri corporation, to provide managed care services to

individuals in Buchanan County. Heartland and SJPI each own 50% of the

common stock of Health Choice.

The Health Choice physician provider panel consists of

approximately 85% of the physicians working or residing in Buchanan

County, including nearly all of the SJPI physicians. Heartland is the

primary provider of hospital services for Health Choice.

SJPI and Heartland established, through Health Choice, a

utilization review program and a fee schedule for competing physicians

in Buchanan County and agreed on several occasions that SJPI physicians

and Heartland would deal with managed care plans only through Health

Choice. In general, SJPI and Heartland advised managed care plans that

they had to use Health Choice's provider panel, fee schedule, and

utilization review program. At no time, however, did Heartland, SJPI or

the physicians participating on the Health Choice provider panel share

substantial risk in connection with the achievement by Health Choice of

predetermined cost containment goals. Since the formation of Health

Choice, no managed care plan has been able to enter Buchanan County

without contracting with Health Choice, despite the efforts of several

plans to do so. Because of the high percentage of local doctors

participating in Health Choice, no managed care plan could assemble an

adequate panel of providers without including some physicians who

participated in Health Choice.\3\ By refusing to deal with managed care

plans except through Health Choice, Heartland and SJPI physicians were

able to obtain higher compensation and a more favorable hospital

utilization review program from managed care plans than they would have

been able to obtain independently.

\3\Shortly before Health Choice became operational, HealthNet, a

competing managed care plan, entered Buchanan County. HealthNet

contracted with several self-insured plans in Buchanan County but

with no managed care plans.

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Based on the facts described above, the Complaint alleges that the

defendants entered into a contract, combination, or conspiracy to

reduce or eliminate the development of managed care in Buchanan County

in violation of Section 1 of the Sherman Act, 15 U.S.C. 1. The

Complaint further alleges that this conduct had the effect of (1)

unreasonably restraining price and other competition among managed care

plans, (2) unreasonably restraining price competition among physicians,

and (3) depriving consumers and third-party payors of the benefits of

free and open competition in the purchase of health care services in

Buchanan County.

III

Explanation of the Proposed Final Judgment

The proposed Final Judgment is intended to prevent the continuance

or recurrence of defendants' agreement to discourage the development of

managed care in Buchanan County. The overarching goal of the proposed

Final Judgment is to enjoin defendants from engaging in any activity

that unreasonably restraints competition among physicians and among

managed care plans in Buchanan County, while

[[Page 51814]]

still permitting defendants to market a provider-controlled plan.\4\

\4\This relief comports with the Statements of Enforcement

Policy and Analytical Principles Relating to Health Care and

Antitrust that the U.S. Department of Justice and the Federal Trade

Commission issued jointly on September 27, 1994, 4 Trade Reg. Rep.

(CCH) para.13,152, at 20,787-98, and in particular with the

principles enunciated therein that a provider network (1) should not

prevent the formation of rival networks; and (2) may not negotiate

on behalf of providers, unless those providers share substantial

financial risk or offer a new product to the market place. Statement

8, id. at 20,788-89; Statement 9, id. at 20,793-94, 20,796.

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A. Scope of the Proposed Final Judgment

Section III of the proposed Final Judgment provides that the Final

Judgment shall apply to defendants and to all other persons (including

SJPI stockholders) who receive actual notice of this proposed Final

Judgment by personal service or otherwise and then act or participate

in concert with any defendant. The proposed Final Judgment applies to

SJPI, Health Choice, Heartland, and Heartland's healthcare-related

entities. The proposed Final Judgment does not apply to Heartland's

entities that do not provide health care services.

B. Prohibitions and Obligations

Sections IV through VIII of the proposed Final Judgment contain the

substantive provisions of the consent decree. Section IV applies to

SJPI, Section V to Health Choice, and Section VI to Heartland. Section

VII contains additional provisions that apply to Health Choice and to

Heartland. Section VIII applies only to Heartland.

In Sections IV(A) and V(A), SJPI and Health Choice are enjoined

from requiring any physician to provide physician services exclusively

through SJPI, Health Choice, or any managed care plan in which SJPI or

Health Choice has an ownership interest. SJPI and Health Choice are

also barred from precluding any physician from contracting, or urging

any physician not to contract, with any purchaser of physician

services.

Sections IV(B), V(B), and VI(A) prohibit the sharing of

competitively sensitive information. SJPI, Health Choice, and Heartland

are enjoined from disclosing to any physician any financial, price, or

similarly competitively sensitive business information about any

competing physician or any competitor of defendants. An exception

permits any defendant to disclose such information if disclosure is

reasonably necessary for the operation of a qualified managed care plan

(``QMCP''--as defined in the proposed Final Judgment and discussed

below) in which that defendant has an ownership interest, or if the

information is already generally available to the medical community or

the public.

Sections IV(C) and V(C) prohibit fee setting and provide that SJPI

and Health Choice, respectively, are enjoined from collectively

negotiating or setting fees or other terms of reimbursement, or

negotiating on behalf of competing physicians, unless the negotiating

entity is a QMCP. However, SJPI and Health Choice are permitted to use

a messenger model (as defined in the proposed Final Judgment and

discussed below).

Sections IV(D), V(D), and VI(B) enjoin SJPI, Health Choice, and

Heartland, respectively, from owning an interest in any organization

that sets fees or other terms of reimbursement, or negotiates for

competing physicians, unless that organization is a QMCP and it

complies with Sections IV(A) and (B) (for SJPI) and Sections V(A) and

(B) (for Health Choice and Heartland). However, defendants may own an

interest in an organization that uses a messenger model, as discussed

below.

Section VI(C) enjoins Heartland from agreeing with a competitor to

allocate or divide any markets or set the price for any competing

service, except as is reasonably necessary for the operation of any

QMCP or legitimate joint venture in which Heartland has an ownership

interest.\5\

\5\Statements 2 and 3 of the Statements of Enforcement Policy

and Analytical Principles Relating to Health Care and Antitrust, 4

Trade Reg. Rep. (CCH) para.13,152 at 20,775-81 (1994), discuss how

to assess whether collateral agreements are reasonably necessary for

the operation of a particular legitimate joint venture.

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Section VI(D) enjoins Heartland from acquiring any family or

general internal medicine practice without plaintiff's prior approval,

or from acquiring any other physician practice located in Buchanan

County without 90 days prior notification.

Section VI(E) enjoins Heartland from conditioning the provision of

its inpatient hospital services on the purchase or use of Heartland's

utilization review program, managed care plan, or ancillary,

outpatient, or physician services, unless such services are

intrinsically related to the provision of acute inpatient care. (These

prohibitions, however, do not apply to any organization or any contract

in which Heartland has a substantial financial risk.)

Section VII of the proposed Final Judgment contains additional

provisions with respect to Health Choice and Heartland. Section VII(A)

requires Health Choice to notify participating physicians annually that

they are free to contract separately with any other managed care plan

on any terms, and to notify in writing each payor with whom Health

Choice has or is negotiating a contract that each of its participating

physicians is free to contract separately with such payor on any terms

and without consultation with Health Choice.

Under Section VII(B)(1), Heartland is required to observe its

formal written policy relating to the provision of ancillary services.

This policy was developed by Heartland and is attached to the proposed

Final Judgment. Heartland must under Section VII(B)(2) file with

plaintiff annually on the anniversary of the filing of the Complaint a

written report disclosing the rates, terms, and conditions for

inpatient hospital services that Heartland provides to any managed care

plan or hospice program, including those affiliated with Heartland.

Heartland is required under Section VII(B)(3) to give plaintiff

reasonable access to its credentialing files for the purpose of

determining if Heartland misused its credentialing authority, such as

by denying hospital privileges to physicians affiliated with managed

care plans that compete with Health Choice.

Section VIII permits Heartland to engage in certain activities.

Under Section VIII(A), Heartland may own 100% of an organization that

includes competing physicians on its provider panel and sets fees or

other terms of reimbursement or negotiates for physicians, provided the

organization complies with Sections V(A) and (B) and with the

subcontracting requirements of a QMCP.

Section VIII(B) permits Heartland to employ or acquire the practice

of any physician not located in Buchanan County, who derived less than

20% of his or her practice revenues from patients residing in Buchanan

County in the year before employment or acquisition.

Section VIII(C) permits Heartland to employ or acquire the practice

of any general practice, family practice, or internal medicine

physician, provided Heartland actively recruited the physician to begin

offering those services in Buchanan County, gave either substantial

financial support or an income guarantee to such physician, and is

employing the physician or acquiring the practice within two years of

the first offering of those services by that physician in Buchanan

County. Heartland must give plaintiff 30 days notice and all

information in its possession necessary to determine

[[Page 51815]]

whether the above criteria have been met.

Under Section VIII(D), Heartland may employ or acquire, with

plaintiff's approval, any physician who would cease practicing in

Buchanan County but for Heartland's employment or acquisition.

Section IX of the proposed Final Judgment describes the

circumstances under which defendants may seek a modification of the

proposed Final Judgment. It provides that any defendant may move for a

modification of the proposed Final Judgment, and plaintiff will

reasonably consider an appropriate modification, in the event that any

of the provisions of the proposed Final Judgment proves impracticable

or in the event of a significant change in law or fact.

Section X of the proposed Final Judgment requires the defendants to

implement a judgment compliance program. Section X(A) requires that

within 60 days of entry of the Final Judgment, defendants must provide

a copy of the proposed Final Judgment and the Competitive Impact

Statement to certain officers and all directors. Sections X (B) and (C)

require defendants to provide a copy of the proposed Final Judgment and

Competitive Impact Statement to persons who assume those positions in

the future and to brief such persons annually on the meaning and

requirements of the proposed Final Judgment and the antitrust laws,

including penalties for violating them. Section X(D) requires

defendants to maintain records of such persons' written certifications

indicating that they (1) have read, understand, and agree to abide by

the terms of the proposed Final Judgment, (2) understand that their

noncompliance with the proposed Final Judgment may result in conviction

for criminal contempt of court, and imprisonment, and/or fine, and (3)

have reported any violation of the proposed Final Judgment of which

they are aware to counsel for defendants. Section X(E) requires

defendants to maintain for inspection by plaintiff a record of

recipients to whom the proposed Final Judgment and Competitive Impact

Statement have been distributed and from whom annual written

certifications regarding the proposed Final Judgment have been

received.

The proposed Final Judgment also contains provisions in Section XI

requiring defendants to certify their compliance with specified

obligations of Section IV through X of the proposed Final Judgment.

Section XII of the proposed Final Judgment sets forth a series of

measures by which the plaintiff may have access to information needed

to determine or secure defendants' compliance with the proposed Final

Judgment. Section XIII provides that each defendant must notify

plaintiff of any proposed change in corporate structure at least 30

days before that change to the extent the change may affect compliance

obligations arising out of the proposed Final Judgment.

Finally, Section XV states that the decree expires five years from

the date of entry, except that plaintiff during that five year period

may, in its sole discretion, after consultation with defendants, extend

for an additional five years all provisions of the decree except the

provisions of Section VI(D), that portion of the Final Judgment dealing

with Heartland's acquisition of physician practices.

C. Effect of the Proposed Final Judgment on Competition

1. The Prohibitions on Setting and Negotiating Fees and Other Contract

Terms

The prohibitions on setting and negotiating fees and other contract

terms set forth in Sections IV (C) and (D), V (C) and (D), and VI(B)

provide defendants with essentially two options for complying with the

proposed Final Judgment.\6\ First, Health Choice may change its manner

of operation and no longer set or negotiate fees on behalf of competing

physicians, for example by using a ``messenger model,'' a term defined

in the proposed Final Judgment. Second, Health Choice may restructure

its ownership and provider panels to become a QMCP.\7\

\6\For convenience, this Statement discusses Health Choice's

options. However, the same options are available to SJPI and

Heartland, should they choose to utilize them.

\7\Of course, Health Choice could simply cease operations and

dissolve. Defendants have indicated, however, that they will not

pursue that approach. In any event, the Judgment's prohibitions on

setting and negotiating fees and other contract terms (as well as a

number of other prohibitions) apply to any organization in which the

defendants own an interest, not just to Health Choice.

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Currently, SJPI owns 50% of Health Choice and includes among its

shareholders competing physicians who do not share substantial

financial risk. In addition, Heartland, which owns the other 50% of

Health Choice, employs physicians who compete with the SJPI physicians

and other physicians on the Health Choice provider panel. The SJPI and

Heartland physicians on the provider panel also do not share financial

risk. The proposed Final Judgment prevents Health Choice, under its

present structure, from continuing to set or negotiate fees or other

terms of reimbursement collectively on behalf of these competing

physicians. (Section V(C).)\8\ Such conduct would constitute naked

price fixing. Arizone v. Maricopa County Medical Soc'y, 457 U.S. 332,

356-57 (1982).

\8\Similarly, Section IV(C) prevents SJPI from setting or

negotiating fees and other contract terms for just SJPI physicians,

and Sections (V(D) and VI(B) prevent physicians and Heartland from

engaging in such conduct through their ownership of Health Choice.

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The proposed Final Judgment does not, however, prohibit Health

Choice as presently structured from engaging in activities that are not

anticompetitive.\9\ In particular, while the proposed Judgment enjoins

Health Choice from engaging in price fixing or similar anticompetitive

conduct, it permits Health Choice to use an agent or third party to

facilitate the transfer of information between individual physicians

and purchasers of physician services. Appropriately designed and

administered, such messenger models rarely present substantial

competitive concerns and indeed have the potential to reduce the

transition costs of negotiations between health plans and numerous

physicians.

\9\For example, nothing in the proposed Final Judgment prevents

Health Choice from continuing to offer billing, utilization

management, and third party administrator services, provided it does

not violate the Judgment's prohibitions, in Sections V (A) and (B),

on exclusivity and the collection and dissemination of competitively

sensitive information.

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The proposed Final Judgment makes clear that the critical feature

of a properly devised and operated messenger model is that individual

providers make their own separate decisions about whether to accept or

reject a purchaser's proposal, independent of other physicians'

decisions and without any influence by the messenger. (Section II(F).)

The messenger may not, under the proposed Judgment, coordinate

individual providers' responses to a particular proposal, disseminate

to physicians the messenger's or other physicians' views or intentions

concerning the proposal, act as an agent for collective negotiation and

agreement, or otherwise serve to facilitate collusive behavior.\10\ The

[[Page 51816]]

proper role of the messenger is simply to facilitate the transfer of

information between purchasers of physician services and individual

physicians or physician group practices and not to coordinate or

otherwise influence the physicians decision-making process.\11\

\10\For example, it would be a violation of the proposed Final

Judgment if the messenger selected a fee for a particular procedure

from a range of fees previously authorized by the individual

physician, or if the messenger were to convey collective price

offers from physicians to purchasers or negotiate collective

agreements with purchasers on behalf of physicians. This would be so

even if individual physicians were given the opportunity to ``opt

out'' of any agreement. In each instance, it would really be the

messenger, not the individual physician, who would be making the

critical decision, and the purchaser would be faced with the

prospect of a collective response.

\11\For example, the messenger may convey to a physician

objective or empirical information about proposed contract terms,

convey to a purchaser any individual physician's acceptance or

rejection of a contract offer, canvass member physicians for the

rates at which each would be willing to contract even before a

purchaser's offer is made, and charge a reasonable, non-

discriminatory fee for messenger services, provided the messenger

otherwise acts consistently with the proposed Final Judgment.

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If, on the other hand, Health Choice wants to negotiate on behalf

of competing physicians, it must restructure itself to meet the

requirements of a QMCP as set forth in the proposed Final Judgment. To

comply, (1) the owners of members of Health Choice (to the extent they

compete with other owners or members or compete with physicians on

Health Choice's provider panels) must share substantial financial risk,

and comprise no more than 30% of the physicians in any relevant market;

and (2) to the extent Health Choice has a provider panel that exceeds

30% of the physicians in any relevant market, there must be a

divergence of economic interest between the Health Choice owners and

the subcontracting physicians, such that the owners have the incentive

to bargain down the fees of the subcontracting physicians. (Section

II(I)(2).) As explained below, the requirements of a QMCP are necessary

to avoid the creation of a physician cartel while at the same time

allowing payors access to such panel.

The financial risk-sharing requirement of a QMCP ensures that the

physician owners in the venture share a clear economic incentive to

achieve substantial cost savings and provide better services at lower

prices to consumers. This requirement is applicable to all provider-

controlled organizations since without this requirement a network of

competing providers would have both the incentive and the ability to

increase prices for health care services.

The requirement that a QMCP not include more than 30% of the local

physicians in certain instances is designed to ensure that there are

available sufficient remaining physicians in the market with the

incentive to contract with competing managed care plans or to form

their own plans. This limitation is particularly critical in this case

in view of the defendants' prior conduct in forming negotiating groups

with up to 85% of the local physicians.

Many employers and payors in the St. Joseph area indicated that

they may want managed care products with all or many of the physicians

in St. Joseph on the provider panel. The QMCP's subcontracting

requirements are designed to let Health Choice (or any other QMCP)

offer a large physician panel, but with restrictions to avoid the risk

of competitive harm. To offer panels above 30%, Health Choice must

operate with the same incentives as a nonprovider-controlled plan.

Specifically, the owners of Health Choice must bear significant

financial risk for the payments to, and utilization practices of, the

panel physicians. These requirements prevent Health Choice from using

the subcontracts as a mechanism for increasing fees for physician

services.

Consequently, the proposed Final Judgment permits a QMCP to

subcontract with any number of physicians in a market provided three

important safeguards are met. Under Section II(I)(2) of the proposed

Final Judgment, the subcontracting physician panel may exceed the 30%

limitation only if (1) there is a sufficient divergence of economic

interest between those subcontracting physicians and the owners such

that the owners have the incentive to bargain down the fees of the

subcontracting physicians, (2) the organization does not directly pass

through to the payor substantial liability for making payments to the

subcontracting physicians, and (3) the organization does not compensate

those subcontracting physicians in a manner that substantially

replicates ownership.

Health Choice would meet the subcontracting requirements if, for

example, Health Choice were compensated on a capitated, per diem, or a

diagnostic related group basis and, in turn, reimbursed subcontracting

physicians pursuant to a fee schedule. In such a situation, an increase

in the fee schedule to subcontracting physicians during the term of the

Health Choice contract with the particular payor would not be directly

passed through to the payor and, instead, would be borne by Health

Choice itself. This would provide a substantial incentive for Health

Choice to bargain down its fees to the subcontracting physicians.

On the other hand, the subcontracting requirements would not be met

if a Health Choice contract with a payor were structured so that

significant changes in the payments by Health Choice to its physicians

directly affected payments from the payor to Health Choice, or if the

payor directly bears the risk for paying the panel physicians or pays

the panel physicians pursuant to a fee-for-service schedule. The

requirements would also not be satisfied if contracts between Health

Choice and the subcontracting physicians provided that payments to the

physicians depended on, or varied in response to, the terms and

conditions of Health Choice's contracts with payors.\12\ Any of these

scenarios would permit Health Choice to pass through to payors, rather

than bear, the risk that its provider panel will charge fees that are

too high or deliver services ineffectively.\13\

\12\Nothing in the proposed Final Judgment prohibits Health

Choice or any other QMCP from entering into arrangements that shift

risk to providers so long as those provisions are consistent with

the criteria for a QMCP set forth in Section II(I) of the Judgment.

\13\Similarly, Health Choice would fail the ownership

replication restriction of Section II(I) of the proposed Final

Judgment if, for example, the owners paid themselves a dividend and

then, through declaration of a bonus, paid the same or similar

amount to the subcontracting physicians. The same would be true if

the owners otherwise structured dividends, bonuses, and incentive

payments in such a way that ensures that subcontracting and owning

physicians receive equal overall compensation.

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2. Prohibition on Exclusivity

Sections IV(A), V(A), and VI(B) of the proposed Final Judgment

enjoin defendants from requiring physicians to deal exclusively with

their managed care plans or urging physicians not to contract with

other payors. Health choice is also required to inform both its

providers and payors with which it has or is negotiating contracts,

that each provider is free to contract separately with any managed care

plan on any terms. (Section VII(A) (1) and (2).) These provisions will

encourage the development of competing managed care plans in the St.

Joseph area by ensuring that physicians remain free to decide

individually whether, and on what terms, to participate in any managed

care plan.

3. Physician Acquisitions

Section VI(D) of the proposed Final Judgment enjoins Heartland from

acquiring additional family practice and general internal medicine

physician practices in Buchanan County without plaintiff's prior

written approval, and from acquiring any other active physician

practice in Buchanan County without 90 days' prior notification.\14\

[[Page 51817]]

These provisions will prevent Heartland from obtaining such physician

concentration that would permit it to raise prices for physician

services above competitive levels or otherwise thwart the ability of

competing managed care plans to enter and compete effectively in St.

Joseph.\15\

\14\By letter dated June 8, 1995, from Chief of Staff, Antitrust

Division, Lawrence R. Fullerton, to counsel for Heartland, Thomas P.

Watkins, Esq., plaintiff has indicated to Heartland that it does not

intend to challenge the acquisition of Internal Medicine Associates

of St. Joseph, a three-physician practice group providing general

internal medicine services in St. Joseph. (See Attachment.)

\15\The proposed Final Judgment permits Heartland to employ or

acquire other physician practices where the employment or

acquisition would not result in a substantial lessening of

competition in the St. Joseph area either because (1) the physician

derived only limited revenues from patients in Buchanan County, (2)

Heartland actively recruited the physician to the St. Joseph area,

or (3) the physician would exit the market but for Heartland's

employment or acquisition. (Section VIII (B), (C) and (d).)

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4. Other Substantive Provisions

Sections IV(B), V(B), and VI(A) of the proposed Final Judgment

enjoin the disclosure to any physician of any financial or

competitively sensitive business information about any competing

physician or competitor of defendants. These provisions will ensure

that defendants do not exchange information that could lead to price

fixing or other anticompetitive harm.

Section VII(B)(3) provides plaintiff access to Heartland's

credentialing files to ensure that Heartland does not abuse its

credentialing authority by denying privileges to or otherwise

disciplining physicians who participate in a competing managed care

plan. Similarly, Section VII(B)(1) requires Heartland to abide by its

formal written referral policy regarding ancillary services to ensure

that Heartland will not abuse its control over inpatient hospital

services to reduce or eliminate competition among providers of

ancillary services in St. Joseph.

Section VI(E) enjoins Heartland from requiring managed care plans

to use other Heartland services such as its utilization review program

or managed care plan in order to obtain inpatient hospital services.

This Section will permit managed care plans to use their own physician

panels, utilization review, and fee schedule, thereby fostering the

development of truly competitive health care delivery systems in St.

Joseph.

Section VII(B)(2) requires Heartland to file annually with

plaintiff a report of the rates, terms, and conditions for inpatient

hospital services that Heartland provides any managed care plan or

hospice program. This will assist plaintiff in assessing whether

Heartland has abused its power in the inpatient hospital market.

Finally, Section XI(C) requires any defendant owning an interest in

a QMCP that includes any single physician practice group comprising

more than 30% of the physicians in any relevant market to notify

plaintiff if the practice group acquires additional physicians. This

will ensure that the United States knows of any such acquisition and

can evaluate its potential anticompetitive effects.

5. Conclusion

The Department of Justice believes that the proposed Final Judgment

contains adequate provisions to prevent further violations of the type

upon which the Complaint is based and to remedy the effects of the

alleged conspiracy. The proposed Final Judgment's injunctions will

restore the benefits of free and open competition in St. Joseph and

will provide consumers with a border selection of competitive health

care plans.

IV

Alternatives to the Proposed Final Judgment

The alternative to the proposed Final Judgment would be a full

trial on the merits of the case. In the view of the Department of

Justice, such a trial would involve substantial costs to both the

United States and defendants and is not warranted because the proposed

Final Judgment provides all of the relief necessary to remedy the

violations of the Sherman Act alleged in the Complaint.

V

Remedies Available to Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any

person who has been injured as a result of conduct prohibited by the

antitrust laws may bring suit in federal court to recover three times

the damages suffered, as well as costs and a reasonable attorney's fee.

Entry of the proposed Final Judgment will neither impair nor assist in

the bringing of such actions. Under the provisions of Section 5(a) of

the Clayton Act, 15 U.S.C. 16(a), the proposed Final Judgment has no

prima facie effect in any subsequent lawsuits that may be brought

against one or more defendants in this matter.

VI

Procedures Available for Modification of the Proposed Final Judgment

As provided by Sections 2 (b) and (d) of the APPA, 15 U.S.C. 16 (b)

and (d), any person believing that the proposed Final Judgment should

be modified may submit written comments to Gail Kursh, Chief;

Professions & Intellectual Property Section/Health Care Task Force;

Department of Justice; Antitrust Division; 600 E Street, N.W.; Room

9300; Washington, D.C. 20530, within the 60-day period provided by the

Act. Comments received, and the Government's responses to them, will be

filed with the Court and published in the Federal Register. All

comments will be given due consideration by the Department of Justice,

which remains free, pursuant to Paragraph 2 of the Stipulation, to

withdraw its consent to the proposed Final judgment at any time before

its entry, if the Department should determine that some modification of

the Final Judgment is necessary for the public interest. Moreover, the

proposed Final Judgment provides in section XIV that the Court will

retain jurisdiction over this action, and that the parties may apply to

the Court for such orders as may be necessary or appropriate for the

modification, interpretation, or enforcement of the proposed Final

Judgment.

VII

Determinative Documents

No materials and documents of the type described in Section 2(b) of

the APPA, 15 U.S.C. 16(b), were considered in formulating the proposed

Final Judgment. Consequently, none are filed herewith.

Dated: September 13, 1995.

Respectfully submitted,

Edward D. Eliasberg, Jr.,

John B. Arnett, Sr.,

Dando B. Cellini,

Mark J. Botti,

Gregory S. Asciolla,

Attorneys, Antitrust Division, U.S. Dept. of Justice, 600 E Street,

N.W., Room 9420, Washington, D.C. 20530, (202) 307-0808.

[FR Doc. 95-24365 Filed 10-2-95; 8:45 am]

BILLING CODE 4410-01-M