United States v. Evangelical Community Hospital, et ano; Response to Public Comments

CourtAntitrust Division
Citation86 FR 51183
Publication Date14 Sep 2021
Record Number2021-19800
51183
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
Patent No. 8,508,607 (‘‘the ’607 patent’’).
The complaint further alleges that an
industry in the United States exists as
required by the applicable Federal
Statute. The complainant requests that
the Commission institute an
investigation and, after the
investigation, issue a limited exclusion
order and cease and desist orders.
ADDRESSES
: The complaint, except for
any confidential information contained
therein, may be viewed on the
Commission’s electronic docket (EDIS)
at https://edis.usitc.gov. For help
accessing EDIS, please email
EDIS3Help@usitc.gov. Hearing impaired
individuals are advised that information
on this matter can be obtained by
contacting the Commission’s TDD
terminal on (202) 205–1810. Persons
with mobility impairments who will
need special assistance in gaining access
to the Commission should contact the
Office of the Secretary at (202) 205–
2000. General information concerning
the Commission may also be obtained
by accessing its internet server at
https://www.usitc.gov.
FOR FURTHER INFORMATION CONTACT
:
Katherine Hiner, Office of the Secretary,
Docket Services Division, U.S.
International Trade Commission,
telephone (202) 205–1802.
SUPPLEMENTARY INFORMATION
: Authority:
The authority for institution of this
investigation is contained in section 337
of the Tariff Act of 1930, as amended,
19 U.S.C. 1337, and in section 210.10 of
the Commission’s Rules of Practice and
Procedure, 19 CFR 210.10 (2020).
Scope of Investigation: Having
considered the complaint, the U.S.
International Trade Commission, on
September 8, 2021, Ordered that
(1) Pursuant to subsection (b) of
section 337 of the Tariff Act of 1930, as
amended, an investigation be instituted
to determine whether there is a
violation of subsection (a)(1)(B) of
section 337 in the importation into the
United States, the sale for importation,
or the sale within the United States after
importation of certain products
identified in paragraph (2) by reason of
infringement of one or more of claims
1–4, and 6–36 of the ’912 patent; claims
1–16 of the ’312 patent; and claims 1–
4, 6–7, 10–13, 15–16, 19–21, 25–26, and
29 of the ’607 patent, and whether an
industry in the United States exists as
required by subsection (a)(2) of section
337;
(2) Pursuant to section 210.10(b)(1) of
the Commission’s Rules of Practice and
Procedure, 19 CFR 210.10(b)(1), the
plain language description of the
accused products or category of accused
products, which defines the scope of the
investigation, is ‘‘IP security cameras
and systems, as well as the software and
components of those cameras and
systems’’;
(3) For the purpose of the
investigation so instituted, the following
are hereby named as parties upon which
this notice of investigation shall be
served:
(a) The complainants are:
Motorola Solutions, Inc., 500 W.
Monroe St., Chicago, IL 60661
Avigilon Corporation, 555 Robson St.
3rd Floor, Vancouver, British
Columbia, V6B 1A6, Canada
Avigilon Fortress Corporation, 555
Robson St. 3rd Floor, Vancouver,
British Columbia, V6B 1A6, Canada
Avigilon Patent Holding 1 Corporation,
555 Robson St. 3rd Floor, Vancouver,
British Columbia, V6B 1A6, Canada
Avigilon Technologies Corporation, 555
Robson St. 3rd Floor, Vancouver,
British Columbia, V6B 1A6, Canada
(b) The respondents are the following
entities alleged to be in violation of
section 337, and are the parties upon
which the complaint is to be served:
Verkada Inc., 405 E 4th Avenue, San
Mateo, California 94401
(c) The Office of Unfair Import
Investigations, U.S. International Trade
Commission, 500 E Street SW, Suite
401, Washington, DC 20436; and
(4) For the investigation so instituted,
the Chief Administrative Law Judge,
U.S. International Trade Commission,
shall designate the presiding
Administrative Law Judge.
Responses to the complaint and the
notice of investigation must be
submitted by the named respondents in
accordance with section 210.13 of the
Commission’s Rules of Practice and
Procedure, 19 CFR 210.13. Pursuant to
19 CFR 201.16(e) and 210.13(a), as
amended in 85 FR 15798 (March 19,
2020), such responses will be
considered by the Commission if
received not later than 20 days after the
date of service by the complainant of the
complaint and the notice of
investigation. Extensions of time for
submitting responses to the complaint
and the notice of investigation will not
be granted unless good cause therefor is
shown.
Failure of a respondent to file a timely
response to each allegation in the
complaint and in this notice may be
deemed to constitute a waiver of the
right to appear and contest the
allegations of the complaint and this
notice, and to authorize the
administrative law judge and the
Commission, without further notice to
the respondent, to find the facts to be as
alleged in the complaint and this notice
and to enter an initial determination
and a final determination containing
such findings, and may result in the
issuance of an exclusion order or a cease
and desist order or both directed against
the respondent.
By order of the Commission.
Issued: September 8, 2021.
Lisa Barton,
Secretary to the Commission.
[FR Doc. 2021–19740 Filed 9–13–21; 8:45 am]
BILLING CODE 7020–02–P
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 https://www.justice.gov/
atr/case/us-v-geisinger-health-and-
evangelical-community-hospital. 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
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51184
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
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
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51185
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
1
Amended proposed Final Judgment ¶IV.B.2.
2
Amended proposed Final Judgment ¶V.A.
3
Amended proposed Final Judgment ¶¶IV.B.3, 6.
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.
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
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51186
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
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.
9
Amended proposed Final Judgment ¶IV.G.
10
Amended proposed Final Judgment ¶IV.G,
VII.A.
11
Amended proposed Final Judgment §VI.
12
Amended proposed Final Judgment §§VIII, XI.
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.
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.
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
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
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
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.
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.
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.
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51187
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
17
UPMC Comment, attached as Exhibit C.
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.
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.
20
UPMC Comment at 10.
21
Amended proposed Final Judgment ¶VII.A.
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.
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.
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.
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.
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
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51188
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
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).
23
Amended proposed Final Judgment ¶V.B.
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), https://
www.healthit.gov/sites/default/files/EHR_
Contracts_Untangled.pdf.
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.
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
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
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
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: david.stoltzfus@usdoj.gov
[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
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51189
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
1
ECF No. 51–1.
2
ECF No. 1.
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.
5
The Margin Guarantee was also included in
Exhibit D to the Amended Collaboration
Agreement. ECF No. 46–2 at 54, 60–61.
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
RDAGEN@AXINN.COM
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.
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.
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.
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.
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.
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51190
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
6
Compl. ¶67 (‘‘there are no transaction-specific
efficiencies to weigh against the harm’’).
7
United States v. Am. Tel. & Tel. Co., 552 F.
Supp. 131, 151 (D.D.C. 1982) (citations and
subsequent history omitted).
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.
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.
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.
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
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
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
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51191
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
19
CVS Health, 407 F. Supp. 3d at 48.
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.
22
See ECF No. 51–3, at 56 (§B.2), at 61 (§ B.2).
23
See ECF No. 51–3, at 55–56 (§B.1), at 60–61
(§B.1).
24
See ECF No. 51–3, at 55–56 (§§A, B.1), at 60–
61 (§§A, B.1).
25
See ECF No. 51–3, at 55–57 (§§B.1, B.3, B.6,
B.7); id. at 59 (Exhibit A); at 60–63 (§§B.1, B.3, B.6,
B.7); id. at 64 (Exhibit A).
26
See ECF No. 51–3, at 55–57 (§§B.1, B.3, B.6,
B.7); id. at 59 (Exhibit A); at 60–62 (§§B.1, B.3, B.6,
B.7); id. at 64 (Exhibit A).
27
See ECF No. 51–3, at 56–57 (§§B.6, B.7), at 61–
62 (§§B.6, B.7).
28
See ECF No. 51–3, at 59 (Exhibit A), at 64
(Exhibit A).
29
The 7.5% interest retained by Geisinger does
not entitle it to receive any cash flow. ECF 51–3,
at 8 (§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.’’).
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 ’’).
recent matter involving the health care
industry, ‘‘with so much at stake, the
congressionally mandated public interest
inquiry must be thorough.’’
19
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.
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.
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:
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
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
If the margin dollars increase,
Evangelical pays Geisinger a retroactive
payment and Geisinger’s rates go down.
26
Geisinger and Evangelical share highly
competitively sensitive information to
effectuate the agreement on a monthly basis
(discussed further below).
27
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
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).
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
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
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51192
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
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.
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).
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’’).
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
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
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
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:
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.
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:
ÆLeaders from Defendants have had
‘‘regular touch base meetings,’’ in which they
discussed a variety of topics, including
strategic growth options.
ÆGeisinger has shared with Evangelical
the terms of its loan forgiveness agreement,
which Geisinger uses as an important tool to
recruit physicians.
ÆGeisinger 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.
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.
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51193
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
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’’).
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.
38
Compl. ¶29.
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).
¶ 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.
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
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:
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.
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.
As a fallback, Geisinger and Evangelical
sought to ‘‘concoct’’ a partial acquisition,
Compl.¶ 24, but that arrangement too might
be blocked.
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.
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.
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.
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
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51194
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
42
See Second Amended Collaboration
Agreement, §6.5, ECF No. 51–3, at 9.
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], https://www.gao.gov/assets/gao-15-
817.pdf.
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.’’).
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), https://www.ftc.gov/system/files/
documents/advocacy_documents/submission-ftc-
staff-southwest-virginia-health-authority-virginia-
department-health-regarding/
160930wellmontswvastaffcomment.pdf. 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.
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.’’).
49
See Second Amended Collaboration
Agreement, §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.’’), https://www.epic.com/
docs/mucertification.pdf.
50
Information Blocking, ONC’S CURES ACT
FINAL RULE, https://www.healthit.gov/curesrule/
final-rule-policy/information-blocking (last visited
May 30, 2021).
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.’’).
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:
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;
Geisinger will provide support for such
systems at an 85% discount to Evangelical;
and
The parties will enter an IT sharing
agreement, whereby Geisinger will provide
additional back office systems to Evangelical
at commercially reasonable rates.
42
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
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
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
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:
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
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
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51195
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
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.’’).
55
DEP’T OF JUSTICE AND FED. TRADE
COMM’N., ANTITRUST GUIDELINES FOR
COLLABORATIONS AMONG COMPETITORS 15
(2000) (emphasis added), https://www.ftc.gov/sites/
default/files/documents/public_events/joint-
venture-hearings-antitrust-guidelines-collaboration-
among-competitors/ftcdojguidelines-2.pdf.
56
ECF No. 51–3, at 56 (§B.6), at 61 (§ B.6).
57
Id.
58
ECF No. 51–3 at 59, 64.
59
Id.
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.
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
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
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.
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
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES
51196
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices
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.
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.
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), https://
www.justice.gov/sites/default/files/atr/legacy/2011/
06/17/272350.pdf.
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.’’).
66
FTC v. Penn State Hershey Med. Ctr., 838 F.3d
327, 344 (2016) (quoting Phila. Nat. Bank, 374 U.S.
at 362).
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.
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
In the event that the DOJ declines that
remedy, there are other options that would
improve the relief:
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.
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
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
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
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.
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
VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 PO 00000 Frm 00099 Fmt 4703 Sfmt 9990 E:\FR\FM\14SEN1.SGM 14SEN1
tkelley on DSK125TN23PROD with NOTICES

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT