Hti Health Services v. Quorum Health Group

• Decision Date: 14 March 1997
• Docket Number: Civil Action No. 5:96-CV-108Br(S).
• Citation: 960 F.Supp. 1104
• Parties: HTI HEALTH SERVICES, INC., Plaintiff, v. QUORUM HEALTH GROUP, INC., River Region Medical Corporation (Formerly known as ParkView Medical Corporation), and Vicksburg Clinic, P.A., Defendants.
• Court: U.S. District Court — Southern District of Mississippi

960 F.Supp. 1104

HTI HEALTH SERVICES, INC., Plaintiff, v. QUORUM HEALTH GROUP, INC., River Region Medical Corporation (Formerly known as ParkView Medical Corporation), and Vicksburg Clinic, P.A., Defendants.

Civil Action No. 5:96-CV-108Br(S).

United States District Court, S.D. Mississippi, Western Division.

March 14, 1997.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Heber S. Simmons, III, Armstrong, Allen, Prewitt, Gentry, Johnson & Holmes, Jackson, MS, Wendy E. Ackerman, Steven C. Sunshine, Jonathan L. Greenblatt, Matthew David Lee, Thomas Aquinas McGrath, III, Linda M. McMahon, Shearman & Sterling, Washington, DC, for HTI Health Services, Inc.

Jon Randall Patterson, William N. Reed, Baker, Donelson, Bearman & Caldwell, Jackson, MS, Sean M. Haynes, W. Michael Richards, Baker, Donelson, Bearman & Caldwell, Memphis, TN, for Quorum Health Group, Inc.

William N. Reed, Baker, Donelson, Bearman & Caldwell, Memphis, TN, for River Region Medical Corp.

Todd C. Richter, Watson & Jernigan, P.A., Jackson, MS, John P. Sneed, Phelps Dunbar, Jackson, MS, for Vicksburg Clinic, P.A.

OPINION

BRAMLETTE, District Judge.

Plaintiff HTI Health Services, Inc., d/b/a Columbia Vicksburg Medical Center ("Columbia") brought this antitrust action to enjoin a pending merger involving the defendants Quorum Health Group, Inc. ("Quorum Health"), River Region Medical Corporation (formerly known as ParkView Medical Corporation, referred to herein as "River Region") and the Vicksburg Clinic, P.A. (the "Vicksburg Clinic"). The co-defendants are referred to collectively herein as "Quorum". The merger is structured to align the two largest physician clinics in Vicksburg, Mississippi with one of the town's largest hospitals, ParkView Regional Medical Center ("ParkView"). ParkView's leading hospital rival, the Vicksburg Medical Center ("VMC"), is owned and operated by Columbia. Columbia is a wholly-owned subsidiary of Columbia/HCA HealthCare Corp., the largest for-profit hospital chain in the country. Quorum Health, the indirect majority shareholder of River Region, is also a large, for-profit health care corporation.

In its complaint filed July 29, 1996, Columbia alleged antitrust violations under the Sherman and Clayton Acts and requested preliminary and permanent injunctive relief to prohibit the merger's consummation. Following expedited discovery, the parties' opted to proceed directly to trial. The Court heard the case without a jury from September 30 through October 16, 1996. After the parties gave their closing arguments on November 6, 1996, the Court took the case under advisement. Now having thoroughly considered the record, legal arguments and case law, it is this Court's opinion, based on the findings of fact and conclusions of law to follow, that Columbia has failed to carry its burden of proof under the relevant antitrust laws. Columbia's request for injunctive and all other relief must therefore be denied.

BACKGROUND

A long and competitive history of a divided medical community creates the setting for this contested merger. For many years, VMC and ParkView (previously named Mercy Hospital) have been considered the leading hospitals in Vicksburg and the surrounding areas of Warren County, Mississippi. Vicksburg, a city of roughly 30,000 people, is located in the southwest quadrant of the state on the Mississippi River border with Louisiana. Although in the past as many as four hospitals have operated in Vicksburg, ParkView and VMC are the only survivors, and the city has become a "two-hospital town."

The Street Clinic and the Vicksburg Clinic are the city's oldest physician clinics. Both have operated since approximately the World War I era, and both have maintained a traditional alliance with one of the two hospitals: the Street Clinic with ParkView and the Vicksburg Clinic with VMC. The Street Clinic is located on ParkView's medical campus, and physicians associated with that clinic are shareholders in River Region. The Vicksburg Clinic operates as a professional association and is officed on VMC's campus in space that it leases from Columbia. Without delving into the historic reasons for these hospital/clinic alliances, suffice it to say that the age-old schism running through Vicksburg's medical community has divided the dominant doctor and hospital groups into two, well-matched rivals.

According to the executed merger agreement dated May 31, 1996 among ParkView Medical Corporation (predecessor to River Region), ParkView Sub Inc. and the Vicksburg Clinic (the "Merger Agreement"), the merger is structured to accomplish a stock-for-stock swap between River Region and the Vicksburg Clinic. In short, once the merger is consummated, the Vicksburg Clinic physicians will join their longstanding rivals at the Street Clinic as shareholders of River Region. The merged clinics (referred to herein as the "River Region Clinic") will become the single largest physician clinic in the Vicksburg area.

Although the Street and Vicksburg Clinics are currently the largest and most diversely specialized clinics in Warren County, they are not the only ones. Mission Primary Care (the "Mission Clinic"), also located in Vicksburg, is a family medicine clinic that was established in 1995 and is managed by a Columbia-owned medical services organization, VIP, Inc. Other clinics in Vicksburg include the Better Living Clinic and two small clinics that are operated by River Region, The Family Medicine Clinic of Vicksburg and the Women's Clinic of Vicksburg. In addition to these smaller clinics, a number of independent physicians practice in and around Vicksburg. Columbia's VIP manages, in whole or in part, many of the independent physicians' practices.

The revolutionary reorganization of the health care industry, which has swept much of the country since the early 1990s, has been slow to arrive in Vicksburg. Innovations that are prevalent elsewhere, such as integrated health care delivery systems, intrastate and regional networking among hospitals and other providers, and managed care options in health insurance coverage, are new to the Vicksburg community. Essentially, managed care plans such as health maintenance organizations ("HMOs") and preferred provider organizations ("PPOs") negotiate with doctors, hospitals and other health service providers to establish a health care network that will serve the plan's enrollees. Because managed care plans purchase services in quantity, they negotiate for discounted rates from the health care providers, which, in principle, are passed along to customers in the form of lower health care coverage costs. With or without the pending merger, the expectation is that managed care will grow over time in Vicksburg and Warren County, thereby stimulating price competition as plan providers scramble for new customers. Managed care may make additional inroads into Warren County through a Medicaid managed care pilot program, which is slated to begin in eleven Mississippi counties but which was inactive at the time of trial.

Also new to Vicksburg is the growth of casino gambling. Along with the development of the casino industry, Vicksburg and Warren County are experiencing significant economic growth, a decline in unemployment and the entry of new, nongaming businesses. Documents in evidence indicate that, between 1980 and 1994, Warren County's median family income increased 404% and its per capita income rose 126%.

Against this backdrop of changing times, a group of Vicksburg's independent physicians and clinic doctors formally met in the summer of 1993 to discuss ideas about reorganizing the area's hospital and medical services. One idea was to eliminate the duplication of services and procedures performed at the two hospitals by assigning a specific set of services to each hospital. For example, ParkView might be designated as the pediatric and ob/gyn center, while VMC would develop as the surgical care center. The hope was that, eventually, a new hospital could be constructed on a separate, neutral site and the old hospitals could be used for psychiatric units, nursing home facilities or other purposes. Another concern voiced by the physicians was Vicksburg's need for technologically advanced medical equipment including, but not limited to, a cardiac catherization laboratory, open heart surgery facilities and a permanent magnetic resonance imaging ("MRI") device. Because of intense competition between the two hospitals, neither had been successful in receiving the required approval from the state authorities for procuring such equipment. As a general rule, Mississippi requires that hospitals receive state regulatory approval in the form of a "certificate of need" or "CON" before capital expenditures for certain equipment or new technology may be incurred. In an attempt to end the regulatory gridlock, the Vicksburg doctors discussed approaching the CEOs of the two hospitals to encourage them to join forces and procure the cardiac catherization laboratory and MRI in a profit-sharing arrangement. The doctors hoped that, by forming a joint venture, the state regulators would no longer be forced to choose between the two hospitals and could award certificates of need to the unified project. Following the 1993 meeting, letters were sent to the executives of the owners of both hospitals, but the physicians' efforts failed. Vicksburg's need for technologically advanced equipment remained unresolved at the time of trial.

Dissatisfaction with the medical delivery system continued to grow among the community's physicians in general, and the Vicksburg Clinic physicians in particular. In December 1994, the nineteen physician shareholders at the Vicksburg Clinic wrote to the CEO of HealthTrust, owner and operator of VMC at that time, to complain about the hospital's failure to execute a several-year-old plan to expand the clinic's physical facilities and improve services. The physician group expressly requested...