St. Joseph's Hosp. v. HOSP. AUTHORITY OF AMERICA

Decision Date18 July 1985
Docket NumberNo. CV484-271.,CV484-271.
PartiesST. JOSEPH'S HOSPITAL, INC., Plaintiff, v. HOSPITAL AUTHORITY OF AMERICA, HCA Management Company, and Chatham County Hospital Authority, d/b/a Memorial Medical Center, Defendants.
CourtU.S. District Court — Southern District of Georgia

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J. Marbury Rainer, Rainer, Parker, Hudson, Rainer, Dobbs & Kelly, Atlanta, Ga., and William P. Franklin, Jr., Oliver, Maner & Gray, Savannah, Ga., for plaintiff.

Thomas A. Varlan, Sutherland, Asbill & Brennan, Atlanta, Ga., John M. Tatum, Savannah, Ga., for Chatham Co. Hosp. Authority.

Joe Sims, Kevin D. McDonald, Jones, Day, Reavis & Pogue, Washington, D.C., Sam P. Inglesby, Jr., Savannah, Ga., for Hospital Corp. of America and HCA Management Co.

ORDER

EDENFIELD, District Judge.

Before the Court are the defendants' motions to dismiss plaintiff's complaint, as amended, against them.

I. Background

This antitrust action arises over the provision of cardiac surgical services in the Southeast Georgia area. Plaintiff St. Joseph's Hospital, Incorporated ("St. Joseph's") is a Georgia nonprofit corporation doing business in Savannah, Georgia, as a licensed, nonprofit general acute care hospital. Amended Complaint at 2, ¶ 4. Defendant Hospital Corporation of America ("HCA") is a for-profit corporation in the business of operating both HCA and non-HCA owned hospitals worldwide. Id. at 3, ¶ 5. HCA Management Company ("HCAM") is a wholly owned subsidiary of HCA and has been under contract with defendant Chatham County Hospital Authority, d/b/a Memorial Medical Center ("MMC") to manage MMC.1 Id., ¶ 6. MMC also is a licensed, nonprofit, general acute care hospital in Savannah. St. Joseph's and MMC compete with each other in the health care services market in the Savannah, Georgia area.

In Georgia, hospitals must comply with state administrative and licensing requirements before they are able to build new hospitals or new patient care units in existing hospitals.2 Adherence to this requirement is mandated by the state's "principal objective of ... health care cost control." St. Joseph's Hospital, Inc. v. State Health Planning Agency and Chatham County Hospital Authority, Civ. No. X84-4497-G at 8 (Chatham Superior Ct., May 6, 1985) (hereinafter, "St. Joseph's I").

MMC currently provides cardiac surgical services in the Southeast Georgia area. St. Joseph's does not. St. Joseph's applied to the State Health Planning Agency ("SHPA") for a Certificate of Need ("CON")3 to enable it to provide such services in competition with MMC.

The defendants have allegedly obstructed St. Joseph's efforts to establish a cardiac surgery program within its hospital by, inter alia, opposing in bad faith St. Joseph's October 1983 CON application before the SHPA. Complaint at 8, ¶ 21. That litigation is ongoing as of the date of this Order. Because most of the defendants' allegedly improper conduct revolves around that litigation, the Court will indulge in a more detailed history of it.

St. Joseph's CON application before the SHPA was complete as of November, 1983. In January, 1984, MMC sent a letter to the SHPA4 (Complaint, Exh. A) which allegedly overstated MMC's capacity to provide cardiac surgical care to the public.5 Plaintiff's complaint does not allege that plaintiff was unable to respond to this letter before the SHPA issued its decision. However, while plaintiff's CON application was pending, the SHPA adopted the "New Cardiac Surgery Rule" (hereinafter, the "New Rule") on February 10, 1984 (made permanent on March 1, 1984), which in effect imposed a two-year moratorium on new heart surgery programs in Georgia. In April, 1984, the SHPA acted on St. Joseph's CON application and denied same on the basis of the New Rule and, inter alia, because MMC's cardiac care facilities would be needlessly duplicated, especially in light of data, allegedly derived from MMC's letter, showing that only 30% of MMC's total capacity was being utilized. Complaint, Exh. B.

St. Joseph's appealed the SHPA's decision to the State Health Planning Review Board ("Review Board") on April 27, 1984. Id., at 12, ¶ 33. Although MMC was not a formal party at this stage, it consulted with and advised the SHPA to move the Review Board to dismiss the appeal without a hearing. The SHPA did this, but it was denied by the Review Board hearing officer. However, that hearing officer advised the SHPA that he had previously represented plaintiff in another legal context and offered to disqualify himself upon the SHPA's motion. Id., ¶¶ 34-35.

MMC, representing that it would not seek to delay matters, moved the Review Board to let it intervene. This motion was granted. Id., at 12-13, ¶¶ 36-37. Two weeks later, MMC moved to disqualify the Review Board hearing officer because of his prior representation of the plaintiff. Id., at 13, ¶ 37(a). The Review Board Chairman, Joseph A. Sibley, disqualified the hearing officer and appointed himself to that position.

Thereafter, MMC moved to dismiss plaintiff's appeal on the same grounds stated in SHPA's earlier, unsuccessful motion. Before the Review Board ruled on this motion, however, MMC suggested that the appeal be postponed indefinitely. Id., at 13-14, ¶ 37(c). The Review Board chairman agreed and stayed the proceedings until the validity of the New Rule and its application to St. Joseph's CON could be resolved by the courts. St. Joseph's I, supra, at 4.

In response, St. Joseph's sought injunctive relief through a declaratory judgment action filed in this Court, St. Joseph's Hospital v. John A. Sibley, III, et al., CV484-266 (S.D.Ga. July 26, 1984), which was later dismissed. Sibley's stay order was subsequently lifted pursuant to a state court mandamus order. St. Joseph's Hospital, Inc. v. Sibley, Civ. No. D-12402 (Fulton Superior Ct., Aug. 17, 1984) (Williams, J.).

Complying with the mandamus order, a panel of the Review Board conducted a full evidentiary hearing in September, 1984. St. Joseph's I, at 4-5. At that hearing, the defendants "maintained and vigorously asserted the position that the New Rule was reasonable." Complaint at 14, ¶ 37(e). This position, however, "was in direct contradiction to their earlier expression of opposition to the New ... Rule in a letter submitted to the SHPA at the time the Rule was promulgated." Id.

In its decision of December 6, 1984, the Review Board panel found that St. Joseph's satisfied the CON requirements. Id., at 14-15. However, the CON could not be issued because the Board had no authority to do so until the New Rule's validity was resolved in the related cases then on appeal to the Georgia Court of Appeals. Id. That court, however, recently dismissed those appeals on jurisdictional grounds. State Health Planning Review Board v. Piedmont Hospital, 173 Ga.App. 450, 326 S.E.2d 814 (1985).

Upon plaintiff's complaint, the Chatham County Superior Court addressed the application of the New Rule to St. Joseph's in St. Joseph's I. Chatham County Superior Court Judge Cheatham, who permitted defendant MMC to intervene in the case before this court, see Order Allowing Intervention of Memorial Center, Inc., Civ. Actions X84-4497-G, X85-0034-C (Chatham Superior Ct., May 6, 1985), concluded that "the Rule is unreasonable and arbitrary in its interpretation and application by the Panel." St. Joseph's I, at 13. He held that the rule, "as interpreted in a preclusive fashion and applied retroactively to St. Joseph's, is invalid, and ... must be interpreted to allow the Review Board to approve St. Joseph's CON application in view of the Review Board's decision on the merits." Id., at 6, n. 2, quoting St. Joseph's Hospital, Inc. v. State Health Planning Agency, Civ. No. X84-0992-C (Chatham Superior Ct., May 6, 1985) (companion declaratory judgment decision) (hereinafter, St. Joseph's II). Accordingly, the Review Board's decision was "modified to direct SHPA to issue a CON to St. Joseph's...." St. Joseph's I, at 25; Complaint at 16-17. In June, 1985, St. Joseph's I & II were appealed to the Georgia Court of Appeals. As of the date of this Order, no decision has issued from that court.

Among its more conclusory allegations in the case sub judice, plaintiff maintains that MMC conspired with the other defendants and unnamed individuals to prevent St. Joseph's from completing its plans to establish a cardiac surgery program within its hospital. Complaint at ¶ 15. Stated differently, that beginning in 1982, the defendants, in violation of the Sherman Anti-trust Act, 15 U.S.C. § 1, "engaged in an unlawful combination and conspiracy to monopolize, and otherwise unreasonably restain, trade and commerce in the furnishing of medical-surgical hospital services generally, and in particular the furnishing of cardiac surgery services." Id., at Count I, and ¶¶ 20, 50. These antitrust activities, which in part consist of bad faith efforts to oppose St. Joseph's institution of cardiac surgery and other tertiary services, are continuing, alleges plaintiff. Id., at ¶ 21. The defendants' activities are designed to preserve MMC's monopolistic position in the relevant health care market detailed in plaintiff's complaint. Id., at Count I & ¶ 21.

Without such service unit in its hospital, St. Joseph's is compelled to transfer those patients needing cardiac surgery to MMC, its competitor. St. Joseph's thus loses desired medical staff and patient business, while MMC enjoys corresponding monopolistic fruits and patients must endure both increased costs and health risks. Id., at ¶¶ 27-30, 41-48.

Another example of MMC's bad faith conduct, according to plaintiff, is its actions regarding National Medical Enterprises, Inc. ("NME"). NME was required to submit a "Certificate of Need" ("CON") to the state in order to build a new, medical-surgical hospital in West Chatham County, Georgia. Plaintiff alleges that after opposing NME's application, HCA and MMC submitted their own, more...

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