AHLA's Speaking of Health Law

A Look at the Recent DOJ Complaint in U.S. v. Geisinger, Part 2

March 05, 2021 AHLA Podcasts
AHLA's Speaking of Health Law
A Look at the Recent DOJ Complaint in U.S. v. Geisinger, Part 2
Show Notes Transcript

In this follow-up to their podcast from October 2020, Dionne Lomax, Managing Director of Antitrust and Trade Regulation, Affiliated Monitors, Inc., speaks to Lisl Dunlop, Axinn Veltrop & Harkrider LLP, and Steve Vieux, Shook Hardy & Bacon LLP, about the U.S. v. Geisinger Health and Evangelical Community Hospital case. The speakers recap DOJ’s March 3 settlement and how it addresses the issues raised in the complaint. They also discuss DOJ’s approach to the complaint’s no-poach allegations and the two civil class action lawsuits that were recently filed. From AHLA's Antitrust Practice Group.

To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.

Speaker 1:

Hello everyone. I'm Dionne Lomax and I am Vice Chair of Education for a h l ALA's Antitrust Practice Group. I want to welcome everyone back, which to this podcast, this is part two of our podcast discussing US versus Geisinger Health and Evangelical Community Hospital. I wanna thank the A H L A Antitrust Practice Group, and more importantly, I want to thank our guest speakers today. I, Liesel Dunlop is a partner at Aon, and Steve View is Council at Shook Hardy. And they have come to us once again to share their knowledge and expertise with us as relates to some recent developments in the DO J's case against Geisinger. In fact, just two days ago, the DOJ announced a settlement, and so that's what we're here to talk to you with you about today. And, um, so let's just kick it off with Steve. Steve, can you start us off and provide us with a brief overview of the DOJ settlement and how it addresses the issues raised in the complaint?

Speaker 2:

Okay, great. Thank you Dion. And good morning everyone. Well, at least good morning for me on the West Coast<laugh>. Um, anyway, yeah, the, um, settlement that the DOJ recently entered into with the defendant's Geiger Evangelical, it seems to be narrowly, uh, um, designed to address, um, their concerns about competition in area. Mainly focused on making sure that Geisinger and Evangelical Health remain competitive com competing and independent, um, health systems, health concerns. Um, and it does that by, on a high level, by capping Geisinger's ownership, partial ownership interest in Evangelical reducing, um, Geisinger Health's interest from 30%, which was part of the original proposed partial acquisition deal, reducing that to a passive ownership now of 7.5%. Also, there are several provisions in the settlement designed to prevent Geisinger from having otherwise influence or control over Evangelical and preventing the parties from sharing comp competitively sensitive information in the future. And also both parties are required to implement, um, rather robust antitrust compliance programs going forward. But what's interesting about the settlement is that also tries to maintain the pro competitive benefits of the two parties current and proposed, um, collaboration, for example, it still allows, um, some quality enhancing aspects of the deal, allows'em to go forward, such as implementation of a new electronic health record system for Evangelical with related with assistance from Geisinger Health. Also, evangelical can, can keep, um, 20.43 million already investigated, invested in it by Geisinger with the majority of that funding going to patient room, improve a patient room improvement project, and the rest for sponsorship of a joint local re recreation and wellness center.

Speaker 1:

Very interesting. Okay, so, so Liesel, Steve gave us a little bit of a teaser, so I wanna dive a little bit deeper. As you know, as you, as you all know, as we all know, in many cases, settlements involving partial ownership issues sometimes have firewall requirements and or they might even require oversight by a compliance monitor. Liesel, can you discuss these aspects of the settlement and walk us through the settlement process in a little bit more detail with respect to those items?

Speaker 3:

Sure. And, uh, thanks for having me back on to talk about this really interesting case. Um, so, you know, I, I found the, um, provisions on, you know, firewalls and, and particularly the compliance programs, really interesting and quite extensive. Um, so as Steve said, one of the issues that was raised in the complaint was that, uh, the collaboration agreement would enable sharing of competitively sensitive information. So in particular, um, there were a couple of provisions of the collaboration agreement that re one of one of them gave Geisinger a right of first refusal, um, over any, um, collaboration, uh, partnership, joint venture acquisition that, um, evangelical might enter into with some third party. So in order for that right of first refusal to be able to be exercised, evangelical would have to tell Geisinger about all this stuff, um, you know, before a a, you know, at, at an early stage of a potential deal. Um, and maybe even having that provision there would probably, you know, disincentivize them from trying to enter into anything like that. Um, and then the second piece of, um, competitively sensitive information were these requirements that Evangelical had to get Geisinger's approval effectively for, um, big investments in strategic projects to come out of that original 200 million. Um, and, uh, of course when the, um, partial ownership interest got reduced to 7.5 million, that kind of became 20 million, I think. And, uh, and then and was specifically designated to a couple of projects so that they took that out of the equation as well. Um, so those two information sharing opportunities have, have gone with the amended, um, agreement, collaboration agreement and, and though having those kinds of provisions in an agreement between the parties has been prohibited. Um, and you know, there are also express prohibitions on, um, sharing of non-public information include, you know, and again, it says, you know, including about strategic projects and also no access to each other's financial records. Um, but there is going to be some ongoing kind of contact and information flow between them around this, um, electronic medical records, um, collaboration that, that Steve was talking about. So that part's still there. So that's when the compliance program comes in. Um, and the compliance program provisions here are actually pretty detailed. Um, you know, you, you might remember last year, um, the DOJ established a new office, it's called the Office of Decree Enforcement and Compliance. And so it, the DOJ is really taking a much, um, more targeted and focused approach to consent decrees, um, and enforcement and monitoring of compliance with consent decrees going forward. Um, a little bit like the FTC does with its, uh, compliance division. Um, so the proposed final judgment says that both defendants have to institute an antitrust compliance program, not only for the proposed final judgment, but for the antitrust laws generally. Um, and we'll talk a little bit later about the no poach stuff, so maybe that's a little arrow towards that. Um, the DOJ actually needs to review and approve the compliance plan. Um, so that's interesting. Um, there are specific provisions about having a compliance officer, um, the trainings that have to be run, the annual certifications they have to get, and again, the DOJ has approval rights over all of this stuff, including the identity of the monitor or the officer. Um,

Speaker 1:

So then let me ask you, so, so no, no, there's no provision that requires an independent monitor though,

Speaker 3:

Don't think it's an independent monitor. Okay. I think it's a compliance officer officers described as, and you know, if you remember when, um, there was the e-books case and Apple ended up with a, a big, you know, compliance, uh, requirement in that consent decree. They did have an outside monitor, but they also had a requirement to appoint an officer into Yes,

Speaker 1:

That's true.

Speaker 3:

I think, I think it's like, I think it's something like that. Um, anyway, then there are also provisions about if, if the compliance officer comes across some potential violations of the proposed final judgment, they have a notification and report requirement on that. Um, and then there are all of the, the firewall provisions and they, they have to have a, a, a plan for that firewall and how it's gonna work, and the DOJ has to review and approve that. So compliance office is gonna be quite busy here,<laugh>

Speaker 1:

Exactly it. And so is the doj it sounds like<laugh>.

Speaker 3:

Yeah, that that's what I mean at, at the doj. Oh yeah,

Speaker 1:

Exactly.

Speaker 3:

My friend, my friend Larry Riker, and his and his staff are gonna be kept a little busy on this for a while

Speaker 1:

Trying to Exactly,

Speaker 3:

Yeah. So, and then there are a very detailed inspection provisions, um, access provisions that, that I'm used to seeing, but also a right to conduct interviews. And, uh, there are references to, um, you know, if, if necessary requiring the parties to respond to written interrogatories or provide written reports on things. So, you know, pretty in depth and detailed provisions on, um, you know, post-degree co decree

Speaker 1:

Compliance. Now, um, can you tell us a little bit about the TAC process that, that just very quickly involved here?

Speaker 3:

Sure. Yeah. I mean, it doesn't really have much practical impact on the parties complying with the, the judge, the consent decree, because the way it works is the, um, parties agree to comply with the proposed final judgment until it becomes final. So from their perspective, from the party's perspective, you know, this, this doesn't have much IM impact, but the DOJ does have to go through a, a notice and comment process. It's in the T Act, it's a kind of sunshine act to let the public kind of see what's going on in DOJ settlements. And, um, the public will have 60 days from publication of the proposed final judgment in the federal register. So it will be interesting to see if there are any comments and, and what people might have to say about this. Um, so the, the judgment will become final, probably take about three months.

Speaker 1:

Okay, great. Great. So n now let's, let's circle back to what, uh, Lisa, I think you just mentioned about the no poach allegations. And Steve, I'm coming back to you this time,<laugh>. So there are no poach allegations in the complaint yet. The DOJ hasn't seemed to take an any action on that just yet. Um, so reading the tea leads, what do you think that this means?

Speaker 2:

Okay. Yeah, that's good. And granted, you know, I have no insight<laugh> into what the DOJ is doing. Um, I'm not part of that team. This is just conjecture. Yes. Uh, but my, you know, my best guess as a former enforcer myself at the FTC is that perhaps they didn't feel it was strong enough evidence, um, for, you know, a standalone, standalone allegation. I think it was just one paragraph, um, one or two paragraphs in the complaint. Um, also, so they thought maybe it, it was a strong enough for a standoff standalone allegation, but at least strong enough to help them with their coordinated effect story. Um, then also too, just when you're litigating the bigger concern is, you know, preventing this partial acquisition. So, you know, they concern that may be, you know, getting into detail about a separate, um, no poach agreement that these guys had going back before, perhaps before, well, allegedly before, um, they entered into the partial acquisition agreement. The concern is that would just interfere, um, with, you know, the nice clean, um, story they wanted to tell at trial, uh, you know, gearing up for trial. Um, now there is, uh, that the, the settlement agreement, um, does address that. Um, there is a provision prohibiting, um, the parties from, you know, advising or consulting in the hiring or recruiting, uh, respectively of certain senior, uh, level employees. So you can see that as a nod to that. Um, although, you know, you've seen that in other types of, um, settlements dealing with, um, mergers. Um, one other thing too, and I'll jump the gun a little bit, is that just for the audience, um, the doj, despite what it did with those allegations, with that issue in this complaint, the DOJ takes, um, no, no alleged, no poach agreements, um, or even, uh, or non-solicitation or even alleged wage fixing the salary fixing agreements. Basically labor market competition takes that seriously. Um, you know, in the past these allegations would've been dealt with, with civil enforcement by Brother DOJ and the ftc. Um, now we've seen a call for now the DOJ to uses criminal powers, um, to enforce, um, you know, alleged violations of, uh, antitrust law as it relates to labor competition. In fact, justice this past month, uh, the DOJ was able to secure its first criminal indictment of, uh, of, for an alleged for, uh, an alleged non no approach agreement. Um, and this was in the healthcare arena. Um, this was against surgical care affiliates, a unit of United Health for which is an operator of outpatient and surgical facilities. Um, allegedly the, they're alleged to have reached, um, not no poach agreements with certain healthcare operators in Texas and Colorado. And then before that, just a month before that in Texas, uh, the DOJ was able to secure a criminal indictment of Nuj Jindi, the owner, former owner of a therapist staffing company for allegedly reaching agreements with, um, with competitors, not no poach agreements, but allegedly reaching agreements on, um, salary, um, to, um, therapists, um, in Texas mm-hmm.<affirmative>. So in terms of labor market competition in healthcare, um, just to give a warning to folks who have clients in this area, um, the DOJ takes us very seriously and, you know, if you need assistance in terms of counseling, your clients do the right thing. They're now going after these using their criminal power. So<laugh>, you know, criminal fines and something that's very scary, um, jail time potential for that. Right. It's something to keep in mind.

Speaker 3:

Absolutely. That's something I was going to point out, Steve. You know, the, the no post allegation in the, in the civil complaint on the partial acquisition is, is just that one paragraph. But, um, now that the DOJ is prosecuting this stuff criminally, um, it's probably a, you know, different group, um, looking at it. If, if, if they are, assume that they are, um, and you know, they'll be, they'll be looking to, to bring a criminal indictment here rather than, you know, the civil case. So that that's another reason, you know, for it being separated.

Speaker 1:

Yeah, a absolutely. And let's not forget, you know, you, you've got a bunch of, um, class action lawsuits that often get filed in these matters, and as we both, as we all know, within the last month, there have been two follow on civil class actions,<laugh>, that were filed against the parties here. And so I'd like both of you just to speak to that, Lisa was kick off with you. Can you give us a, a little bit of a flavor of what those two actions entail?

Speaker 3:

Sure. So, um, two punitive class actions, um, one brought by a class of nurses and the other by a class of, um, nursing assistants or patient access representatives as they're called, um, uh, the nurses' cases is the lead, plaintiff is lib, and the other one is sour. Um, both brought in district court, middle district of Pennsylvania, um, tribal damages actions, uh, alleging violation of section one and corresponding Pennsylvania antitrust laws. And the period, um, the alleged, um, no poach agreement period is May, 2015 until August, 2020, which is when the DO J'S complaint, uh, do J'S complaint was filed. So they're basing, it basically alleging that this was going on all through, um, the DOJs investigation, um, until the complaint was filed. Um, you know, the complaints rely pretty heavily on the DOJ complaint in the partial acquisition matter. Um, you know, they repeat all of the allegations about, you know, the market positions of Geisinger and Evangelical and kind of extrapolate from that that they are the dominant employers of healthcare workers in that region. Um, you know, they refer to the DO oj, um, and ftc, I need trusts guidance on human professional for human pro profession, uh, human resources professionals, um, where they're getting their theories from. Um, they repeat that specific allegation that's in the DOJ complaint, uh, which relates to a communication between Geisinger and Evangelical, um, people, um, about nurses poaching each other's nurses. Um, but that is the only specific allegation about, you know, that evidence is the agreement. They try to infer the agreement from a whole lot of other stuff. Um, there's some very interesting, um, description of the dynamics of competition, uh, in healthcare, um, employment, um, in terms of, you know, reactive, um, offering reactive pay and proactively increasing pay and how the dynamic works internally. So even people who aren't going to leave are gonna get more money because there's an internal equity type of, um, issue. I found all of that quite fascinating, the, the dynamics of it mm-hmm.<affirmative>. Um, but, but it's not very specific evidence about a, a conspiracy and Yeah, you know, it, it's gonna, it would be interesting, you know, if they go ahead. Um, and you know, there's gonna be motions to dismiss filed as, as there often are. Um, you know, there aren't a lot of really specific allegations of the who, what, when, how, why of a conspiracy. There's this one allegation taken from the DOJ complaint, so it's kind of secondhand already about communications between the nurse, between the CEOs and the HR people about the nurses. I mean, that's gonna be able to be substantiated because it's come directly outta some documents, I imagine. Um, but apart from that, they're alleging regular touch base meetings, but there's no allegations of who was there or what was said. Um, they mentioned some, um, DOJ information sharing allegations about a physician loan agreement. Um, I mean, it's, yeah, it's kind of about employment, but it's not really very direct on, I know poached conspiracy, um, they, they mentioned some antitrust challenges about prior Geisinger acquisitions. I mean, that's not really relevant to<laugh> poach agreement. So it's, it's good on the theory, but it's a little thin on the conspiracy claims right now. So my read is, I think that they're waiting for the DOJ to bring their criminal enforcement action, and then it will just turn into the usual, you know, cartel case with the follow on. So once, once there's a criminal plea, um, then, you know, section four lets you just, you know, follow on and assume the, assume the, um, the illegality.

Speaker 2:

I agree with Lisa. Yeah. Um, these are these two follow ons. Um, yeah, if you read the complaint, um, yeah, it just, it, there's a lot of, uh, pretty much a lot, a lot of it taken from the DOJ complaint. I mean, they're relying on as Lisa, um, um, suggested perhaps waiting for the DO oj, um, to file its criminal case and just see what they can get from that, from, uh, via section four. And also if they're able to, uh, you know, to, um, survive the motion of the citizen that won't doubtly come to their way, um, discovery in their own case, which may turn up some interesting documents, some interesting information. Um, you know, I mean, yeah, this is just as, this is similar to what you've seen in other cases dealing with price fixing, um, conspiracies. Um, you know, there's a whole new world where it's, we're seeing this aggressive section one enforcement, both by the government and by private parties, um, in the, in the, in the labor market in terms of labor competition. So this is something folks need to be very concerned of, um, in terms of, you know, the public sector, public enforcement politically, you know, it's a no-brainer, especially in these times, these concerns, uh, you know, rising inequality. Um, you know, it's a great way, you know, if you're the do oj, um, or even ftc, you know, you know, for, in fact for actions where it might be more appropriate for the FTC to use the civil enforcement, um, you know, power, you know, it's a no-brainer, you know, to get political support for your agency<laugh>, you know, bipartisan on a bipartisan basis, um, and for, you know, you know, private deter for private plaintiffs. Yeah. It's, it can be a lucrative area. So something I think folks need, definitely need to keep on their radar, especially, um, in, um, the healthcare arena.

Speaker 1:

Yeah. Yeah. Um, one of the things that, that strikes me about all this activity, particularly with respect to the criminal enforcement in the healthcare area, is that, you know, when we were all began practicing<laugh> we're all around the same age when we started, began practicing in healthcare, and I trust was unheard of to have a criminal indictment of a, a health, a healthcare entity. Right. So times have definitely changed. Yeah. Times have definitely changed. Yeah. But, but I just wanted,

Speaker 2:

Yeah. Started in the FTC and I was doing like, oh, sorry, go ahead. No, yeah. Cause I remember, like I started, yeah, we're at the same age and I started at the FTC around the turn of the century. That's how old I am<laugh>. Um, a lot of my first cases, you know, you know, at the ftc, you know, we were going after, we thought we had like great debt to rights, evidence of literal price fixing, um, reimbursement rates among physicians, you know, um, and, you know, we issued strong orders, but, you know, it was like, if this was in any other<laugh> industry, any other area, yeah. It would be criminal. Yeah. Same, same as the doj.

Speaker 1:

Steve, when you were at the ftc, I was at the doj, I was in the healthcare task force. Mm-hmm. And yeah, we would, they were civil consent decree, you know, so it's a new, it's definitely a new day. Eli, what were you gonna say?

Speaker 3:

Well, I was just gonna say, you know, I, I wasn't in the FTC or the doj, but you know, I was around at that time

Speaker 1:

<laugh><laugh>

Speaker 3:

And, and you know, it's really just a, it, it's interesting how it has changed. Uh, it, you know, it's just a, um, another example of, of the agency's view that, you know, healthcare is, is the same as any other industry and the antitrust laws apply and, you know, we, we still have to particularly this concern with labor markets, though I think that's really part of the, yeah, the popular discussion around antitrust. It's something that hasn't really been, um, a feature. I mean, you have some people saying you should take impact on labor markets into account in merger analysis. So, you know, you usually think of synergies as, as something good, well, well, maybe not so good when, you know, you personally are a synergy. So<laugh>

Speaker 1:

Well, there you go.<laugh>. Wow. Well, um, I, I just have to say this has been delightful, both parts one and part two. And, um, I just so appreciate you guys. And look, look, you guys might, we might be the dream team. I might be calling on you to talk about another case in the near future. So, but wait, wait. We might have a guilty plea coming up, right?<laugh>? Oh, this is true. This

Speaker 2:

Is true.<laugh><laugh>, true.

Speaker 1:

We may have a part three. Yeah. Stay tuned.

Speaker 2:

Yeah. Audience

Speaker 1:

<laugh>.

Speaker 2:

Well, the follow private actions. Yeah, definitely. Right here.

Speaker 1:

Exactly. Exactly. So what, we'll wrap this one up for now. Stay tuned. Possibly for a part three, we don't know. But once again, I wanna thank Liesel and Steve and on behalf of the A H L A Antitrust Practice Group, wanna thank everyone for listening to our podcast today. Take care.