Justice Department Sues Two Hospital Systems for Agreeing to Allocate Marketing Territories

The Department of Justice today sued Charleston Area Medical Center (“CAMC”) and St. Mary’s Medical Center for unlawfully agreeing to allocate territories for the marketing of healthcare services, a practice that deprived consumers of the benefits of access to important information about competing healthcare providers.  The department filed the civil antitrust lawsuit in the U.S. District Court for the Southern District of West Virginia, while simultaneously filing a proposed settlement that, if approved by the court, would resolve the lawsuit.

According to the department’s complaint, one way that hospitals compete to attract patients is by marketing their healthcare services, including through print advertisements, such as newspaper advertisements, and outdoor advertisements, such as billboards.  Advertising also spurs hospitals to compete for patients by investing in providing better care and a broader range of services.  The complaint alleges that CAMC and St. Mary’s curtailed competition for years by agreeing to geographic limits on the marketing of competing healthcare services.  CAMC agreed not to place print or outdoor advertisements in Cabell County, West Virginia, and St. Mary’s agreed not to place print or outdoor advertisements in Kanawha County, West Virginia.  The agreement disrupted competition, deprived patients of information needed to make informed healthcare decisions, and denied physicians working for the defendants the opportunity to advertise their services to potential patients. 

“These hospitals limited competition by agreeing on how and where each would advertise competing healthcare services,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “Marketing is an important tool that hospitals use to compete for patients.  Today’s action will end the hospitals’ anticompetitive agreement and promote competition.”

The proposed settlement prohibits CAMC and St. Mary’s from agreeing with other healthcare providers, including hospitals and physicians, to limit marketing or to divide any geographic market or territory.  The proposed settlement also prohibits communications between the defendants about their marketing activities, subject to limited exceptions.  The hospitals will also implement compliance measures designed to prevent the recurrence of these types of anticompetitive practices.

CAMC is a nonprofit West Virginia corporation headquartered in Charleston, West Virginia, which operates four general acute-care hospitals (CAMC General Hospital, CAMC Memorial Hospital, CAMC Women and Children’s Hospital, and CAMC Teays Valley Hospital) with a total of 908 beds and a medical staff of over 120 employed physicians.

St. Mary’s is a nonprofit West Virginia corporation headquartered in Huntington, West Virginia, which operates a general acute-care hospital located in Cabell County with 393 beds and a medical staff of over 50 employed physicians.  St. Mary’s also serves as a teaching hospital for medical students and residents from Marshall University School of Medicine.

The proposed settlement with CAMC and St. Mary’s, along with the department’s competitive impact statement, will be published in the Federal Register, as required by the Antitrust Procedures and Penalties Act.  Any person may submit written comments concerning the proposed settlement within 60 days of its publication to Peter J. Mucchetti, Chief, Litigation I Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street N.W., Suite 4100, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.