The U.S. Department of Justice filed a lawsuit Thursday against Charleston Area Medical Center and St. Mary's Hospital, claiming the hospitals split their marketing territories and kept area residents from getting information about competing health care services.
The antitrust lawsuit, filed in federal court in Charleston, alleges that, for years, CAMC agreed not to advertise on billboards or in print in Cabell County, while St. Mary's, in Huntington, didn't advertise in Kanawha County. The alleged agreement constitutes an unreasonable restraint of trade, which violates the federal Sherman Antitrust Act, according to federal officials.
"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," DOJ officials said in a news release.
With the complaint, lawyers for the government filed a proposed settlement agreement that would end the alleged marketing pact and require the hospitals to implement steps to prevent future antitrust practices.
Federal law requires that notice of the settlement be published for 60 days, to allow public comment. The hospitals agreed to bear the costs for notices to appear in newspapers, the agreement states. Those who wish to comment on the proposed agreement should contact the Antitrust Division of the DOJ. The case has been assigned to U.S. District Judge John Copenhaver Jr.
"These hospitals limited competition by agreeing on how and where each would advertise competing healthcare services," Assistant Attorney General Bill Baer, of the DOJ's Antitrust Division, said in the release. "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 lawsuit doesn't identify any employees by name.
CAMC doesn't agree with the allegations, spokesman Dale Witte said in an email Friday.
"CAMC cooperated with the DOJ investigation, but disputes the allegations in the complaint. CAMC has reached an agreement with the DOJ to settle the matter to avoid expensive and protracted litigation," Witte wrote.
Angela Henderson-Bentley, a spokeswoman for St. Mary's, said in an emailed statement Friday afternoon that hospital employees discovered the issue and reported it to the government. She also said St. Mary's "aggressively advertises" on television in Kanawha County.
"St. Mary's Medical Center discovered this issue on its own, voluntarily disclosed it to the U.S. Department of Justice and fully cooperated with the Justice Department's review of this matter," Henderson-Bentley said.
According to the complaint, the alleged agreement has been in place since at least 2012 and has been monitored and enforced by the marketing departments of the hospitals.
An executive from each hospital testified about their respective marketing departments in a deposition with federal officials, according to the lawsuit.
The complaint also shows that government officials have seen emails of marketing employees pertaining to the alleged agreement.
The agreement between the hospitals barred any advertisements in the county of its competitor "on billboards or in print," according to St. Mary's director of marketing, the eight-page complaint states. "He also testified that 'the agreement between St. Mary's and CAMC is still in place today.' "
In January 2012, according to the lawsuit, a CAMC urology group asked its hospital's marketing department to advertise in a Huntington newspaper.
The director of marketing responded to the request that CAMC does not typically advertise there because of its "gentleman's agreement," the complaint states, and says the ad was never placed.
In May 2013, according to the lawsuit, the marketing director for St. Mary's complained to CAMC after an advertisement for it appeared in a Huntington newspaper that promoted a CAMC physician's group. CAMC agreed to pull the ad, according to the complaint.
An email from a marketing director to senior executives at the Huntington hospital states, "I talked with CAMC and they agreed this ad violated our agreement not to advertise in Charleston paper if they didn't advertise in Huntington paper."
"Their director of marketing says she pulled the ad but was concerned it might still run again one more time this Sunday. I can't call the [newspaper] and make sure because they could challenge this type of handshake agreement. That prevents them from getting advertising dollars from a different advertiser. We'll see and I'll follow up from there but after Sunday I am confident we won't see CAMC again in [the Herald-Dispatch newspaper]." the email states, according to the lawsuit.
Twice in 2014, a physicians group with CAMC requested marketing in Cabell County and was turned down by the hospital's marketing department, the lawsuit claims.
"Just watch the county line my friend," CAMC's director of marketing wrote about one request, according to the lawsuit.
The federal agreement prohibits communications between the hospitals about their marketing activities. The hospitals will be required to appoint an antitrust compliance officer, who must, among other things, notify all employees annually that any employee may disclose, without reprisal, information concerning any potential violation of the agreement or antitrust laws. The agreement will expire after five years, federal documents state.
Cabell Huntington Hospital submitted a bid in 2014 to purchase St. Mary's. Last year, West Virginia Attorney General Patrick Morrisey announced an agreement establishing several conditions to ensure the merger complied with the West Virginia's antitrust laws and the Sherman Act. The Federal Trade Commission has also challenged the merger.
St. Mary's has 393 beds and a medical staff of more than 50 physicians, the DOJ's release states. It serves as a teaching hospital for medical students and residents from Marshall University. CAMC has 908 beds and a medical staff of more than 120 employed physicians.
Reach Kate White at kate.white@wvgazettemail.com, 304-348-1724 or follow @KateLWhite on Twitter.