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However, in the Morton Plant case a different approach was taken. Rather than require a sale of assets or disapprove the venture altogether, the Department of Justice agreed to permit the hospitals to form a non-profit, tax exempt organization (the “Partnership”) to consolidate and jointly operate certain patient services 1, which will be provided to each of the hospitals at cost, and to provide certain administrative services 2 to the hospitals3. Thus, although the two hospitals cannot consummate the merger, and are required to continue as “separate and competing corporate entities, with separate Boards of Trustees and executive management,” they nevertheless are able to obtain many of the benefits they expected the merger to provide.

In order to maintain competition between the two hospitals, the Agreement strictly limits the type of information that the Partnership may discuss. The Partnership Board cannot discuss

1. services that are not eligible for consolidation through the Partnership,
2. managed care contracting, or
3. the marketing or the pricing of any services offered by the hospitals, whether or not the services are provided by the Partnership.

The logic behind this settlement is clear. The Government will permit the hospitals to combine those aspects of their businesses where there are significant economic benefits from consolidation but little danger of the elimination of competition in north Pinellas County. Thus, they are permitted to combine expensive tertiary and specialized services that face competition from hospitals outside North Pinellas County,

1. outpatient services that face competition from outpatient clinics, and
2. administrative services.

In areas where the hospitals are in direct competition and a merger would eliminate that competition, they are required to maintain their separate identities and operations.

Implications

We believe that the implications of this consent decree are quite substantial for the following reasons:

1. The settlement demonstrates a willingness on the part of the Department of Justice to apply new more flexible remedies to the health care/antitrust field. Prior to the announcement of this settlement, we would have been hesitant to recommend the Morton Plant “solution,” because the Department of Justice had never considered partial integration on these terms to be acceptable for hospitals. Now, while there is no assurance that this will become an industry model, the Morton Plant approach provides, at a minimum, a basis for discussion.

2. The Morton Plant consent decree may not fit the needs of some hospitals exploring affiliations with competing institutions. A hospital should not adopt this particular approach just to please the Department of Justice if the result is not what the hospital wishes to do in the first instance for business reasons, apart from antitrust considerations. Morton Plant should be utilized as a guide only if it makes good business sense.

3. The Morton Plant “model” may as a practical matter create some risk. Because the institutions in the Morton Plant matter maintain their independence to a substantial degree, each must be vigilant in overcoming natural tendencies as “partners” or “joint venturers” to share proprietary, confidential information with each other, particularly in the areas that are specifically proscribed -marketing and pricing. The antitrust laws continue to apply.

4. Although the Morton Plant settlement does not necessarily imply that the other antitrust enforcement agencies, the Federal Trade Commission and the Connecticut Attorney General, would find the terms of such a consent decree acceptable, the Government’s strong support for the consent decree’s pro-competition and pro-consumer impact should aid in discussions with these other agencies.
   

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1. The patient care services that the Partnership will be permitted to provide to the hospitals include:

1. all outpatient services;
2. open-heart surgery, and any service that required the immediate availability of an open-heart surgery unit;
3. robotically assisted prosthetic implantation;
4. special spinal instrumentation procedures involving the insertion of multiple rods in the spinal column;
5. stem cell procedures;
6. advanced linear accelerator equipment and procedures;
7. HDR brachy therapy;
8. stereotactic radio therapy;
9. inpatient diagnostic and therapeutic radiology services, including, among other things, standard x-rays;
10. inpatient laboratory services;
11. neonatal level III services;
12. inpatient mental health services;
13. home health care and home infusion services;
14. durable medical equipment;
15. rehabilitative services, skilled nursing, retirement facilities, and long-term care.

2. The administrative services the Partnership will be permitted to provide to the hospitals include:

1. human resources (except management positions at the hospital level with responsibility for management, marketing, planning, pricing or managed care contracting);
2. medical staff organization and development;
3. information services;
4. telephone and other communication services;
5. accounting, billing and collection;
6. housekeeping and laundry;
7. medical records;
8. material management and plant maintenance;
9. support services for charitable foundations; and
10. all miscellaneous services not related to patient care and not exceeding $250,000 per year.

3. In addition to providing the hospitals with the defined patient care and administrative services, the Partnership can also provide other services to the hospitals (such as pediatrics or neonatal level II services) if the Government does not object within 120 days of receiving notice of the Partnership’s intent to provide such services. The Partnership is also permitted to provide to the hospitals any new services not currently provided by either hospital on ninety-day notice to the Government so long as the service is tertiary or higher and requires physician subspecialists, specialized support staff, and “expensive equipment.” The Partnership is permitted to incur debt, and Morton is permitted to lend to Mease up to $21 million for a planned expansion of Mease.