`
`IN THE UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF OHIO
`WESTERN DIVISION
`
` CASE NO.
`
`Judge
`
`COMPLAINT WITH JURY TRIAL
`DEMANDED
`
`ST. LUKE’S HOSPITAL, d/b/a
`MCLAREN ST. LUKE’S
`c/o Martin Morrissey
`5901 Monclova Road
`Maumee, OH 43537
`
`And
`
`WELLCARE PHYSICIANS GROUP, LLC
`c/o Jennifer Montgomery
`5901 Monclova Road
`Maumee, OH 43537
`
`Plaintiffs,
`
`vs.
`
`PROMEDICA HEALTH SYSTEM, INC.
`c/o CT Corporation System
`4400 Easton Commons Way, Ste. 125
`Columbus, OH 43219
`
`and
`
`PROMEDICA INSURANCE
`CORPORATION
`c/o CT Corporation System
`4400 Easton Commons Way, Ste. 125
`Columbus, OH 43219
`
`and
`
`PARAMOUNT CARE, INC.
`c/o CT Corporation System
`4400 Easton Commons Way, Ste. 125
`Columbus, OH 43219
`
`and
`
`PARAMOUNT CARE OF MICHIGAN,
`INC.
`c/o The Corporation Company
`
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`40600 Ann Arbor Rd, E. Ste 201
`Plymouth, MI 48170
`
`and
`
`PARAMOUNT INSURANCE COMPANY
`c/o CT Corporation System
`4400 Easton Commons Way, Ste. 125
`Columbus, OH 43219
`
`and
`
`PARAMOUNT PREFERRED OPTIONS,
`INC.
`c/o CT Corporation System
`4400 Easton Commons Way, Ste. 125
`Columbus, OH 43219
`
`Defendants.
`
`COMPLAINT
`
`INTRODUCTION
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`1.
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`This Complaint is being filed to seek preliminary and permanent injunctive relief
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`and damages in response to immediately impending actions by ProMedica Health System, Inc.
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`(“ProMedica”) which threaten to seriously harm St. Luke’s Hospital and its physicians and
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`patients. ProMedica’s actions will further cement and enhance ProMedica’s dominant market
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`position and will suppress efforts at greater competition by St. Luke’s.
`
`2.
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`McLaren Health Care Corporation, a multi-hospital system in Michigan, has
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`recently acquired St. Luke’s, and agreed to revitalize it with a $100 million investment, as well as
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`the assumption of substantial debt. McLaren’s commitment will provide vital support to allow St.
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`Luke’s to recover from the serious financial wounds inflicted on it by the unfair divestiture
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`agreement imposed on St. Luke’s by ProMedica, after ProMedica’s acquisition of St. Luke’s was
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`reversed by the Federal Trade Commission (“FTC”). McLaren’s efforts will also include additional
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`critical assistance which will allow St. Luke’s to operate successfully and offer a broader range of
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`services to the community. These new services would include substantial new cancer care services
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`offered by the Karmanos Cancer Center, a subsidiary of McLaren which provides nationally
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`recognized cancer services, including a wide variety of services not now available in Lucas
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`County. These efforts will make St. Luke’s a more significant competitor to ProMedica, the
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`dominant health care system in Lucas County.
`
`3.
`
`In response, ProMedica has caused its health insurance subsidiaries (“Paramount”)
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`to provide notice of termination of their commercial insurance and Medicare Advantage contracts
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`with St. Luke’s and its physicians, effective January 1, 2021. Notice of termination was given the
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`day after the McLaren acquisition was complete. In fact, senior ProMedica executives admitted
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`that this action was taken in response to McLaren’s acquisition and in response to the prospect of
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`greater competition from McLaren St. Luke’s. On the same date, ProMedica terminated the
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`contracts of its Michigan hospitals with McLaren Health Plan.
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`4.
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`ProMedica also caused its subsidiaries to terminate eight different service and
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`related contracts with St. Luke’s after the McLaren transaction was announced. ProMedica also
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`applied pressure to its physicians to cease practicing at St. Luke’s.
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`5.
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`All these actions will harm (and some already have harmed) St. Luke’s and health
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`care competition in numerous relevant markets in Lucas County. In particular, termination of the
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`Paramount contracts would very seriously and irreparably injure St. Luke’s, would deprive large
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`numbers of patients of their preferred health care providers, and would suppress additional
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`competition from St. Luke’s which the McLaren relationship promises to create. These actions are
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`completely anticompetitive, unjustified, and contrary to the legitimate business interest of
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`Paramount, since it has been highly profitable for Paramount to include St. Luke’s in its network,
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`and Paramount has done so since 2010. Similarly, the physician relationships that ProMedica has
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`terminated have been highly beneficial to ProMedica, and have existed since 2018. ProMedica and
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`Paramount’s actions make sense only as an effort to harm St. Luke’s and maintain ProMedica’s
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`dominance.
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`6.
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`These actions triggered by the McLaren transaction are only the latest in an ongoing
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`campaign by ProMedica to prevent or suppress competition from St. Luke’s and its other
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`competitors and to thereby maintain and enhance ProMedica’s monopoly power. ProMedica’s
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`actions began in 2007 and 2008, when it demanded that certain major health plans not include St.
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`Luke’s in their networks. ProMedica’s anticompetitive actions continued with an effort to acquire
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`St. Luke’s, even though it should have been apparent to ProMedica that such an acquisition clearly
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`violated federal antitrust laws. ProMedica then removed many of St. Luke’s functions and services
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`while the FTC’s antitrust challenge was proceeding. ProMedica continued to take action to harm
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`St. Luke’s throughout the “divestiture” process ordered by the FTC.
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`7.
`
`ProMedica’s efforts to harm St. Luke’s and diminish its competitiveness also
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`resulted in the imposition of extremely harsh terms as part of the divestiture, which left St. Luke’s
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`saddled with enormous debt and tremendous obstacles to operating profitably after the divestiture.
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`8.
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`During the same period, ProMedica has taken extraordinary steps to neutralize any
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`competition from University of Toledo Medical Center (“UTMC”). ProMedica agreed to pay
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`University of Toledo hundreds of millions of dollars in order to shift virtually the entire faculty of
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`the University of Toledo Medical School from UTMC to ProMedica, thereby depriving UTMC of
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`its status as an academic medical center and conferring that status on ProMedica Toledo Hospital.
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`9.
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`All these actions have been taken for one reason and one reason only, and that is to
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`harm competition and entrench ProMedica’s dominance. They are clear violations of the antitrust
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`laws. In particular, unless the attempted termination of St. Luke’s by Paramount is preliminarily
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`and permanently enjoined, ProMedica’s efforts will be successful, and St. Luke’s, its patients and
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`health care in Lucas County will be irreparably harmed.
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`PARTIES
`
`10.
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`Plaintiff St. Luke’s Hospital, d/b/a “McLaren St. Luke’s” is a domestic nonprofit
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`corporation organized under the laws of Ohio. Its principal office is located in the City of Maumee
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`Ohio, County of Lucas, and State of Ohio. The sole member of St. Luke’s Hospital is McLaren
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`Health Care Corporation.
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`11.
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`Plaintiff WellCare Physicians Group, LLC (“WellCare”), is a domestic limited
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`liability company organized under the laws of Ohio. WellCare employs physicians and other
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`medical practitioners in a variety of specialties. Its principal office is located in the City of Maumee
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`Ohio, County of Lucas, and State of Ohio. The sole member of WellCare is St. Luke’s.
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`12.
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`Defendant ProMedica Health System, Inc. (“ProMedica”) is a domestic nonprofit
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`corporation organized under the laws of Ohio. Its principal office location is located in Toledo,
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`Lucas County, Ohio. ProMedica offers medical, surgical, psychiatric, rehabilitative, skilled
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`nursing, home health, and hospice services across 28 states. The system includes at least 12
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`hospitals, 4 ambulatory surgery centers, and more than 400 post-acute facilities. The system also
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`includes a large employed physician group and insurance entities, as described below.
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`13.
`
`Defendant ProMedica Insurance Corporation is a domestic nonprofit corporation
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`organized under the laws of Ohio. The principal office location of ProMedica Insurance
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`Corporation is located in Toledo, Lucas County, Ohio. ProMedica is the sole shareholder of
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`ProMedica Insurance Corporation. ProMedica Insurance Corporation and its subsidiaries currently
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`offer various insurance products in Ohio and Michigan, including commercial insurance,
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`Medicaid, Medicare, and managed care workers compensation insurance.
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`14.
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`Defendant Paramount Care, Inc. (“Paramount”) is a domestic nonprofit corporation
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`organized under the laws of Ohio. The principal office of Paramount Care, Inc. is located in
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`Maumee, Lucas County, Ohio. ProMedica Insurance Corporation is the sole shareholder of
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`Paramount Care, Inc.
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`15.
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`Paramount Care of Michigan, Inc. (“Paramount of Michigan”) is a nonprofit
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`corporation organized under the laws of Michigan. The principal office of Paramount Care of
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`Michigan, Inc. is located in Dundee, Monroe County, Michigan. ProMedica Insurance Corporation
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`is the sole shareholder of Paramount Care of Michigan, Inc.
`
`16.
`
`Paramount Insurance Company (“Paramount Insurance Company”) is a for profit
`
`corporation organized under the laws of Ohio. The principal office of Paramount Insurance
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`Company is located in Maumee, Lucas County, Ohio. ProMedica Insurance Corporation is the
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`sole shareholder of Paramount Insurance Company.
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`17.
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`Paramount Preferred Options, Inc. (“Paramount Preferred Options”) is a for profit
`
`corporation organized under the laws of Ohio. The principal office of Paramount Preferred
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`Options, Inc. is located in Maumee, Lucas County, Ohio. ProMedica Insurance Corporation is the
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`sole shareholder of Paramount Preferred Options, Inc. ProMedica Insurance Corporation and the
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`various ProMedica entities are referred herein collectively as “Paramount.”
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`JURISDICTION AND VENUE
`
`18.
`
`This Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and
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`1337(a), Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26 and Sections 1 and 2 of the
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`Sherman Act, 15 U.S.C. §§ 1 and 2.
`
`19.
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`Defendants transact business in the Northern District of Ohio and are subject to
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`personal jurisdiction therein. The actions complained of herein took place in this district. Venue is
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`proper in this district pursuant to 15 U.S.C. §§ 15, 22 and 26, and 28 U.S.C. § 1391.
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`TRADE AND COMMERCE
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`20.
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`Defendants are engaged in interstate commerce and their activities substantially
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`affect interstate commerce. Hundreds of millions of dollars of ProMedica’s revenues come from
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`sources located outside of Ohio, including payments from the federal government through such
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`programs as Medicare, and payments from out of state commercial payors such as Aetna, Cigna
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`and United. Paramount receives millions of dollars of payments in interstate commerce from
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`Medicare and from the federal government to subsidize payments for Paramount members on the
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`health care exchanges. Paramount also receives millions of dollars in payments of premiums from
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`employers outside of Ohio who have Paramount members inside Ohio. ProMedica owns and
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`operates medical facilities and an insurance company, Defendant Paramount of Michigan, in
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`Michigan. ProMedica treats a substantial number of patients from other states, including, in
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`particular, Michigan. The Defendants expend millions of dollars on the purchase of supplies in
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`interstate commerce.
`
`21.
`
`St. Luke’s also earns millions of dollars (and WellCare earns at least hundreds of
`
`thousands of dollars) of revenues in interstate commerce. These include at least hundreds of
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`thousands of dollars of payments in interstate commerce relating to Paramount members outside
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`of Ohio, treating patients from outside Ohio, and treating patients whose employers are based
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`outside of Ohio. St. Luke’s and WellCare obtain millions of dollars in payments from national
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`insurers, such as Aetna and United, as well as Medicare. This is also true in particular for the
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`obstetrics, outpatient CT surgery and ENT surgery services provided by St. Luke’s and which were
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`affected by ProMedica’s anticompetitive conduct. St. Luke’s also purchases millions of dollars in
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`goods (and WellCare purchases at least hundreds of thousands of dollars and goods) across state
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`lines.
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`22.
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`For these reasons, the threatened increase in volume and market power of
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`ProMedica, the shifting of Paramount members from St. Luke’s and the weakening of St. Luke’s
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`described herein will substantially affect the parties’ revenues in interstate commerce. Such actions
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`will also substantially affect the flow of patients across state lines and purchase of supplies in
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`interstate commerce, substantially increasing ProMedica’s volume of patients and interstate
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`purchases and decreasing the volumes of St. Luke’s Hospital and WellCare Physicians’ patients
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`and interstate purchases. The increase in ProMedica’s prices that will result from these actions will
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`also substantially impact patients and health plans purchasing ProMedica’s services, or previously
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`purchasing St. Luke’s services, in interstate commerce.
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`23. With the exceptions of these activities in interstate commerce, ProMedica,
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`Paramount, St. Luke’s and WellCare all engage in substantial activities (involving hundreds of
`
`millions of dollars) in intrastate commerce in Ohio. The ProMedica facilities, St. Luke’s and
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`WellCare all provide their services primarily to patients in Ohio. These activities involve hundreds
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`of millions of dollars of services for each of these parties. Paramount sells insurance primarily to
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`employers and members in Ohio. All these entities employ significant numbers of individuals in
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`Ohio. As a result, the anticompetitive actions challenged herein will also have (and have had) a
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`substantial impact on intrastate commerce in Ohio, because they will substantially affect the
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`revenues and purchases of each of the parties hereto.
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`MONOPOLY POWER
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`24.
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`ProMedica has monopoly power in each of the relevant markets. ProMedica has a
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`share of at least 45%-50% in the relevant general acute care hospital markets, as described below.
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`It has a 70% share in the relevant inpatient OB services markets. It has greater than a 50% share
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`in the relevant cardiothoracic surgery, overall outpatient surgery and ENT outpatient surgery
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`markets. It has a 40%-50% share in the relevant emergency department and imaging markets.
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`25.
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`The evidence of ProMedica’s market power is set forth in great detail by the
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`findings in the rulings relating to ProMedica’s acquisition of St. Luke’s. This includes the rulings
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`by the Federal Trade Commission, In the Matter of ProMedica Health System, Inc., 2012-1 Trade
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`Cases P 77840 (F.T.C.) (2012), 2012 WL 1155392 (“FTC Commission Decision”), its
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`Administrative Law Judge, In the Matter of ProMedica Health System, Inc., 152 F.T.C. 708
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`(2011), 2011 WL 11798464 (“ALJ Decision”), Judge Katz of this Court, F.T.C. v. ProMedica
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`Health System, Inc., No. 3:11 CV 47, 2011 WL 1219281 (N.D. Ohio Mar. 29, 2011) (“Judge Katz
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`Decision”) and the Sixth Circuit’s opinion affirming the Federal Trade Commission’s opinion,
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`ProMedica Health System, Inc. v. F.T.C., 749 F.3d 559 (6th Cir. 2014) (“Sixth Cir. Decision”).
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`While all those decisions were based on events in the 2010 period, ProMedica’s market position
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`has become significantly stronger since that time. ProMedica has added new facilities since the
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`time period addressed by these decisions, including its ProMedica Wildwood Orthopedic and
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`Spine Hospital and its Parkway Surgery Center. It has also, as described more fully below,
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`effectively acquired the greater part of the medical staff of University of Toledo Medical Center,
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`and severely weakened that competitor. ProMedica’s actions described below have also weakened
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`competition from St. Luke’s. Both, St. Luke’s and UTMC have lost at least two market share
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`points since 2015, and ProMedica has gained market share commensurately. For all these reasons,
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`ProMedica is even more dominant today than it was in 2010 and 2011.
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`26.
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`The evidence from these decisions shows that ProMedica is a “must-have” system
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`for health plans seeking to serve companies with employees in Lucas County, because health plans
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`cannot offer a commercially viable provider network to those companies without including
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`ProMedica. The Federal Trade Commission found that “the record makes clear that a network
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`which does not include a hospital provider that services half the county’s patients in one relevant
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`market, and more than 70% of the county’s patients in another relevant market, would be
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`unattractive to a huge swath of potential members.” Sixth Cir. Decision at 570. Under the
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`prevailing two stage model of health care competition, as described below and in the Sixth
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`Circuit’s decision, if a hospital is needed by health care plans in order for them to offer a provider
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`network which will allow them to attract employers and individuals to subscribe to their plans,
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`then that hospital is able to demand higher prices and thereby possesses monopoly power.
`
`27.
`
`The evidence of ProMedica’s market dominance is overwhelming. Judge Katz
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`noted in his opinion that “ProMedica acknowledged its market dominance in the Lucas County
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`market through ordinary course documents,” Judge Katz Decision *20, citing five different
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`ProMedica documents. Judge Katz also noted that “ProMedica’s pre-Acquisition [of St. Luke’s]
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`dominance was evident in its ability to successfully negotiate St. Luke’s exclusion from [a
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`managed care] network for 16 months.” Judge Katz Decision at *20. Judge Katz also noted that
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`“[l]ocal employers and physicians recognize that ProMedica is the dominant healthcare provider
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`in Lucas County.” Judge Katz Decision at *27.
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`28.
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`The Federal Trade Commission reached the same conclusion. In the Commission’s
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`opinion concerning ProMedica’s acquisition of St. Luke’s, it noted that “ProMedica regards itself
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`as the dominant hospital system in Lucas County, and that assessment is shared by others.” FTC
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`Commission Decision at *8. The Administrative Law Judge in the FTC proceeding noted that a
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`“Standard & Poor’s credit presentation stated: ‘ProMedica Health System has market dominance
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`in the Toledo MSA.’” ALJ Decision at *60. The Administrative Law Judge noted that “ProMedica
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`listed its ‘[d]ominant market share’ as a strength” in an internal analysis. ALJ Decision at *60.
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`29.
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`This dominance exists, in part, because ProMedica does not have any rivals who
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`are capable of restraining it. Judge Katz noted that “Mercy did not provide a sufficiently strong
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`competitive constraint to prevent ProMedica from exercising its market power before the
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`Acquisition.” Judge Katz Decision at *24. Judge Katz also noted that “[p]rior to the Acquisition,
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`Mercy’s presence in the market did not limit ProMedica’s ability to charge the highest rates, by
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`far, in Lucas County.” Judge Katz Decision at *24. Judge Katz concluded that “Mercy has not
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`been a sufficiently strong competitive constraint before the Acquisition against ProMedica’s
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`exercise of market power.” Judge Katz Decision at *23.
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`30.
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`The leading Mercy hospital, St. Vincent, offers outstanding services, but because
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`of its location in the central city of Toledo and its large volume of poor and indigent patients, it is
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`not as attractive a location for more affluent commercially insured patients as is the ProMedica-
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`owned Toledo Hospital. This limits Mercy’s ability to compete with ProMedica.
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`31.
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`The other competitor in Lucas County, UTMC, has recently been substantially
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`weakened by the actions of ProMedica, including the payment of hundreds of millions of dollars
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`in order to secure the movement of UTMC’s residents and most of its medical staff to ProMedica’s
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`Toledo Hospital. As a result, UTMC is not a significant competitive constraint on ProMedica’s
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`ability to raise prices.
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`32.
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`As also described below, St. Luke’s has already been significantly weakened by
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`ProMedica’s actions, and is operating currently with huge financial losses. With the acquisition by
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`McLaren, St. Luke’s is positioned to become a more significant competitive constraint on
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`ProMedica, but ProMedica’s actions as described in this Complaint are being undertaken in order
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`to prevent that from happening.
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`33.
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`Since 2010, the time period analyzed by the FTC and the courts, ProMedica’s
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`market share has increased while the market shares of St. Luke’s and UTMC have decreased.
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`34.
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`ProMedica’s monopoly power is also reflected in its ability to charge unusually
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`high prices. Judge Katz also noted that ProMedica, prior to its acquisition of St. Luke’s, had “the
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`highest prices in Lucas County.” Judge Katz Decision at *20. The Federal Trade Commission
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`concluded that “ProMedica, as the dominant hospital system in Lucas County, had significant
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`bargaining leverage which allowed it to command among the highest rates, not only in Lucas
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`County, but also the entire state of Ohio.” FTC Commission Decision at *50. These high prices do
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`not reflect a higher quality of services. The Federal Trade Commission concluded that while
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`ProMedica was “among the most expensive hospital systems in Ohio . . . at the same time,
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`however, some of its quality scores are ‘subpar.’” FTC Commission Decision at *24. Judge Katz
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`concluded that “ProMedica, the system with the highest market shares, has the highest prices.”
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`Judge Katz Decision at *20. Judge Katz’s opinion, the opinion of the FTC Administrative Law
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`Judge and the opinion of the Federal Trade Commission all concluded that “in this market, the
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`higher a provider’s market share, the higher its prices . . . ProMedica’s prices – already among the
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`highest in the state – are explained by bargaining power.” Sixth Cir. Decision at 570. (Emphasis
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`in original.)
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`PROMEDICA’S ANTICOMPETITIVE ACTIONS
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`ProMedica’s Actions Taken to Harm St. Luke’s Prior to Its Effort to Acquire St. Luke’s
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`35.
`
`ProMedica has sought to harm St. Luke’s and suppress its competition since at least
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`2008. The FTC’s Administrative Law Judge noted that a St. Luke’s competitor assessment prior
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`to the acquisition of St. Luke’s by ProMedica observed that ProMedica “will continue to starve
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`SLH through exclusive managed care contracts and owned physicians. They will do this until we
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`sign up with them or are weakened.” Judge Katz Decision at *15. The Administrative Law Judge
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`also referred to another St. Luke’s document which noted that ProMedica is “continuing an
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`aggressive strategy to take over St. Luke’s or put us out of business.” Judge Katz Decision at *15.
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`The Administrative Law Judge found that St. Luke’s was concerned that if it partnered with other
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`facilities it would receive a “scorched earth response” from ProMedica. Lee Hammerling,
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`ProMedica’s Chief Medical Officer and a Vice President, informed St. Luke’s leadership that
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`“we’ll take you apart piece by piece” if St. Luke’s didn’t agree to a ProMedica acquisition. Dr.
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`Hammerling’s comment referred to hiring St. Luke’s physicians and pulling ProMedica physicians
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`from the St. Luke’s campus.
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`ProMedica’s Efforts to Harm St. Luke’s in Connection with the Divestiture of St. Luke’s
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`36.
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`ProMedica’s efforts to suppress competition from St. Luke’s and to maintain and
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`increase its monopoly power continued with its efforts to acquire St. Luke’s. As Judge Katz found,
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`“ProMedica and St. Luke’s entered into their transaction with full knowledge of the applicable
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`antitrust laws and a recognition that the Acquisition raised serious antitrust issues.” Judge Katz
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`Decision at *50. Nevertheless, ProMedica went forward with the transaction.
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`37.
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`During the period that the merger case was litigated with the FTC, ProMedica took
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`a number of steps which seriously disadvantaged St. Luke’s if it was to be divested. ProMedica
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`rapidly moved to integrate St. Luke’s operations with ProMedica as soon as possible, even though
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`it knew that these efforts might have to be unwound in the future to the detriment of St. Luke’s.
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`The acquisition was completed in May of 2010 and the FTC began investigating the transaction
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`very shortly thereafter. Nevertheless, ProMedica moved to rapidly integrate the “back office”
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`operations at St. Luke’s, including most of the functions necessary to the running of a hospital,
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`including billing, purchasing, supply chain, IT, finance, and marketing. The “integration” of these
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`functions involved removing these functions from St. Luke’s, and often transferring St. Luke’s
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`employees in these areas to ProMedica. St. Luke’s lost almost 200 employees through this process.
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`St. Luke’s ultimately had to restore those functions, and replace these employees “from scratch”
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`after divestiture.
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`38.
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`ProMedica also, contrary to its “hold separate” agreement with the FTC, removed
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`a number of clinical and clinically related services from St. Luke’s. This included a number of
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`laboratory functions (including microbiology and histology), and the replacement of a “biplane”
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`special procedures x-ray unit with a “single plane” unit. The single plane unit is unable to perform
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`many high end procedures which are critical to treating stroke victims. This limited the ability of
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`St. Luke’s to treat stroke victims, and this equipment had to be replaced after the divestiture.
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`39.
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`ProMedica also determined that a newly established “step down” intensive care
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`unit, which required less intense staffing than the overcrowded full intensive care unit would not
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`be built to include in-wall “medical gases.” This is a critical problem, because it requires that
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`oxygen be supplied in an awkward way through tanks brought into the room, and also makes it
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`more difficult to utilize ventilators and perform other procedures that require compressed air. All
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`these steps had the effect of reducing St. Luke’s ability to treat more seriously ill patients and
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`making it less competitive with ProMedica, contrary to the hold separate agreement. All these
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`actions weakened St. Luke’s competitiveness after the divestiture was complete.
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`40.
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`ProMedica also took a number of steps to weaken medical education at St. Luke’s.
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`In connection with ProMedica’s affiliation with University of Toledo Medical School, it ended the
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`emergency physician residency and radiologist residency programs at St. Luke’s. ProMedica also
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`allowed St. Luke’s family medicine residency program to lapse during a dispute with the U.S.
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`Center for Medicare and Medicaid Services, even though the dispute was ultimately resolved
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`successfully by St. Luke’s two years later. In the interim, St. Luke’s had no family medicine
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`residents. Residency programs are very important to a hospital, because they provide additional
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`staff, and also train physicians who may stay at the hospital after their residency is complete,
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`providing long term growth in the hospital’s medical staff. ProMedica’s actions harmed St. Luke’s
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`ability to maintain and grow its medical staff. During this period, the quality of St. Luke’s services
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`declined, though they improved again after divestiture.
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`41.
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`After the Federal Trade Commission’s decision ordering divestiture of St. Luke’s,
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`it was necessarily apparent to ProMedica that divestiture would need to occur, since the likelihood
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`of success on appeal given the deferential legal standard and the substantial basis for the Federal
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`Trade Commission’s opinion, was remote. Nevertheless, ProMedica determined to pursue the
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`appeal until the end. In the interim period, it made no efforts to set the stage for St. Luke’s to begin
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`to operate again on its own. Moreover, it failed to sufficiently invest in St. Luke’s to adequately
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`maintain its operations. For example, it never made any effort to market St. Luke’s in the
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`community. Indeed, patients who called into St. Luke’s would be referred to ProMedica’s call
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`center, which generally referred them to other hospitals and physicians in the ProMedica system
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`rather than St. Luke’s or Wellcare, even if the ProMedica physicians’ offices were less convenient
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`to the patient. As a result of these actions, St. Luke’s market position, its operations and its finances
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`deteriorated.
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`42.
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`ProMedica also recruited a number of physicians away from Wellcare, inducing
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`them to work at ProMedica, including two of St. Luke’s most productive physicians as well as two
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`very busy nurse practitioners. At the same time, ProMedica made no efforts to recruit new doctors
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`into Wellcare, even though every hospital’s success depended on its medical staff.
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`43.
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`ProMedica thus used its (temporary) ownership position to severely weaken St.
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`Luke’s while it was apparent that divestiture of St. Luke’s was very likely. ProMedica’s actions
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`made no sense unless it expected St. Luke’s to be divested and intended to use the period before
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`divestiture to weaken St. Luke’s.
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`44.
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`After ProMedica lost the case to the FTC, it began the divestiture process. During
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`the divestiture period, ProMedica’s neglect of St. Luke’s operations continued, even though it still
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`owned the hospital until the divestiture process was complete and even though the FTC’s order
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`required that ProMedica “take such actions as are necessary to maintain the viability, marketability
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`and competitiveness” (FTC Commission Decision at *56) of St. Luke’s, and to “[u]se best efforts
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`to maintain and increase revenues” (FTC Commission Decision at *57) at St. Luke’s.
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`45.
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`ProMedica’s neglect is illustrated by its decision to scrap the planned installation
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`of a new telephone system at St. Luke’s after ProMedica’s chief technology officer outlined this
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`as an “urgent need,” with an estimated cost of $3.85 million. In fact, the first phase of the hardware
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`replacement was actually shipped to St. Luke’s, but then, at ProMedica’s direction, was returned
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`with a note saying “this decision is being prolonged due to divestiture of SLH.” ProMedica also
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`continued to fail to recruit new physicians for Wellcare. St. Luke’s requested that its employees
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`receive retention bonuses to encourage them not to leave St. Luke’s during this period of
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`uncertainty, but (with one exception) ProMedica refused to do so. ProMedica also refused to allow
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`its executives to go to work at St. Luke’s, relying on noncompete provisions in their agreements.
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`46.
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`After initial discussions with St. Luke’s about a divestiture that would allow St.
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`Luke’s to begin to operate on its own, ProMedica shifted course and attempted to sell St. Luke’s
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`to a third party operator of health care systems, Capella Health. ProMedica undertook this
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`approach because it believed that Capella Health would operate St. Luke’s on a “shoe string,” and
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`would either fail in its efforts to operate St. Luke’s or would maintain it as a marginal hospital that
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`would not provide any competitive challenge to ProMedica.
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`47.
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`Capella Health has operated hospital systems around the United States. But at the
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`time that ProMedica engaged these discussions with Capella Health, at leas