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Saturday, July 25, 2009

Carilion target of FTC antitrust complaint

The government says Carilion's purchase of two outpatient centers has reduced competition for health care services.

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The Federal Trade Commission wants to force Carilion Clinic to sell two outpatient centers it bought last year for $20 million, saying the nonprofit's ownership will drive up health care costs and harm the quality of care.

In a complaint issued by the FTC and made public Friday, the government is challenging the Aug. 28 purchase of the Center for Advanced Imaging and the Center for Surgical Excellence.

The commission voted unanimously to file the complaint.

Both outpatient centers had been owned by Odyssey Imaging LLC and were marketed as low-cost, independent alternatives to Carilion.

"We were the nonhospital place to go," said Martin Hellkamp, president of Odyssey.

The FTC emphasized that the purchase eliminated competition by reducing the number of outpatient imaging and surgical services providers.

"Competition among health care providers can help contain costs and improve quality of care," Bureau of Competition Director Richard Feinstein said in an FTC news release. "The elimination of competition between Carilion and CAI and CSE will result in higher health care costs at a time when such costs already cause serious financial hardship for consumers in the Roanoke area and throughout the country."

According to the complaint, the out-of-pocket costs for a brain scan will likely increase by nearly 900 percent if Carilion is allowed to continue to own and operate the imaging center.

A complaint is filed when the FTC has reason to believe that the law has been or is being violated. The complaint does not equate to a finding that Carilion has violated the law.

A request to interview Carilion CEO Dr. Ed Murphy was answered by spokesman Eric Earnhart via e-mail:

"We are currently reviewing the FTC complaint and preparing our response," the statement said. "We are concerned that the complaint appears to be based on inaccurate information. The Center for Advanced Imaging and Center for Surgical Excellence will continue to operate normally. There have been no changes in the center's prices since their purchase last year, and no changes are planned. We will remain focused on our mission to develop an integrated system that improves patient care and reduces health care costs."

While the Carilion statement says prices will not change, the FTC complaint says Carilion "concedes that it will increase prices post-acquisition" for services at both centers.

The for-profit hospital giant HCA Inc., which owns the rival Lewis-Gale Medical Center in Salem, is the only other Roanoke Valley provider of imaging and surgical services, according to the complaint. The FTC alleges in the complaint that with just the two hospitals competing, HCA "will have little incentive to compete aggressively against Carilion."

"We were just made aware of the FTC report today, so it would be premature for us to make specific comments," Nancy May, HCA spokeswoman for Southwest Virginia, said in a prepared statement. "However, we continue to believe that patients need and deserve to have a choice in health care providers. It raises the bar on quality, encourages innovation and can help control costs."

The complaint comes nearly 11 months after the FTC told Hellkamp and Carilion that the sale was being investigated. The FTC took action two days after the sale. Because the sale price was under $60 million, it was too small to trigger an automatic antitrust review.

Typically, when deals that don't trigger automatic review are investigated, it means someone has brought it to the FTC's attention, said Edmund Kitch, a professor at the University of Virginia School of Law who specializes in antitrust law.

"There is usually a back story in these cases where there is someone who has waved the flag," he said.

A segment of the physician community has opposed Carilion's clinic transformation since shortly after its announcement in 2006. Organized as the Coalition for Responsible Healthcare, the group rallied people who shared its concerns, posted a critical billboard and took signatures on an online petition.

Dr. Frank Cotter, a Roanoke Valley eye surgeon who was among the past members of the coalition, welcomed the FTC's action Friday.

"I just want to thank the FTC so much for coming in and assuring our patients can have an affordable place to get an MRI," Cotter said. "We hope that prices for all health care can be lowered by 900 percent by introducing competition."

Cotter said the physician group is no longer formally meeting after it helped create the Citizens Coalition for Responsible Healthcare this past September.

The purchase of the two centers was announced the same day a scathing Wall Street Journal report claimed Carilion's monopolistic dominance of local health care is driving up prices by eliminating competition. In the days following the article and purchase, hundreds of physicians and others raised complaints about Carilion's dominance in the health care market.

The citizens coalition has done little publicly since rallying a crowd of about 400 people in September. At that meeting, the coalition's leadership vowed to fight Carilion to prevent the nonprofit hospital from continuing to drive up health care costs.

Ken King, the president of the coalition, did not return messages left seeking comment. In the past, King has referred questions about the FTC investigation to the physicians.

Carilion has two weeks to respond to the complaint.

Issuing the complaint is the first step in the administrative trial process. A hearing in the complaint is set for March 23, 2010, according to the FTC news release.

Kitch said the battle could last between five and six years assuming Carilion decides to fight the FTC.

Carilion, the Roanoke Valley's largest employer, has previously prevailed in an antitrust challenge from the federal government. In 1989, the U.S. Department of Justice argued a merger between Carilion and Community Hospital create a monopoly of medical care for the area. Carilion won.

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