¶ … government's anti-trust regulations in the case of PeaceHealth, a non-profit health system that operates several hospitals in the Pacific Northwest. PeaceHealth, based in Bellevue, has steadily acquired several rural hospitals in Washington, Oregon and Alaska. Because of its broad network, PeaceHealth has become the object of government anti-trust legislation.
In 2002, the Oregon-based McKenzie-Willamette Hospital filed an anti-trust lawsuit against PeaceHealth. McKenzie-Willamette claimed that Peacehealth gave regional insurers deep discounts and different rates for the same services. This practice involved healthcare insurance companies like Providence Health Care Plan and Regence Blue Cross Blue Shield. According to the McKenzie-Willamette, Peacehealth cut its rates for Regence, in return for the removal of McKenzie-Willamette from Regence's preferred provider list. Similarly, Peacehealth's discounted rates for HMO services resulted in the removal of McKenzie-Willamette from Providence's list of preferred healthcare providers (Harwood 2004).
In the anti-trust lawsuit, McKenzie-Willamette charged that its patient visits declined as a result of PeaceHealth's actions. Additionally, McKenzie-Willamette produced documents showing that PeaceHealth threatened to raise Blue Cross Blue Shield's PPP rate by 14%, if McKenzie-Willamette was admitted to the insurance company's plan (Harwood 2004). Furthermore, PeaceHealth was charged with unfair pricing practices, since the PeaceHealth-owned Sacred Heart Hospital provided tertiary and neonatal services to Regence policy holders at below-market rates. Practices such as these paved the way for PeaceHealth to steadily build a monopoly in the Pacific Northwest region.
The case was brought to trial in October 2003, and by October 31, a Portland-based jury found PeaceHealth guilty of anti-competitive price discrimination. The jury agreed that PeaceHealth's actions constituted anti-competitive price discrimination, interfering with McKenzie-Willamette's business. The jury further found that PeaceHealth was attempting to monopolize the local healthcare market. PeaceHealth was ordered to pay a total of $25.4 million in compensatory and punitive damages (Harwood 2004).
Most high-profile anti-trust cases are now filed in relation to information technology. The PeaceHealth case, however, presents a throwback to original anti-trust cases such as the case filed against Rockefeller's Standard Oil Company. In fact, the PeaceHealth case bears many striking resemblances to the way Standard Oil was judged to be in violation of the Sherman Antitrust Act.
Like the Standard Oil case, PeaceHealth maintained that its discount practices constituted legitimate business decisions. According to PeaceHealth lawyers, offering insurance companies reduced charges in exchange for exclusive contracts did not make the company a monopoly. These practices were only aimed at making PeaceHealth competitive in the health care market.
The verdict shows, however, that PeaceHealth engaged in anti-competitive pricing and that the healthcare company unlawfully interfered with McKenzie-Willamette's business. Furthermore, the verdict shows that PeaceHealth's practices constituted an attempt to use the exclusive dealings to monopolize the healthcare market in the region.
Although the special verdict did not find PeaceHealth guilty of striving to monopolize the market-wide competition, the case still touched on important aspects of anti-trust activities. However, the jury did rule that PeaceHealth's discounts constituted an attempt to monopolize hospital care in the Oregon area. PeaceHealth was also found guilty of attempting to harm free market competition and also attempted to interfere with the business practices of its competitors.
Government anti-trust actions are aimed at protecting competition by breaking up monopolies. However, public choice economists such as Richard B. McKenzie have observed that the changing nature of the markets today have to deal with intensified competition, technological improvements and globalization. This makes it more difficult for anti-trust enforcers to truly gauge what constitutes unfair business practices. In fact, almost all anti-trust lawsuits are filed not by consumers who have been gouged by unfair pricing. Rather, like McKenzie-Willamette, such cases are often filed by competitors who are losing their market share. The fact that PeaceHealth is
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