On June 20, 2006, attorneys, supported by the Service Employees International Union (SEIU), filed four separate class action lawsuits in federal district courts in Chicago, San Antonio, Albany and Memphis alleging that some, but not all, hospitals in those cities conspired in violation of the federal antitrust laws to depress registered nurses’ wages by participating in and conducting wage, salary and benefit surveys. Reed v. Advocate Health Care, Docket No. 06C 3337 (N.D. Ill.); Maderazo v. Vanguard Health System, Docket No. SA06CA0535G (W.D. Tex.); Unger v. Albany Medical Center, Docket No. 06cv00765 (N.D. N.Y.); Clarke v. Baptist Memorial Healthcare Corp., Docket No. 06cv02377 (W.D. Tenn.). The attorneys representing the plaintiffs in these four cases have said that they may file similar complaints in other jurisdictions.
Each complaint alleges two separate claims. The first count asserts that the defendant hospitals engaged in a per se violation of Sherman Act Section 1, which prohibits agreements that unreasonably restrain competition, by conspiring to depress nurses’ compensation. The second count alleges a rule of reason claim based upon the hospitals’ participation in wage, salary and benefits surveys for the purpose, and having the effect, of depressing registered nurses’ compensation or limiting competition for nurses based on their compensation. In each case, the class on whose behalf the complaint has been filed is alleged to comprise all registered nurses employed by the defendant hospitals since June 20, 2002. No court has found that any of the defendant hospitals has violated the law based on the conduct alleged in the four complaints.
Not All Hospitals Named in Each Market
The complaints do not name as defendants all of the hospitals or employers of registered nurses in the geographic areas where the defendant hospitals operate. The Chicago complaint names six defendants (excluding affiliates) that collectively operate 23 hospitals in the Chicago area. The complaint filed in San Antonio names three systems as defendants, which collectively operate 11 hospitals and additional facilities in San Antonio. The Albany complaint names five defendants (excluding affiliates) that collectively operate six hospitals in Albany, Amsterdam, Schenectady and Troy, New York. The complaint in Memphis names two systems that collectively operate at least 10 hospitals in Shelby and Tipton Counties in Tennessee and DeSoto County in Mississippi.
Government Traditionally Views Information Exchanges as Pro-Competitive
Although the complaints characterize the defendant hospitals’ participation in wage, salary and benefits surveys as anticompetitive, the federal antitrust enforcement agencies and courts have traditionally viewed the exchange of information regarding wages, salaries or benefits among competitors as pro-competitive. See United States v. United States Gypsum Co., 438 U.S. 422, 441 n.16 (1978); United States v. Citizens & Southern National Bank, 422 U.S. 86, 113 (1975); In re Baby Food Antitrust Litigation, 166 F.3d 112, 125 (3rd Cir. 1999). In the Statement of Department of Justice and Federal Trade Commission Enforcement Policy on Provider Participation in Exchanges of Price and Cost Information published in August of 1996, the Federal Trade Commission and Antitrust Division of the U.S. Department of Justice specifically approve—that is, create an "antitrust safety zone" for—hospital participation in wage, salary and benefits surveys as long as: (i) the survey is managed by a third-party (e.g., a purchaser, government agency, health care consultant, academic institution, or trade association); (ii) the information provided by survey participants is based on data more than three months old; and (iii) at least five providers report data upon which each disseminated statistic is based, no individual provider’s data represents more than 25 percent on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the prices charged or compensation paid by any particular provider.
The federal enforcement agencies and courts may also view participation in wage, salary and benefits surveys that fall outside the antitrust safety zone as pro-competitive. Courts generally have considered four factors when analyzing the antitrust implications of wage, salary and benefits surveys that fall outside of the safety zone: (i) the availability of information (that is, is the information public or non-public); (ii) the age or timeframe of the information (is it historical, current, or prospective); (iii) the manner in which the data is collected and disseminated (that is, is it disseminated in an aggregated fashion or transparently so that each individual survey participant’s response can be identified); and (iv) the number of participants in the information exchange.
Other Challenges and SEIU Setbacks
The nurses compensation litigation is the first major class action filed against hospitals since the charity care litigation initiated against nonprofit hospitals in June 2004. Within months of the filing of the first charity care case, plaintiffs’ attorneys filed nearly identical, or "copycat," complaints in several jurisdictions. At least one copycat nurses compensation complaint has already been filed in Illinois. Plaintiffs in Schultz v. Evanston Northwestern Healthcare, Docket No. 06cv03569 (N.D. Ill., filed June 30, 2006), have alleged claims substantially similar to those in the four earlier-filed cases. The plaintiffs in Schultz assert a claim under the Employee Retirement Income Security Act (ERISA).
SEIU representatives joined plaintiffs’ attorneys in announcing the filing of the four original complaints on June 20. SEIU’s involvement in these actions appears to be a prelude to another attempt to organize nurses in various cities. The SEIU largely failed to achieve success with the charity care litigation and has encountered other recent set-backs, including a recent award of $17.3 million in damages to Sutter Health stemming from the SEIU’s mailing of defamatory statements in postcards to consumers and the failure of the Illinois legislature to pass a bill backed by the SEIU that would have required each nonprofit hospital in Illinois to provide charity care in an amount equal to eight percent (8%) of its operating costs.