Nursing Law Report (Report 4)

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.

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.

At the heart of these lawsuits are hospital wage surveys. 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 and 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.

Courts generally have considered four factors when analyzing the antitrust implications of wage, salary and benefits surveys that fall outside of the safety zone:

• the availability of information (that is, is the information public or non-public). The exchange of private information is considered more problematic, when compared to the sharing of wage information with nursing unions or other public entities could have pro-competitive effects;
• the age or timeframe of the information (is it historical, current, or prospective). Current data has a tendency to generate anticompetitive effects.
• 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). Is it public or private data and how is the information communicated to the other hospitals, in public or private forums; and
• the number of participants in the information exchange. Did the parties meet to discuss the information, if so, there is a greater tendency toward collusion and a greater antitrust risk

The nursing lawsuits build on an early Federal Trade Commission case challenging human resource practices in Utah. In United States v. Utah Society for Healthcare Human Resources Admin., et al. (94C282G, 3/14/94), there was a one-count complaint, alleging a violation of § 1 of the Sherman Act designed to stop defendants -- Utah Society for Healthcare Human Resources Administration ("USHHRA"), a professional association of hospital human resource directors in Utah; and nine named hospitals in the Salt Lake County, Utah, area, all of whose human resource directors belong to USHHRA -- from continuing their conspiracy to exchange non-public prospective and current information about overall budgets, nursing budgets, and entry level wages for registered nurses. The Department alleged that the information exchange had the purpose and effect of stabilizing entry level wages for registered nurses and limited the amount and frequency of increases in both entry level wages for registered nurses and wages paid to registered nurses at all levels of experience. The parties entered into a settlement agreement whereby the defendants were enjoined from engaging in various anticompetitive activities designed to fix the salaries of nurses employed at hospitals throughout the State of Utah. The Final Judgment was entered on September 14, 1994 (1994-2 Trade Cas. (CCH) ¶ 70,795).

Although many legal scholars believe that the standards established in Utah Society of Healthcare Human Resources prevent nurses from effectively winning these suits, Judges in Chicago and Memphis refused to dismiss the claims in Reed v. Advocate Health Care and Clarke v. Baptist Memorial Healthcare Corp, respectively. In the denial of the motion for summary judgment, a federal judge ruled that the University of Chicago Hospitals cannot invoke the nonstatutory labor exemption to escape an antitrust lawsuit brought by Chicago area registered nurses. Reed v. Advocate Health Care et al., (N.D. Ill. 3/28/07). The nonstatutory labor exemption to the antitrust laws generally protects agreements or activities between or among em¬ployers and unions in the collective bargaining process from the antitrust laws. The University of Chicago Hospitals invoked the nonstatutory labor exemption pointing out that all wages, benefits, and conditions of employment for its registered nurses were determined by a series of collective bargaining agreements going back to 1969. Even so, the court concluded that the issue is not the collective bargaining activities or agreements with the nurses’ union. Instead, the issue is whether there were agreements among the defendant hospitals – including nonunion hospitals – that affected the compensation of registered nurses. The court ruled that alleged multiemployer conduct occurring outside the context of any collective bargaining is not entitled to the nonstatutory labor exemption.

In the matter of Memphis hospitals, Clarke v. Baptist Memorial Healthcare Corp, the court affirmed the plaintiff’s right to proceed by denial of the motion for summary judgment. The hospital argued that plaintiffs misleadingly identified the wrong market for their Section 1 analysis – the true market is for registered nurses, not registered nurses employed by hospitals; and argued that the named hospitals do not have the requisite market power in the actual relevant market. Defendants also asserted that the plaintiffs’ complain fell short of the federal court’s pleading requirements. These arguments were dismissed.

In an unrelated nursing antitrust case, the Department of Justice challenged wage setting policies for nurse employers. Two nurses in Arizona brought class action complaints in U.S. District Court against the Arizona Hospital and Healthcare Association and 12 other Arizona hospital corporations, charging that for years they have conspired to lower the wages paid to temporary nurses at hospitals throughout Arizona. The lawsuits charge that the hospital association -- known as AzHHA -- coordinated the conspiracy by administering a registry program, used by many hospitals in Arizona, that was originally designed to improve nursing quality, but subsequently used information collected and its role as agent to standardize benefits and depress nurses wages.

In May 2007, the U.S. Department of Justice and the State of Arizona sued AzHHA for illegally conspiring to set the wages of temporary and traveling nurses. Filed simultaneously with the government’s complaint, the consent decree ended the litigation and prohibited AzHHA from engaging in several aspects of its Registry program. AzHHA is prohibited from:

• setting uniform rates to be paid by hospitals for temporary nursing services;
• imposing uniform payment and cancellation terms for participating agencies;
• sharing competitively sensitive information with participants; and
• engaging in any activity that would encourage or result in boycotting or discriminating against hospitals or agencies that do not participate in its Registry.

The consent decree also outlines aspects of the Registry program that are acceptable. Specifically, AzHHA: (1) is permitted to continue its credentialing and quality assurance activities; and (2) may engage in activities that allow hospitals and participating agencies to individually negotiate and agree on rates and contractual terms.

“Temporary nurses have suffered because of this cartel arrangement,” said David Balto, one of the plaintiff's attorneys. “In a competitive market, nurses would have been paid a fair wage for their services. That did not happen because of the illegal cartel. At a time of a serious nursing shortage, when wages would be expected to rise, nursing does seem to defy the laws of supply and demand: wages have remained flat despite years of shortages.”

All the cases reflect a renewed interest in hospital wage-setting processes and compel the courts to look at the larger issue of long-term nursing shortage as an institutional infrastructure issue. Antitrust cases move slowly, however, we should keep careful watch on this case as it portends a change in how hospitals determine nurse wages.

References

1. Barbara R. Bergmann, Curing the Nursing Shortage – the Role of Compensation (letter to the editor) NEJM (354:1648-1649) April 13, 2006, found at the following website
2. United States v. Arizona Hospital and Healthcare Association and AzHHA Service Corporation, case no. CV07-1030-PHX, final judgement (consent degree) (PDF)
3. Vicki Lovell, Solving the Nursing Shortage Through Higher Wages (Institute for Women’s Policy Research: Washington, D.C.) 2006 (PDF)
4. Arthur Lerner, Esq. Crowell and Moring, Recent Development in the Litigation of Nurse Wages Antitrust Class Action Cases (slide presentation)
5. John M. Skonberg, Kerry E. Notestine and Nitin Sud, Sharing Compensation or Benefit Information Between Competitors May Violate Antitrust Laws, Lorman Employment And Labor Update - November 2006, as found at (Website)
6. Steven Greenhouse, Suit Claims Hospitals Fixed Nurses' Pay, New York Times, June 21, 2006, as found at (New York Times)

PUBLICATIONS

1. Landrigan, CP, Czeisler, CA, Barger, LK, et al. (2007) Effective implementation of work-hour limits and systemic improvements. Joint Commission journal on Quality and Patient Safety;33(suppl 1):19-29. (Website)
2. Carrico, R, Ramírez, J. (2007) A process for analysis of sentinel events due to health care–associated infection. American Journal of Infection Control;35:501-507. (Website)
3. “Medication Use: A Systems Approach to Reducing Errors, Second Edition.” Oakbrook Terrace, IL: Joint Commission Resources; 2007; ISBN: 9781599400976. (Website)
4. Ostrom, CM. (2007) Mistakes hospitals don't want you to see. Seattle Times. October 23, 2007:A1. (Website)