[Federal Register Volume 77, Number 41 (Thursday, March 1, 2012)]
[Notices]
[Pages 12617-12620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-4862]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States et al. v. Blue Cross and Blue Shield of Montana, 
Inc., et al.; Public Comments and Response on Proposed Final Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the comments 
received on the proposed Final Judgment in United States et al. v. Blue 
Cross and Blue Shield of Montana, Inc. et al., Civil Action No. 1:11-
CV-00123-RFC, which were filed in the United States District Court for 
the District of Montana on February 21, 2012, together with the 
response of the United States to the comments.
    Copies of the comments and the response are available for 
inspection at the Department of Justice Antitrust Division, 450 Fifth 
Street NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-2481), 
on the Department of Justice's Web site at http://www.usdoj.gov/atr, 
and at the Office of the Clerk of the United States District Court for 
the District of Montana, 316 N. 26th Street, Billings, MT 59101. Copies 
of any of these materials may be obtained upon request and payment of a 
copying fee.

Patricia A. Brink,
Director of Civil Enforcement.

In the United States District Court for the District of Montana; 
Billings Division

    United States of America and State of Montana, Plaintiffs, v. Blue 
Cross and Blue Shield of Montana, Inc., et al., Defendants.
    Case No. 1:11-cv-00123-RFC.

Response of Plaintiff United States to Public Comment on the Proposed 
Final Judgment

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h) (``APPA'' or ``Tunney Act''), the 
United States hereby responds to the public comment received regarding 
the proposed Final Judgment in this case. The single comment received 
agrees that the proposed Final Judgment will provide an effective and 
appropriate remedy for the antitrust violations alleged in the 
Complaint. The United States will move the Court for entry of the 
proposed Final Judgment after the public comment and this response have 
been published in the Federal Register, pursuant to 15 U.S.C. 16(d).

I. Procedural History

    On November 8, 2011, the United States and the State of Montana 
filed a civil antitrust lawsuit challenging an agreement (the 
``Agreement'') between defendant Blue Cross and Blue Shield of Montana, 
Inc. (``Blue Cross'') and defendants Billings Clinic; Bozeman Deaconess 
Health Services, Inc.; Community Medical Center, Inc.; Northern Montana 
Health Care, Inc.; and St. Peter's Hospital (collectively, the 
``hospital defendants'').
    The hospital defendants are five of the six hospitals that own 
defendant New West Health Services, Inc. (``New West''), a health 
insurer that competes against Blue Cross to provide commercial health 
insurance to Montana consumers. In the Agreement, Blue Cross agreed to 
pay $26.3 million to the hospital defendants in exchange for their 
collectively agreeing to stop purchasing health insurance for their own 
employees from New West and instead buy insurance for their employees 
from Blue Cross exclusively for six years. Blue Cross also agreed to 
provide the hospital defendants with two seats on Blue Cross's board of 
directors as long as the hospitals do not compete with Blue Cross in 
the sale of commercial health insurance.
    The Complaint alleged that the Agreement would likely cause New 
West to exit the markets for commercial health insurance, eliminating 
an important competitor to Blue Cross and ultimately leading to higher 
prices and lower-quality service for consumers. Consequently, the 
Complaint alleged that the Agreement unreasonably restrained trade in 
the sale of commercial health insurance within Montana in the Billings 
Metropolitan Statistical Area (``MSA''), Bozeman Micropolitan 
Statistical Area (``MiSA''), Helena MiSA, and Missoula MSA, in 
violation of Section 1 of the Sherman Act, 15 U.S.C. 1; and that the 
Agreement substantially lessened competition in the sale of commercial 
health insurance in those same areas, and would likely continue to do 
so, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18, and the 
Montana Unfair Trade Practices Act, Mont. Code Ann. Sec.  30-14-205.
    Simultaneously with the filing of the Complaint, the United States 
and the State of Montana filed a proposed Final Judgment and 
Stipulation signed by the plaintiffs and the defendants consenting to 
entry of the proposed Final Judgment after compliance with the 
requirements of the Tunney Act, 15 U.S.C. 16. Pursuant to those 
requirements, the United States also filed its Competitive Impact 
Statement (``CIS'') with the Court on November 8, 2011; published the 
proposed Final Judgment and CIS in the Federal Register on November 18, 
2011, see 76 FR 71355; and had summaries of the terms of the proposed 
Final Judgment and CIS, together with directions for the submission of 
written comments relating to the proposed Final Judgment, published in 
The Washington Post on alternating days from November 17 to November 
29, 2011, and in the Billings Gazette on November 14, 17, 19, 21, 23, 
25, and 28. The sixty-day period for public comment ended on January 
28, 2011. One comment was received, as described below and attached 
hereto.

II. The Investigation and Proposed Resolution

    The proposed Final Judgment is the culmination of an investigation 
by the Antitrust Division of the United States Department of Justice 
(``Department'') of the Agreement among defendants described above. As 
part of its investigation, the Department issued eight Civil 
Investigative Demands and conducted more than 30 interviews of health-
insurance competitors, brokers, customers, and other individuals with 
knowledge of the health-insurance industry in Montana. The Department 
carefully analyzed the information obtained and thoroughly considered 
all of the issues presented.
    The Department found that the Agreement would effectively eliminate 
New West as a viable competitor in the sale of commercial health 
insurance for several reasons. First, news that none of New West's 
owners would buy health insurance for their own employees from New West 
created a perception that New West was exiting the commercial health-
insurance market, likely causing many existing and potential customers 
to stop purchasing (or decline to purchase) insurance from New West. 
Second, the Agreement would have led New West and its hospital owners 
to significantly reduce their support for and efforts to win commercial 
health-insurance customers, further hindering its ability to compete. 
Furthermore, because the hospital defendants agreed to act 
collectively, the Agreement with Blue Cross ensured that New West would 
lose the support of all its owners

[[Page 12618]]

and likely exit the market. The Agreement further deterred the 
hospitals from supporting New West by granting them two positions on 
Blue Cross's board of directors as long as the hospitals do not own or 
belong to a competing insurer.
    By eliminating New West as an effective competitor, the Agreement 
would have significantly increased concentration in the markets for 
commercial health insurance in Montana. In the four relevant areas, 
Blue Cross's share of commercial health insurance ranged from 
approximately 43% to 75% at the time the Agreement was signed, and New 
West's share ranged from 7% to 12%.
    The Agreement also would have eliminated vigorous head-to-head 
competition between Blue Cross and New West. For the past several 
years, New West had been one of only two significant alternatives to 
Blue Cross for commercial health insurance in the relevant areas. Many 
consumers viewed Blue Cross and New West as the two most significant 
insurers in the relevant areas and each other's main competitor. 
Without New West as an effective competitor, Blue Cross would likely 
have increased prices and reduced the quality and service of commercial 
health-insurance plans to employers and individuals in the relevant 
areas.
    After reviewing the investigative materials, the Department 
determined that the defendants' conduct violated Section 1 of the 
Sherman Act, 15 U.S.C. 1, and Section 7 of the Clayton Act, 15 U.S.C. 
18, as alleged in the Complaint. The proposed Final Judgment will 
eliminate the anticompetitive effects identified in the Complaint by 
requiring New West and the hospital defendants to divest New West's 
commercial health-insurance business, including its administrative-
services-only contracts and its fully-insured business, but excluding 
the contracts that cover the hospital defendants' employees and their 
dependents.
    Other provisions of the proposed Final Judgment will enable the 
acquirer of the divested assets to compete promptly and effectively in 
the market for commercial health insurance. Most importantly, Sections 
IV(G)-(I) ensure that the acquirer has a cost-competitive health-care 
provider network. Section IV(G) requires the hospital defendants to 
sign three-year contracts with the acquirer on terms that are 
substantially similar to their existing contractual terms with New 
West. To address health-care provider contracts that are not under the 
hospital defendants' control, Sections IV(H) and IV(I) require New West 
and the hospital defendants--at the acquirer's option--to (1) use their 
best efforts to assign the contracts that are not under their control 
to the acquirer, or (2) lease New West's provider network to the 
acquirer for up to three years, using their best efforts to maintain 
the network, including maintaining contracts with substantially similar 
terms.
    New West and the hospital defendants proposed to sell the 
Divestiture Assets to PacificSource Health Plans, and the United 
States, after consulting with the State of Montana, has approved 
PacificSource as the acquirer. New West and PacificSource have entered 
into a definitive sale agreement and filed the necessary notification 
and request for approval with the Montana Commissioner of Securities 
and Insurance.

III. Standard of Judicial Review

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a sixty-day comment 
period, after which the court shall determine whether entry of the 
proposed Final Judgment ``is in the public interest.'' 15 U.S.C. 
16(e)(1). In making that determination, the court, in accordance with 
the statute as amended in 2004, is required to consider:
    (A) The competitive impact of such judgment, including termination 
of alleged violations, provisions for enforcement and modification, 
duration of relief sought, anticipated effects of alternative remedies 
actually considered, whether its terms are ambiguous, and any other 
competitive considerations bearing upon the adequacy of such judgment 
that the court deems necessary to a determination of whether the 
consent judgment is in the public interest; and
    (B) The impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and individuals 
alleging specific injury from the violations set forth in the complaint 
including consideration of the public benefit, if any, to be derived 
from a determination of the issues at trial.
    15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory 
factors, the court's inquiry is necessarily a limited one as the 
government is entitled to ``broad discretion to settle with the 
defendant within the reaches of the public interest.'' United States v. 
Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); see also United 
States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) 
(assessing public-interest standard under the Tunney Act); United 
States v. InBev N.V./S.A., No. 08-1965 (JR), 2009 U.S. Dist. LEXIS 
84787, at *3 (D.D.C. Aug. 11, 2009) (noting that the court's review of 
a consent judgment is limited and only inquires ``into whether the 
government's determination that the proposed remedies will cure the 
antitrust violations alleged in the complaint was reasonable, and 
whether the mechanisms to enforce the final judgment are clear and 
manageable.'').
    As the United States Court of Appeals for the District of Columbia 
Circuit has held, a court considers under the APPA, among other things, 
the relationship between the remedy secured and the specific 
allegations set forth in the United States' complaint, whether the 
decree is sufficiently clear, whether enforcement mechanisms are 
sufficient, and whether the decree may positively harm third parties. 
See Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the 
relief secured by the decree, a court may not ``engage in an 
unrestricted evaluation of what relief would best serve the public.'' 
United States v. BNS Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing 
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see 
also Microsoft, 56 F.3d at 1460-62; InBev, 2009 U.S. Dist. LEXIS 84787, 
at *3; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 
2001). Courts have held that:

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

    Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\1\ 
In determining whether a proposed settlement is in the public interest, 
a district court ``must accord deference to the government's 
predictions about the efficacy of its remedies, and may not

[[Page 12619]]

require that the remedies perfectly match the alleged violations.'' SBC 
Commc'ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 
(noting the need for courts to be ``deferential to the government's 
predictions as to the effect of the proposed remedies''); United States 
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) 
(noting that the court should grant due respect to the United States' 
``prediction as to the effect of proposed remedies, its perception of 
the market structure, and its views of the nature of the case'').
---------------------------------------------------------------------------

    \1\ Cf BNS, 858 F.2d at 464 (holding that the court's ``ultimate 
authority under the [APPA] is limited to approving or disapproving 
the consent decree''); United States v. Gillette Co., 406 F. Supp. 
713, 716 (D. Mass. 1975) (noting that, in this way, the court is 
constrained to ``look at the overall picture not hypercritically, 
nor with a microscope, but with an artist's reducing glass''); see 
generally Microsoft, 56 F.3d at 1461 (discussing whether ``the 
remedies [obtained in the decree are] so inconsonant with the 
allegations charged as to fall outside of the `reaches of the public 
interest' '').
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    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[A] proposed decree must be approved 
even if it falls short of the remedy the court would impose on its own, 
as long as it falls within the range of acceptability or is `within the 
reaches of public interest.' '' United States v. Am. Tel. & Tel. Co., 
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United 
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd 
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also 
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 
1985) (approving the consent decree even though the court would have 
imposed a greater remedy). To meet this standard, the United States 
``need only provide a factual basis for concluding that the settlements 
are reasonably adequate remedies for the alleged harms.'' SBC COMMCTIS, 
489 F. Supp. 2d at 17.
    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its complaint, and does not authorize the court to 
``construct its own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also InBev, 2009 
U.S. Dist. LEXIS 84787, at *20 (``the `public interest' is not to be 
measured by comparing the violations alleged in the complaint against 
those the court believes could have, or even should have, been 
alleged''). Because the ``court's authority to review the decree 
depends entirely on the government's exercising its prosecutorial 
discretion by bringing a case in the first place,'' it follows that 
``the court is only authorized to review the decree itself,'' and not 
to ``effectively redraft the complaint'' to inquire into other matters 
that the United States did not pursue. Microsoft, 56 F.3d at 1459-60. 
As the United States District Court for the District of Columbia 
confirmed in SBC Communications, courts ``cannot look beyond the 
complaint in making the public interest determination unless the 
complaint is drafted so narrowly as to make a mockery of judicial 
power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
    In its 2004 amendments to the Tunney Act,\2\ Congress made clear 
its intent to preserve the practical benefits of using consent decrees 
in antitrust enforcement, adding the unambiguous instruction that 
``[n]othing in this section shall be construed to require the court to 
conduct an evidentiary hearing or to require the court to permit anyone 
to intervene.'' 15 U.S.C. 16(e)(2). This language effectuates what 
Congress intended when it enacted the Tunney Act in 1974. As Senator 
Tunney explained: ``[the] court is nowhere compelled to go to trial or 
to engage in extended proceedings which might have the effect of 
vitiating the benefits of prompt and less costly settlement through the 
consent decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of 
Senator Tunney). Rather, the procedure for the public-interest 
determination is left to the discretion of the court, with the 
recognition that the court's ``scope of review remains sharply 
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC 
Commc'ns, 489 F. Supp. 2d at 11.\3\
---------------------------------------------------------------------------

    \2\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for courts to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns, 
489 F. Supp. 2d at 11 (concluding that the 2004 amendments 
``effected minimal changes'' to Tunney Act review).
    \3\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) (if 
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt 
failure of the government to discharge its duty, the Court, in 
making its public interest finding, should * * * carefully consider 
the explanations of the government in the competitive impact 
statement and its responses to comments in order to determine 
whether those explanations are reasonable under the 
circumstances.''); S. Rep. No. 93-298 at 6 (1973) (``Where the 
public interest can be meaningfully evaluated simply on the basis of 
briefs and oral arguments, that is the approach that should be 
utilized.'').
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IV. Summary of Public Comment and the United States' Response

    During the sixty-day comment period, the United States received 
only one comment, submitted by the American Medical Association 
(``AMA''), which is attached to this Response. In its January 13, 2012 
comment, the AMA expressed its support for the United States' and the 
State of Montana's analysis as well as the remedy articulated in the 
proposed Final Judgment, stating that the action against the defendants 
``represents an important step towards reining in health insurers and 
hospitals whose actions conspire to restrain competition and maintain 
monopolized health insurance markets.'' AMA Comment at 1. The United 
States has carefully reviewed the comment and has determined that the 
proposed Final Judgment remains in the public interest.
    The AMA is the largest association of physicians and medical 
students in the United States. The AMA's comment states that the AMA 
``applauds the DOJ for its vigilance in recognizing the anticompetitive 
conduct'' of the defendants and for ``fashioning a remedy that holds 
the promise of nurturing competition in Montana.'' Id. The AMA views 
the proposed Final Judgment as creating a ``pro-competitive remedy that 
addresses the entry barriers faced by small Blue Cross rivals such as 
New West.'' Id. The comment concludes that ``the proposed consent 
decree will reverse the anticompetitive effects of the challenged 
Agreement.'' Id.

V. Conclusion

    After reviewing the AMA's public comment, the United States 
continues to believe that the proposed Final Judgment, as drafted, 
provides an effective and appropriate remedy for the antitrust 
violations alleged in the Complaint, and is therefore in the public 
interest. The United States will move this Court to enter the proposed 
Final Judgment after the AMA's comment and this response are published 
in the Federal Register.

Dated: February 10, 2012
     Respectfully submitted,

/s/ Scott I. Fitzgerald
Scott I. Fitzgerald (WA Bar <greek-i>39716),
Claudia H. Dulmage.

Attorneys for the United States, U.S. Department of Justice, 
Antitrust Division, Litigation I Section, 450 Fifth Street NW., 
Suite 4100, Washington, DC 20530.

CERTIFICATE OF SERVICE

    I hereby certify that, on February 10, 2012, a copy of the 
foregoing document was served on the following persons by the following 
means:
1, 2, 3 CM/ECF
    -------- Hand Delivery
    -------- U.S. Mail
    -------- Overnight Delivery Service
    -------- Fax
    -------- E-Mail
1. Clerk, U.S. District Court
2. Counsel for Defendant Blue Cross and Blue Shield of Montana:
    David C. Lundsgaard
    Graham & Dunn PC

[[Page 12620]]

    2801 Alaskan Way Suite 300--Pier 70
    Seattle, WA 98121-1128
    <a href="/cdn-cgi/l/email-protection#e3878f968d87908482829187a38491828b828e87968d8dcd808c8e"><span class="__cf_email__" data-cfemail="f59199809b91869294948791b59287949d949891809b9bdb969a98">[email protected]</span></a>
3. Counsel for Billings Clinic; Bozeman Deaconess Health Services, 
Inc.; Community Medical Center, Inc.; New West Health Services, Inc.; 
Northern Montana Health Care, Inc.; and St. Peter's Hospital:
    Kevin P. Heaney
    Crowley Fleck PLLP
    Transwestern Plaza II
    490 N. 31st St., Suite 500
    Billings, MT 59101
    <a href="/cdn-cgi/l/email-protection#046f6c61656a617d4467766b7368617d626861676f2a676b69"><span class="__cf_email__" data-cfemail="aec5c6cbcfc0cbd7eecddcc1d9c2cbd7c8c2cbcdc580cdc1c3">[email protected]</span></a>

/s/ Scott I. Fitzgerald

Scott I. Fitzgerald,
Antitrust Division, U.S. Department of Justice, 450 Fifth Street 
NW., Suite 4100, Washington, DC 20530, (202) 353-3863, 
<a href="/cdn-cgi/l/email-protection#dcafbfb3a8a8f2bab5a8a6bbb9aebdb0b89ca9afb8b3b6f2bbb3aa"><span class="__cf_email__" data-cfemail="96e5f5f9e2e2b8f0ffe2ecf1f3e4f7faf2d6e3e5f2f9fcb8f1f9e0">[email protected]</span></a>.
AMA--AMERICAN MEDICAL ASSOCIATION
James Madara, Executive Vice President, CEO
American Medical Association
515 N. State Street
Chicago, Illinois 60654
amarassn.org
(p) 312.464.5000
(f) 312.464.4184

January 13, 2012

Mr. Joshua H. Soven,
Chief, Litigation I Section,
Antitrust Division,
United States Department of Justice,
450 5th Street, N, Suite 4700,
Washington, DC 20530.

Re: Comments to Proposed Consent Judgment in U.S. v. Blue Cross and 
Blue Shield of Montana, Inc., et al. [FR Doc. 2011-29656]

    Dear Mr. Soven:
    On behalf of the physician and medical student members of the 
American Medical Association (AMA), I appreciate the opportunity to 
provide comments in response to the action by the Antitrust Division of 
the Department of Justice (DOJ) in the matter of Blue Cross and Blue 
Shield of Montana, Inc. (Blue Cross) and several Montana-area hospitals 
(the Hospital Defendants) in U.S. v. Blue Cross and Blue Shield of 
Montana, Inc., et al., Civil Action No. 1:11-cv-00123-RFC. This action 
represents an important step towards reining in health insurers and 
hospitals whose actions conspire to restrain competition and maintain 
monopolized health insurance markets.
    Accordingly, the DOJ has acted in the public interest with the 
proposed decree, and the AMA submits the following comments in support. 
According to the DOJ's complaint, Blue Cross agreed to pay $26.3 
million to the Hospital Defendants in exchange for their agreement to 
collectively stop purchasing health insurance from New West Health 
Services, an insurer owned by the Hospital Defendants, and instead buy 
from Blue Cross exclusively for six years (the Agreement). The 
Agreement, it is alleged, would likely cause New West to exit the 
relevant Montana markets for commercial health insurance. Because New 
West is Blue Cross's only viable competitor, the Agreement would have 
eliminated all competition. Accordingly, as the Complaint alleges, the 
Agreement would have led to higher prices and lower quality service for 
consumers.
    The AMA applauds the DOJ for its vigilance in recognizing the 
anticompetitive conduct described above and for fashioning a remedy 
that holds the promise of nurturing competition in Montana. For years, 
the AMA has been expressing its concern over the lack of competition in 
health insurance markets nationally. In its most recent study of health 
insurance markets, the AMA found that 83% of the 368 metropolitan areas 
studied qualify as highly concentrated areas, while in 95% of these 
markets, at least one insurer has a market share of 30% or greater. 
See, ``Competition in Health Insurance: A Comprehensive Study of U.S. 
Markets,'' American Medical Association (AMA) (2011 update). Health 
insurance markets that are monopolized not only hurt consumers 
directly, they also enable health insurers to exercise monopsony power 
in physician markets, eventually leading to reductions in service 
levels and quality of care. The market conditions in Montana are 
consistent with what the AMA has found nationally.
    Blue Cross' dominance in Montana health insurance markets presents 
a significant barrier to the market success of smaller rivals such as 
New West, even assuming the absence of exclusionary conduct such as 
that alleged in this case. In 2010, then Assistant Attorney General 
Christine Varney reported that the DOJ found that new health insurer 
entrants cannot compete with incumbents for potential purchasers of 
their products unless the new entrants can offer similar provider 
discounts to their enrollees--but they cannot offer these competitive 
discounts without being able to promise providers a significant number 
of enrollees to make such an arrangement viable. In turn, these 
barriers of entry create an anticompetitive environment in which the 
dominant insurer can achieve lower input prices by demanding lower 
rates from providers (who face a significant loss of revenue if they 
refuse such demands), without having to lower their consumer output 
prices (the cost of their premiums).\1\
---------------------------------------------------------------------------

    \1\ See, Speech by Christine Varney, Assistant Attorney General 
Antitrust Division, U.S. Department of Justice at American Bar 
Association/American Health Lawyers Association Antitrust in 
Healthcare Conference, May 24, 2010.
---------------------------------------------------------------------------

    In the instant case, the DOJ has fashioned a pro-competitive remedy 
that addresses the entry barriers faced by small Blue Cross rivals such 
as New West. First, the proposed final judgment would eliminate the 
anticompetitive effects of the challenged Agreement by requiring New 
West and the Hospital Defendants to divest New West's commercial health 
insurance business. Tentative arrangements call for the acquiring 
entity to be PacificSource, which is an established health insurer in 
the Pacific Northwest. To overcome Blue Cross' advantage in obtaining 
discounts from the Hospital Defendants because of its size, the 
proposed consent decree creatively requires New West and the Hospital 
Defendants to help provide PacificSource with a cost-competitive 
provider network. The Hospital Defendants are required to sign three-
year hospital contracts with PacificSource on terms substantially 
similar to the existing contractual terms with New West. The decree 
also requires Blue Cross to provide thirty days' written notice to the 
DOJ before entering into any exclusive contracts with health insurance 
brokers--contracts that might hinder important health insurer access to 
brokers. These provisions will help ensure that PacificSource will be 
able to compete as effectively as New West before the parties entered 
the Agreement.
    In sum, the divestiture of New West mandated in the proposed 
consent decree will reverse the anticompetitive effects of the 
challenged Agreement, while the additional provisions may foster an 
even more robust competition within the market than existed before the 
Agreement. Given the weak state of health insurer competition in 
Montana, we applaud the DOJ for creating this remedy in the public 
interest.
     Sincerely,
James L. Madara, MD.
[FR Doc. 2012-4862 Filed 2-29-12; 8:45 am]
BILLING CODE M


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