PeaceHealth liable in antitrust lawsuit.

Byline: Tim Christie The Register-Guard

CORRECTION (ran 11/04/03): In McKenzie-Willamette Hospital's antitrust lawsuit, a federal jury determined that PeaceHealth violated federal law in one area - attempting to monopolize the local market for hospital services - and state law in two areas - price discrimination and interfering with business relationships. A story Saturday on Page A1 incorrectly reported that the jury found two federal violations and one state violation.

A federal jury sided Friday with McKenzie-Willamette Hospital, finding that PeaceHealth tried to monopolize the local market for hospital services, engaged in price discrimination and unlawfully interfered in McKenzie-Willamette's business relationships.

The jury awarded McKenzie-Willamette $5.4 million in economic damages in connection with two violations of federal antitrust law, a sum that automatically triples to $16.2 million.

McKenzie-Willamette also is entitled to attorney fees, which could range from $2 million to $4 million, said Thomas Triplett, the hospital's lead attorney in the trial.

Jurors also found that PeaceHealth violated state law, and awarded McKenzie-Willamette $5.4 million in economic damages plus $9.2 million in punitive damages.

But McKenzie-Willamette is entitled to one award, not both, Triplett said. The federal award, plus attorney fees, could approach $20 million, while the award for violating state law would total $14.6 million, but McKenzie-Willamette has made no decision yet.

PeaceHealth lawyers asked the judge to set aside the verdict moments after the jury delivered it, and a spokeswoman said she expected the hospital corporation to appeal.

McKenzie-Willamette officials said local health consumers were the real winners in the case.

"We're very gratified we were able to prevail and keep choice for consumers in Lane County," said Maureen Weathers, McKenzie-Willamette's board chairwoman.

She suggested the verdict shows PeaceHealth, the owner of Sacred Heart Medical Center in Eugene, was a victim of its own "unbridled pride."

"When that gets taken to excess, that can lead to weakness, where a person doesn't have the humility to realize they're not the only game in town," she said.

Roy Orr, McKenzie-Willamette's chief executive officer, said he found it significant that the jury decided to award punitive damages - a monetary penalty intended to punish a wrong-doer and provide a deterrent against further wrongdoing.

Orr pointed out that the judge told jurors they could award such damages only if they found PeaceHealth intended to harm McKenzie-Willamette "by some grievous violation of society's interests" and if there was clear evidence that PeaceHealth "acted with malice."

The jury found PeaceHealth tried to monopolize the local market for hospital services and engaged in unlawful price discrimination - both federal violations - and violated state law by interfering with McKenzie-Willamette's business relationships.

Marilyn Klug, PeaceHealth's vice president for business development in Oregon, said she was pleased that jurors sided with PeaceHealth on three other federal antitrust charges.

The five-man, three-woman jury found that PeaceHealth didn't unlawfully monopolize the local hospital market, didn't conspire to monopolize the market and didn't engage in exclusive dealing.

"Most of the allegations have gone away," she said. "We believe the facts are on our side. We understand an antitrust trial is incredibly complex. We respect (the jury's) decision - we just don't agree with it."

Klug said she assumes PeaceHealth will appeal after conferring with its lawyers. Even if PeaceHealth doesn't succeed in reversing the verdict, the $16.2 million antitrust judgment won't affect its plans to build a new $450 million hospital in north Springfield, she said.

"Our commitment here is for the long haul," she said.

Still to be decided is whether U.S. District Judge Ancer Haggerty will order PeaceHealth to make changes to avoid anti-competitive conduct in the future.

In pretrial documents, McKenzie-Willamette lawyers asked the judge to order PeaceHealth to divest itself of PeaceHealth Medical Group, its 110-doctor medical practice in Eugene. Triplett and Orr said it hasn't been decided whether McKenzie-Willamette would still push for that remedy.

McKenzie-Willamette, established in 1954 as an independent hospital in Springfield, sued PeaceHealth in January 2002. PeaceHealth is a Catholic-sponsored health system based in Bellevue, Wash., that owns six hospitals in the Northwest, including its flagship, the 432-bed Sacred Heart.

McKenzie-Willamette alleged PeaceHealth used its dominant market power to compete unfairly for exclusive health insurance contracts with the state's two major insurers, Regence BlueCross Blue Shield of Oregon and Providence Health Plans. They introduced evidence suggesting PeaceHealth pressured the insurers to exclude McKenzie-Willamette from preferred provider contracts.

The suit also alleged that PeaceHealth kept an iron grip on hospital services by taking over rural hospitals in Florence and Cottage Grove and employing doctors to funnel patients to Sacred Heart.

McKenzie-Willamette officials said those tactics drove their hospital to the brink of financial ruin - it lost $2.4 million in 2002 - and would have gone out of business had it not merged with Texas-based Triad Hospitals Inc. on Oct. 1.

During the U.S. District Court trial in Portland, PeaceHealth lawyers suggested McKenzie-Willamette's financial woes were the result of its own inept management, not because of anything PeaceHealth did.

Weathers, who sat with the attorneys for every day of the trial, said she thinks the jury was convinced by the accumulation of evidence against PeaceHealth.

"It kept getting clearer and clearer and clearer what was going on," she said.

The jury's verdict may not be the end of the story. Legal experts say it's common for jury verdicts in these kinds of cases to be overturned on appeal because of the complexity of federal antitrust law.

After 13 days of trial, the jury started deliberating Tuesday morning. About 11 a.m. Friday, they sent a note to the judge indicating they were having difficulty reaching a decision on punitive damages, Triplett said.

After conferring with lawyers on both sides, Haggerty gave jurors what's known as a "dynamite charge," urging them to keep deliberating and to try to reach a verdict, Triplett said. "It's an admonition to not be stubborn," he said.

Twenty minutes later, the jury returned word that they had reached a verdict.

Just before noon, the lawyers for both sides assembled in Haggerty's courtroom on the 13th floor of the Mark O. Hatfield Federal Courthouse in downtown Portland. The jury foreman handed the six-page verdict form to Haggerty, who reviewed it to make sure jurors had answered all 22 questions.

Haggerty read the verdict aloud, then asked the foreman if it was the unanimous verdict of the jury. He said it was. Haggerty then asked each juror if he or she agreed with the verdict, and they all did. Then Haggerty accepted the verdict.

PeaceHealth lawyers immediately told Haggerty they planned to ask him to set aside the verdict. Their legal briefs are due Dec. 8.

WHAT'S NEXT

Appeal: PeaceHealth asks judge to set aside verdict; briefs due Dec. 8 Ruling: PeaceHealth may be told to avoid anti-competitive conduct