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In its latest attack on corporations, the Service Employees International Union filed four class actions in late June against health care systems in Chicago; San Antonio; Albany, N.Y.; and Memphis, Tenn. The lawsuits generally allege that the health care systems have conspired to depress compensation levels of registered nurses at hospitals and that such actions violate federal antitrust law. The named defendants include some of the largest health care systems in the country: Hospital Corporation of America, Ascension Health Inc., Catholic Health East, Seton Health System, Evanston Northwestern Healthcare, Resurrection Health Care, and the University of Chicago Hospital. The size of the defendants alone makes the allegations worth exploring in detail. But a close analysis of these lawsuits reveals that the union is unlikely to prove any illegal conspiracy. Instead what really appears to be going on is that the Service Employees International Union is using these suits as an organizing tool to try to get more registered nurses to join the union. CONSPIRING ABOUT WAGES? The lawsuits are substantially identical, and each has two main counts. Count I of each of the four complaints alleges that the named defendants have conspired to depress wages in violation of Section 1 of the Sherman Antitrust Act, a federal statute that prohibits agreements among competitors that unreasonably restrain trade. The plaintiffs allege that, from before June 2002 through the present, the defendants conspired with one another and with other unnamed hospitals in each geographic area to depress the compensation paid to registered nurses. Specifically, the hospitals allegedly did so by: (a) Agreeing to regularly exchange, and regularly exchanging, detailed nonpublic information regarding the compensation that each health care system is paying, or is willing to pay, its registered nurses;

(b) Agreeing not to compete, and not competing, with one another with respect to the compensation of registered nurses; (c) Paying registered nurses at the same or nearly the same rates as one another; and (d) Jointly recruiting registered nurses at job fairs to avoid competing to attract new registered nurses to their respective hospitals. Each complaint alleges that human resources personnel at the hospitals regularly telephoned one another to determine the compensation that other hospitals were paying their nurses. They also allegedly exchanged information about any scheduled increases in compensation. With this information about their competitors’ compensation rates, the defendants allegedly engaged in a conspiracy in restraint of trade to depress the compensation of nurses. Similarly, Count II of each complaint alleges that the defendants have conspired to exchange compensation information in violation of Section 1 of the Sherman Antitrust Act. The complaints specifically allege that engaging in a continuing agreement to regularly exchange detailed nonpublic information on the compensation rates of nurses amounts to an unreasonable restraint of trade. Supposedly, the agreement to exchange information reduced competition in nursing compensation among area hospitals. From an antitrust standpoint, the plaintiffs in these cases appear to face significant obstacles to proving an unlawful conspiracy. Allegations of unlawful agreements surrounding exchanges of input pricing information (that is, the prices at which firms acquire the goods and services needed to produce their own output) are notably challenging for antitrust plaintiffs. In health care, nursing services constitute one of the “inputs” from which the health care systems produce and provide health care services. As in most industries, such information is widely available from a multitude of sources in the health care industry. Competitors routinely seek out information regarding others’ pricing practices, and the mere possession of such information is neither a violation of the Sherman Act nor evidence of a violation. In fact, pricing transparency is acknowledged to promote, rather than destroy, competition. This is especially true where input markets are concerned, as consumers will benefit from aggressive pricing practices (as long as producers do not actually agree on such prices and thereby constrain supply). In other words, all other factors being equal, the ability to acquire nursing services, drugs, equipment, supplies, and other “inputs” at lower costs allows health care systems to charge lower prices to patients for hospital services. The antitrust laws are implicated when organizations agree to establish the prices at which they will purchase specific inputs; in this case it is the price at which they will compensate nurses for their services, because in such cases, the supply of the affected inputs (that is, nursing services) and organizations’ production levels (that is, hospital services) may be reduced — to the detriment of consumers. Indeed, the Justice Department has approved organized exchanges of historical cost information — including labor costs — when undertaken to assist the participating firms (including competitors) in reducing their costs. A notable example is the Oct. 25, 2001, letter from Charles James, then assistant attorney general, to Alan Sherbrooke, which is available on the Justice Department’s Web site. In its letter, the Department of Justice approved the request of 10 companies that provided towing and barge services in various U.S. waters to exchange historical cost information relating to utilization, repairs, damage claims, revenues per engine hour, labor costs per engine hour, overhead ratios, and supply costs per engine hour. For an agreement to violate Section 1 of the Sherman Act, the Supreme Court has held that a “conscious commitment to a common scheme designed to achieve an unlawful objective” must be established. Such a commitment can be shown by either direct or circumstantial evidence. Direct evidence is that which can defeat a motion for summary judgment if taken as true, whereas circumstantial evidence can defeat a summary judgment motion only if inferences are drawn in the nonmovant’s favor. In its 1986 decision in Matsushita Electric Industrial Company Ltd. v. Zenith Radio Corp., the Supreme Court stated unequivocally that a Section 1 plaintiff cannot avoid summary judgment on the basis of circumstantial evidence that is “as consistent with permissible competition as with illegal conspiracy.” Rather the evidence must “[tend] to exclude the possibility that the alleged conspirators acted independently.” The lower federal courts have enthusiastically embraced this standard. Thus, the inferential basis of the complaint would appear to be the plaintiffs’ most significant challenge. Even by the notice-pleading standards of the federal rules, the allegations in the union’s complaints are strikingly conclusory. For the most part, the price-fixing conspiracy is alleged without names, dates, or places. Even allegations that purport to state specific instances of conspiratorial conduct are stated in only the most general terms (for example, trade group meetings at which nursing compensation was a topic of presentations). There are no direct allegations of an actual agreement. Overall, the complaints leave a clear impression that the plaintiffs are in search of judicial authorization to fish for substantiation of their theories. THE REAL MOTIVATION The real motivation behind these lawsuits is the Service Employees International Union’s desire to unionize the labor force of registered nurses. Because the SEIU has been largely unsuccessful at organizing nurses, it has sought to attract new members through corporate campaigns. Corporate campaigns are organized assaults on the economic, legal, political, and community well-being of a company (in this case, a health care system). They go far beyond simple advocacy to elect a union and can include litigation, political appeals, requests for regulatory investigation, and attempts to create negative publicity about the company. These campaigns are being launched by labor organizations and special interest groups with increasing frequency. Rather than attempting to organize nurses at each hospital, the SEIU has sought to attract nurses across the country to respond to issues and to support it. Thus, the SEIU and its specially formed Nurse Alliance have positioned themselves as the national union to address issues important to nurses. These include staffing, patient safety, quality of care, mandatory overtime, and wages. The SEIU cannot legitimately argue, however, that nurses are truly undervalued. In Chicago, for instance, nurses earn starting salaries approaching $55,000 per annum, and the total compensation of experienced nurses is significantly in excess of $100,000. So the SEIU commissioned its own “study,” Solving the Nursing Shortage Through Higher Wages. Released in March 2006, the self-serving, paid-for report suggests that nurses are not compensated fairly and deserve to be paid more. But the study was not conducted by an independent, reliable source, and it cannot be given much weight. Contrary to the SEIU’s allegations that the defendant hospitals are keeping compensation low despite a so-called nursing shortage, many hospitals in Chicago, for instance, today have nurse-vacancy rates of less than 2 percent. In other words, the SEIU is drastically overstating and misrepresenting the state of the nursing labor force in the Chicago area to serve its baseless claims. Some hospitals have more than 70 percent of their nurses with 20 years’ or more experience, which means these employees typically earn more than $100,000 a year. Despite the SEIU’s allegations that wages are low, a highly aggressive and competitive market for registered nurses in fact exists. And, most important, professional nurses contribute enormously every day to the improvements in quality patient care, service, and operations. The SEIU’s assertion that nurses’ wages contribute to diminished quality patient care is insulting to professional nurses, who provide consistently high standards of care to the patients they serve. These class actions are just the latest effort in the SEIU’s Nurse Alliance campaign to pressure health care systems to embrace unionization of their nurses. Unfortunately, because the SEIU campaign would distract hospitals from devoting all their resources into fulfilling their missions to provide excellent medical service, the ultimate victims of the SEIU’s campaign may very well be the hospitals’ patients.

K. Bruce Stickler is a partner in the Chicago office of Gardner Carton & Douglas, where he represents management in employment and labor matters. Robert W. McCann is a partner in the health care practice in the D.C. office, where he focuses on antitrust counseling. Their firm represents health care providers, including some of the defendants in these antitrust class actions, but is not involved with defending against these suits.

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