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In a decision underscoring a national debate over the delivery of health care services, Northern District of New York Judge David N. Hurd is permitting an ambulatory surgery center to pursue a monopolization claim against a community hospital. Although Rome Ambulatory Surgical Center v. Rome Memorial Hospital, 5:01-CV-23, directly involves only a disagreement in an aging Central New York municipality, it is in many regards a microcosm of a debate occurring in communities and hospitals nationwide, lawyers said. At its heart, the case centers on the right of upstart ambulatory surgical centers to compete with established hospitals, and the right of community hospitals to protect themselves from competition. For years, hospitals have relied on the most profitable services, such as outpatient surgery and orthopedics, to subsidize the less profitable or unprofitable ones, such as emergency care and pediatrics. To cover the cost of providing a wide range of services to the insured and uninsured, hospitals count on the income from the services where they make the most money. The national explosion in the number of limited-service ambulatory surgical centers threatens that equation. In recent years, scores of such facilities, often reliant on investments by doctors, have opened with a standard business plan. Typically, they siphon off the profitable segments of health service, leaving the unprofitable services to the full-service hospitals. That has jeopardized the continued existence of many smaller hospitals, such as the one in Rome. The dispute in Oneida County began in late 1996, when a group of doctors invested in the Rome Ambulatory Surgery Center, even though many of them had admitting privileges with and, arguably, a fiduciary duty to, the local hospital. Doctors who relied on access to Rome Memorial for their more seriously ill patients were then in a position to refer patients to Rome Ambulatory. Since they were investors, they had an apparent economic incentive to do so. Rome Memorial, the only full-service hospital in a city of about 35,000, reacted defensively. According to court records, the hospital amended its bylaws so it could deny privileges to doctors who referred patients elsewhere and negotiated exclusive contracts with two major insurers. Lacking referrals and insurance contracts, Rome Ambulatory Surgery Center was forced to close in January 2001. It sued in federal court, alleging a dozen violations of the Sherman Antitrust Act and state laws on tortious interference. In a 52-page decision last week, Judge Hurd dismissed nine of the 12 claims, finding “insufficient facts to infer that competition was actually restrained.” However, he found that Rome Memorial’s “conduct could be found to be a substantial factor in causing a material injury” to Rome Ambulatory. Hurd ordered a trial on three Sherman Act issues: � Whether the hospital entered into illegal exclusive contracts with insurers. � Whether the hospital tried to monopolize the outpatient surgery market. � Whether the hospital conspired with cooperating doctors to monopolize that market. One of the issues centers on the change in the hospital’s bylaws. Almost immediately after Rome Ambulatory opened, the hospital’s board of directors amended the bylaws so it could take into consideration, when considering staff appointments, whether a physician competed with Rome Memorial. The amendment was never used and was deleted after Rome Ambulatory closed. Physicians “might reasonably have felt threatened by the passing of the bylaw, despite the fact that it was never used,” since doctors needed the hospital more than the new ambulatory center, the judge wrote. He said a reasonable fact-finder could conclude that the intimidation and the alleged conspiracy between the hospital and some doctors would damage Rome Ambulatory by restricting referrals to it. TESTING THE LAW An attorney for the ambulatory center, William G. Kopit of Epstein Becker & Green in Washington, D.C., said this is one of the first cases to test how far a hospital may go to protect itself from competition before it runs afoul of an antitrust or anti-monopolization law. “The hospital associations as well as most individual hospitals have taken the position that competition from either speciality hospitals or ambulatory surgery centers developed by physicians represent a form of unfair competition,” Kopit said. “The surgery center position generally is that competition is good and that hospitals don’t like competition.” The hospital’s attorney, Thomas C. Buckel of Hancock & Estabrook in Syracuse, N.Y., acknowledged that his client “was trying to protect its existence as much as it was its business.” He insisted the hospital did nothing wrong in seeking to shield its interests but acted legally, appropriately and responsibly. Buckel said the case illustrates a tension between traditional market forces and the delivery of health services. “More competition does not necessarily lead to better medicine,” Buckel said. “We don’t want to encourage more surgery and more procedures. We want to encourage less through preventative medicine.” Buckel noted that hospitals are in the unusual role of being required to provide a wide range of services to both insured and uninsured patients. “All hospitals rely on profitable procedures to subsidize the wide range of services they provide to all patients, especially the uninsured,” he said. “When doctors begin cherry-picking these profitable services for their own enrichment, it undermines the existence of community hospitals.” In addition to Kopit, appearing for Rome Ambulatory Surgical Center were Michael R. Bisegger of Epstein Becker and William J. Leberman of Wood & Smith in Syracuse.

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