Universal Hospital Services, Inc. today announced the filing of a lawsuit against Hill-Rom Holdings, Inc. (NYSE: HRC). The complaint alleges that Hill-Rom is violating federal and state antitrust laws by willfully and unlawfully engaging in a pattern of “exclusionary and predatory conduct” in order to “foreclose [market] competition.” The lawsuit, which was filed in the United States District Court for the Western District of Texas in San Antonio, seeks injunctive relief and treble damages, the amount of which will be determined at trial.
The Company says in its complaint that it filed the lawsuit “to preserve choice” in the medical equipment rental industry and to prevent Hill-Rom “from destroying competition in the industry by engaging in a variety of anti-competitive practices that have previously been subject to an injunction and resulted in the payment of over half a billion dollars by Hill-Rom to competitors, hospitals, and healthcare providers.”
The complaint recalls that “Hill-Rom and its predecessor, Hillenbrand Industries, Inc. (“Hillenbrand”), committed similar anti-competitive conduct” that resulted in a “jury in the Western District of Texas [returning] a unanimous verdict in favor of [Hill-Rom competitor Kinetic Concepts Inc. (“KCI”)]” in September 2002. “Hillenbrand eventually agreed to settle the case for $250 million.”
Following the KCI verdict and settlement, according to the suit, “Spartanburg Regional Healthcare System sued Hill-Rom and Hillenbrand on behalf of hospitals and health care providers for damages arising from similar anticompetitive actions in 2003.” “Hillenbrand and Hill-Rom ultimately settled with Spartanburg for $337.5 million.” As part of the settlement, the lawsuit alleges, “Hill-Rom also agreed to a voluntary injunction that prevented Hill-Rom from leveraging its monopoly power in the market for the sale of Standard Hospital Beds into the market for the rental of certain patient handling equipment for three years by forcing Hill-Rom to unbundle and separately price and discount each product.”
“The reprieve on the industry [from Hill-Rom’s voluntary injunction] was short lived,” the lawsuit states. “[S]truggling with sluggish growth in its core business segment,” the complaint alleges that Hill-Rom has “reverted to its old ways now that the injunction has expired and is again using its monopoly power…and a variety of anti-competitive tactics, including exclusive dealing and bundled discounts, in an attempt to monopolize the rental markets for patient handling (“PHE”) and moveable medical equipment (“MME”).”
Hill-Rom, which is described in the complaint as a “serial monopolist,” allegedly “enjoys a monopoly in the sales market for Standard Hospital Beds.” It “is the dominant global manufacturer of standard hospital beds and has maintained a 70-90% market share in the industry for the sale of standard beds in the United States.”
The complaint alleges that Hill-Rom President and CEO John Greisch “boasted to Wall Street investors that Hill-Rom’s strategy was essentially to return to its old strategy of leveraging its monopoly to help bolster Hill-Rom’s bottom line: ‘One of the real strengths of the company that we’re trying to leverage and we’ll continue to leverage going forward is the market position that we enjoy, we’ve got over 70% install base market share in the [Standard Hospital Bed market], tremendous brand name and very, very strong market presence and brand equity within the acute care and post-acute care markets here in the United States and overseas.’”
“To effectuate [the] strategy,” the suit goes on, “Hill-Rom has started leveraging its market power in the Standard Hospital Bed market by negotiating sole-source agreements with national group purchasing organizations and hospital networks that contain steep discounts and rebates on the sale of Standard Hospital Beds bundled with ironclad commitments to use Hill-Rom for their [rental] needs. Hill-Rom knows that, no matter how efficiently or aggressively its competitors in the [rental] markets price their products, competitors simply cannot compete with these steep bundled discounts because they do not sell Standard Hospital Beds.”
Indeed, the lawsuit alleges that “the bundled discounts and rebates Hill-Rom offers on Standard Hospital Beds are so steep and below the attributed cost of providing [rentals] that there is no way for Hill-Rom’s competitors to ever match them and remain in business, even if those competitors are more efficient…or provide a superior rental service.” This is because, according to the complaint, the “conditional discounts and rebates offered by Hill-Rom are so steep that any competitor in the market…would be forced to price its own rental products below cost to be competitive with Hill-Rom’s bundled pricing.”
“Once Hill-Rom forecloses competition,” the lawsuit contends that Hill-Rom “will be able to not only harm consumers by eliminating product choice but also by either charging supra-competitive prices for future rentals or eliminating the rental market altogether, thereby forcing hospital networks and individual hospitals to buy expensive equipment in advance instead of renting it to fit their needs. The net result will be increased costs and prices, reduced output, and less choice in the health care system.”
“The lawsuit asserts that Hill-Rom is once again engaging in monopolistic, exclusionary, and anticompetitive practices that we believe are not only in violation of federal and state laws, but also which hurt consumers. We are taking this action so that Hill-Rom will be held accountable in a court of law for the conduct set forth in the complaint,” says Larry Macon, the lead attorney for the plaintiff in the UHS lawsuit.
A conformed copy of the lawsuit can be downloaded here: http://www.hunton.com/files/webupload/UHS-Complaint.pdf
About Universal Hospital Services, Inc.
Universal Hospital Services, Inc. is a leading nationwide provider of health care technology management and service solutions to the health care industry. UHS owns or manages over 700,000 units of medical equipment for over 8,000 national, regional and local acute care hospitals and alternate site providers in all 50 states. For more than 75 years, UHS has delivered management and service solutions that help clients reduce costs, increase operating efficiencies, improve caregiver satisfaction and support optimal patient outcomes.
