In partnership with the Service Employees International Union (SEIU), beginning in 2006 nurses brought antitrust class actions lawsuits against major health systems in Memphis, San Antonio, Albany Chicago, Detroit, and Arizona, alleging that hospital employers in each of these markets conspired to suppress nurses’ wages. The nurse-plaintiffs in the lawsuits claimed that the defendant health systems violated the Sherman Antitrust Act by reaching an express agreement on what nurses would be paid or, in the alternative, exchanging confidential wage information either directly through informal communications among compensation personnel or indirectly through third parties, such as trade associations conducting wage surveys. Plaintiffs claimed that as a result of these agreements and communication between health systems, compensation for nurses in the affected markets was below what nurses would otherwise be earning, particularly in light of the nursing shortage. For some of the named defendants, nurse compensation was governed by a collective bargaining agreement.

In the most recent rulings in these class actions, on July 21, 2010, the U.S. District Court for the Northern District of New York issued two decisions denying motions for summary judgment filed by the two remaining Albany-area defendants, Albany Medical Center and Ellis Hospital. The case began in 2006 when plaintiffs named five hospital systems as defendants in Fleischman v. Albany Medical Center, Case No. 06-CV-0765 (N.D.N.Y.): Albany Medical Center, Ellis Hospital, Northeast Health, Seton Health System and St. Peter’s Health Care Service. In July, 2008, the court certified a class of approximately 2300 registered nurses employed by the defendant hospitals during a four-year time period. However, the certification was only for purposes of determining whether defendants violated the antitrust laws by engaging in “price-fixing” of wages and whether there was “injury to the class that the [antitrust laws] were designed to prevent.” The court declined to certify a class on damages actually incurred by the nurse class members, determining that the “proposed assessment of damages is too speculative to warrant class certification.”

After the mixed ruling on class certification, three of the defendant health systems—Northeast Health, Seton Health System and St. Peter’s Health Care Service—voluntarily resolved the litigation. Northeast settled for $1,250,872, Seton Health settled for $744,739, and St. Peter's settled for $2,685,622, with a caveat that these sums would be reduced if plaintiffs settle with another defendant for a lower sum as calculated in an agreed upon formula.

Albany Medical Center and Ellis Hospital continued to litigate the case. In a separate renewed motion for summary judgment Ellis Hospital argued that because its wage rates were established exclusively through collective bargaining, they should be shielded from antitrust attack. In denying Ellis Hopital's motion, the court acknowledged that “wage rates for Ellis RNs during the class period were established exclusively through federally mandated collective bargaining between Ellis and the New York State Nurses Association (NYSNA).” However, the court held, “Ellis cannot use its collective bargaining agreement with the nurse’s union to insulate any anticompetitive activity it may have engaged in outside of, and separate from, the collective bargaining process with the nurse’s union.” The hospital also argued that the wage rates in the collective bargaining agreement were non-confidential, publicly available information, and therefore sharing the information with other hospitals was not an antitrust violation. As to this argument the court concluded that whether the collective bargaining agreements at issue were “confidential” was a question of fact for the jury.

In addition, Ellis Hospital and Albany Medical Center both moved for summary judgment on the merits of plaintiffs’ Sherman Antitrust Act claims. Plaintiffs claimed that defendant Hospitals exchanged wage information “through numerous emails, telephone calls, and in-person conversations at job fairs and professional association meetings.” These communications discussed, among other things, “staff RN pay ranges, RN new graduate rates, and shift differentials.” Considering the circumstantial evidence as a whole and construing it in the light most favorable to plaintiffs, the court denied both hospitals' motion for summary judgment, concluding that “a reasonable jury could conclude that Defendants were engaged in collusive behavior.” Moreover, the court held, “the fact that but-for a wage agreement, Defendants [given the nursing shortage and competition for qualified nurses] would be acting against economic self interest is persuasive evidence that Defendants did not act independently. Accordingly, Plaintiffs have provided sufficient evidence of an agreement to with withstand summary judgment.”

Other Actions Resolved or Appealed Following Significant Rulings

Memphis

Clarke v. Baptist Memorial Healthcare, Case No. 2:06-cv-02377 (W.D. Tenn.), an antitrust action against Baptist Memorial Healthcare and Methodist Healthcare in Memphis, Tennessee, also alleged that the hospitals violated antitrust laws by fixing nurses wages. Although the federal court denied the hospital's motion to dismiss, following limited discovery the court denied plaintiffs' motion to certify the case as a class action. Significantly, the court determined that one of the plaintiff’s close affiliation with the SEIU presented a potential conflict with the interests of putative class members. Plaintiffs’ appeal is pending.

Detroit

In Cason-Merenda v. Detroit Medical Center, Case No. 06-15601 (E.D. Mich.), plaintiffs sued Detroit Medical Center, Henry Ford Health System, Mount Clemens General Hospital, St. John Health, Oakwood Healthcare, Bon Secours Health Services, Trinity Health Corporation and William Beaumont Hospitals for alleged “wage-fixing.” Early in the litigation, the court held that, if proven, the complaint stated an antitrust claim against all defendants, including Mt. Clements, whose employees were unionized.

Three of the defendants—St. John, Oakwood and Bon Secours—entered into significant settlements with the plaintiffs, agreeing in total to pay a maximum of $13,583,475, with various future contingencies which could lower the sum significantly. Plaintiffs have filed a motion for class certification and the remaining defendants have filed motions for summary judgment. These motions are currently pending.

Chicago

Seven Chicago area health systems were sued in Reed v. Advocate Health Care, Case No. 06-3337 (N.D. Ill.):University of Chicago Health System, Advocate Health Care, Children’s Memorial Hospital, Evanston Northwestern Healthcare, Michael Reese Medical Center, and Resurrection Health Care. All were alleged to have conspired to suppress nurses’ base wages in violation of antitrust laws. In September, 2009, following four days of hearings, the court denied plaintiffs' motion for class certification. In denying the motion, the court rejected the proffered expert testimony on wage suppression as replete with “errors of conception, errors of computation, and errors of interpretation.” Finding no reliable evidence to show “common impact or damages” the court refused to certify a class.

Plaintiffs did not appeal, opting instead to enter into minimal settlements on behalf of the two named plaintiffs. On February 18, 2010, the action was dismissed.

San Antonio

In Maderazo v. VHS San Antonio Partners, L.P., Case No. 5:06-cv-00535 (W.D. Tex.) nurses sued three San Antonia health systems for allegedly conspiring to fix nurses wages: Baptist Health System, Methodist Healthcare System of San Antonio, and Christus Santa Rosa Health Care Corp. The court bifurcated discovery between class and merits issues and the parties thereafter briefed the issue of class certification. The plaintiffs and defendants are currently awaiting the court’s ruling.

Arizona

In 2007, per diem and traveling nurses in Arizona filed an antitrust class action alleging that the Arizona Hospital and Healthcare Association (AzHHA) and numerous member hospitals “jointly coordinated, fixed, suppressed, stabilized, and lowered wages” through a nurse Registry Program operated by the AzHHA. In July, 2009, in Johnson v. Arizona Hospital and Healthcare Association, Case No. CV 07-1292-PHX-SRB (D. Ariz.), the court certified a class of per diem nurses, finding common issues predominated regarding whether state and federal antitrust laws were violated and, if so, whether the violations had an impact on the nurses’ wages. As to the traveling nurses, however, the court denied class certification because of the evidence that the traveling nurses often negotiated individual compensation directly by assignment and therefore, it concluded, even if they could establish antitrust violations, the court would have to engage in individual inquiries to determine the extent each nurse was impacted by the violations.

What Can We Learn?

These cases, while all raising nearly identical claims, reflect dramatically differing outcomes. The variables appear to be the work product of the experts, the viability of the named class representatives, and perhaps most important the legal philosophy of the judge. But regardless of the outcome, the cost of defending these cases can be enormous in terms of time as well as financial and human resources. For those health systems that have not become entangled in this kind of litigation, the importance of training cannot be overemphasized. Hospital administrators, human resources personnel, nurse managers and nurse recruiters should be educated on the risks of discussing, sharing, or making wage-related information available to other healthcare systems and providers, and should be counseled to make sure salary decisions reflect market realities divorced from what other health systems may be doing.

This entry was written by Rob Wolff.

Photo credit: arakonyunus