The Antitrust Division of the US Department of Justice (DOJ) entered into a deferred prosecution agreement (DPA) with Florida Cancer Specialists & Research Institute LLC (FCS), a leading oncology provider in Southwest Florida, relating to allegations that FCS conspired to allocate medical and radiation oncology treatments for cancer patients with at least one other Florida oncology provider during a 17-year period.
FCS, along with an alleged co-conspirator, was accused of allocating medical oncology treatments, which use chemotherapy and other medications, to FCS and radiation oncology treatments to the unnamed co-conspirator, from at least 1999 to 2016. Under the DPA, FCS agreed to accept responsibility for its actions, pay a $100 million criminal fine, and cooperate with DOJ’s ongoing related investigation, among other notable conditions. In exchange, DOJ will not continue with its criminal prosecution of FCS provided that FCS complies with the terms of the DPA through at least December 31, 2023.
The prosecution and DPA are notable for several reasons. First, this marks the first criminal antitrust prosecution of a hospital or physician group in years. In recent cases, DOJ has chosen to proceed with civil enforcement actions. Recent examples include separate litigation against hospitals in Michigan and West Virginia for allocating territories for the marketing of healthcare services, and litigation against associations in South Dakota and Oklahoma for jointly negotiating with payors on behalf of competing providers.
Second, DOJ historically has used guilty pleas to resolve a criminal case and has avoided the use of DPAs where the Antitrust Division has evidence of a criminal violation. In its DPA – Q&A, DOJ explained that it chose to resolve this matter with a DPA, rather than proceeding to trial, because of the potential collateral consequences of a conviction or guilty plea. Specifically, FCS’s criminal conviction would jeopardize the treatment of current and future cancer patients in Florida as well as ongoing cancer research by triggering a mandatory exclusion from all federal healthcare programs under 42 U.S.C. § 1320a-7. A DPA avoids that outcome by delaying and eliminating the need for a trial, while also enabling DOJ to pursue more serious penalties if FCS breaches the DPA. However, it is important to note the DPA does not bind other federal agencies or states that may choose to bring a suspension or debarment action, though DOJ will make the appropriate government officials aware of the extent of FCS’s cooperation.
Separately, the Florida Attorney General announced that it had resolved a pending case after filing a complaint and obtaining a consent decree with FCS. The state resolution includes a payment of $20 million, a continuing obligation to cooperate in an ongoing investigation, and the development of “a robust compliance program,” among other requirements.
Third, the DPA contains provisions requiring FCS to waive all noncompete, nonsolicitation, and noninterference provisions for all past and present employees and agents, and includes a form communication FCS is to use in announcing the waiver. The DPA – Q&A makes clear that these contractual provisions helped facilitate the market allocation agreement, and that the waiver is expected to expedite renewed competition in the market.
Fourth, the DPA imposes the statutory maximum criminal penalty of $100 million on FCS for violating Section 1 of the Sherman Act. The fine amount is notable insofar as FCS’s revenues from the market allocation agreement are alleged to have been more than $950 million between 1999 and 2016. Although DOJ may seek fine amounts of more than $100 million (based on “twice the gross gain or twice the gross loss”), it chose not to do so here. Under the DPA terms, FCS is required to pay the $100 million, plus interest, in installments between June 1, 2020 and December 31, 2023.
Notably, FCS faces other costly liabilities from the alleged conduct. As noted, the Florida Attorney General announced a separate civil antitrust settlement with FCS for $20 million. In mid-2019, FCS agreed to resolve a private civil antitrust class action for $7.2 million.
Fifth, FCS must continue to cooperate with DOJ in its ongoing investigation and any future litigation regarding the oncology treatment market, including after the expiration of the DPA term if required. Cooperation obligations can be extensive and in FCS’s case include, among other things, providing documents, information, and other materials to assist DOJ’s investigation or litigation as well as using FCS’s best efforts to facilitate cooperation between its current and former employees and DOJ. In addition, FCS must establish and maintain a corporate antitrust compliance program that monitors its activities and those of its affiliates and subsidiaries to deter and detect criminal antitrust violations.
DOJ’s resolution with FCS reflects the agency’s continued focus on the healthcare sector. It also shows DOJ’s willingness to pursue large fines and creative ways of resolving allegations where there could be severe collateral consequences to patients and the healthcare system as a whole from a conviction. In addition, the DPA reflects DOJ’s continued emphasis on cooperation and compliance policies and programs. Healthcare providers should continue to evaluate and update their antitrust policies and programs and should consult experienced antitrust counsel if they identify suspicious activity.