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Hill-Rom Holdings Named in Antitrust Lawsuit

Posted: January 14, 2015

SAN ANTONIO

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.

Contact:

Sitrick And Company
Mike Sitrick or Terry Fahn, 310-788-2850