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Government Charges GE Restricted Competition in Medical Equipment Repair

August 1, 1996

WASHINGTON (AP) _ The Justice Department charged General Electric Co. on Thursday with restricting competition to fix high-tech medical equipment and driving hospital costs substantially higher.

In a civil antitrust lawsuit, the government said the company would let more than 500 hospitals use its servicing software only if they agreed not to fix machines at other hospitals and doctor offices.

The GE practice ``affected every state in the nation″ and its effect ``has been to raise the cost of service to other hospitals,″ said Deputy Assistant Attorney General Joel Klein of the department’s antitrust division.

GE called the suit ``a minor, meritless civil suit″ that wastes taxpayer money. The company added that it feels competition is intense in the equipment service business.

In some cases, hospitals had to pay up to twice what they would otherwise have paid to repair and service X-ray machines, magnetic resonance imaging equipment, CT scanners and other advanced machines, Klein told a news conference. Because the extra costs varied in each local market and were not so high in some markets, the government could not calculate the total extra cost of the practice, he added.

Nationwide, health care providers spend more than $3 billion a year servicing medical equipment.

GE, headquartered in Fairfield, Conn., is the world’s largest manufacturer of medical imaging equipment and is also a leading provider of service for the machines.

The lawsuit was filed in U.S. District Court in Montana following a yearlong investigation of what Klein called numerous complaints. He said Montana was chosen for the lawsuit because the government had a great deal of evidence about how the practice worked in Montana.

The government alleged GE used illegal restrictive licensing agreements to curb competition.

GE signed contracts with more than 500 hospitals that used GE’s diagnostic software to service and repair their GE imaging equipment. These contracts, the government said, prohibited the hospitals from offering their own service for machines at other hospitals, clinics or doctor offices.

So, if a hospital licensed GE software to service its own GE CT scanner, it had to agree not to repair another brand of MRI or mammography machine at a neighboring hospital or clinic, the government said.

``What GE has done is to protect its own market position in the service industry by removing hospitals that have in-house service components from competing with GE,″ Klein said.

GE said that customers could start servicing others’ machines by returning the software and materials and getting a refund of the unused license fee. GE said its service licenses actually make it cheaper for hospitals by allowing them to fix their own machines, rather than hire a repair firm.

The government said that in sparsely populated rural areas, like Montana, hospitals with in-house service departments may be the only alternative to GE that is qualified to work on such equipment.

Klein said GE changed some of its practices in May ``in direct response to our investigation, but we have concluded that their changes were not sufficient and do not undo existing contracts that might have continuing effects.″

The government asked the court to prohibit GE from using licenses that restrict hospitals from competing for medical equipment service and repair work.

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