UNIVERSITY OF WISCONSIN-MADISON ARCHIVES
ORAL HISTORY PROGRAM

Interview #1058
HALL, REED

HALL, REED (1948-)
Undergraduate; former Chair of Board of Directors of Wisconsin Alumni Assn.; former Exec. Director of Marshfield Clinic; Director of Wisconsin Economic Development Corporation.
At UW: [as undergraduate] 1966-1970; with WAA board of directors [1997-2010]

Interviewed: 	2009/2010 (4 sessions)
Interviewer: 	Robert Lange
Index by: 	Stephen A. Pierce
Length: 	6 hours, 00 minutes

Abstract: In his four 2009-2010 interviews with Bob Lange, Reed Hall chronicles his relationship with the University of Wisconsin-Madison as an undergraduate, alumnus, and prominent Wisconsin lawyer from the 1960s to the late 2000s. In the first and second interviews, he recounts major influences in his development as a health lawyer and his work at the Marshfield Clinic as in-house counsel and executive director.  In the third and fourth interview sessions, he explains his involvement with the Wisconsin Alumni Association and details the involved litigation between Marshfield Clinic and Blue Cross/Blue Shield of WI.  This interview was conducted for inclusion into the UW-Madison Oral History Program.

Key Words: Tomah WI; Rotary Club; University of Wisconsin-Madison; 1960s; student protests; Vietnam; Kent State; Sterling Hall bombing; draft; Vernon Thompson; Washington DC; University of North Dakota (UND); National Institutes of Health (NIH); University of Pittsburgh; Milwaukee; Marshfield Clinic; Ben Laughton; Russell Lewis; Melvin Laird; self-insurance; Robert Bromberg; tax exemption; Marshfield Clinic Research Foundation; Wisconsin Alumni Association; Gayle Langer; Paula Bonner; Blue Cross/Blue Shield; Security Health Plan; Judge John C. Shabaz; Judge Richard Posner; Judge Barbara Crabb.

First Interview Session (September 25, 2009): Digital File

Time	Keywords
00:00:00	Start of Interview/Interviewer’s Introduction

00:00:33	Question: Talk about your birthplace and parents. Answer: Hall was born August 19, 1948 in Sparta WI. He grew up in the rural community of Tomah WI. He discussed his parents and grandparents, one of whom was a farmer and another of whom was a WI state representative as a progressive Republican. He grew up on a working farm with a one-room schoolhouse in the corner of the property. He reflected on the positive educational process of the one-room schoolhouse.

00:05:09	Hall and Lange conversed about one-room schoolhouses. Hall remembered his teachers and their families well and reminisced about the school day. 

00:06:42	Question: Were there indicators that you were a smart boy? Answer: He said it was difficult to know that, but remembered always leading in the school setting. Follow up: Influential teachers? Answer: He recalled several, but also talked about the flexible learning process and enjoying reading library books.

00:08:45	Follow up: What did you do on the farm? Answer: Hall discussed dairy farm life, recalling early mornings, fishing in the stream (an important part of his early life), and finding Native American artifacts in the stream and fields after every plowing season.

00:12:24	Question: Were there Native Americans in your school? Answer: Yes; he recalled several groups and individuals in their area of WI, as well as the etymology of Tomah. He mentioned that footpaths running from Black River Falls to Portage to Madison ran right through their property.

00:14:38	Question: After 8th grade? Answer: From his grade school class of 3, he went to Tomah HS class of 300. He talked about details of getting to know classmates, taking the bus. Follow up: Was it a good HS? Answer: He thought so.

00:16:16	[no question] He discussed getting involved in class leadership quite quickly, being junior and senior class president. Follow up: Consciously? Answer: He didn’t know; someone in his sophomore class “ran him,” but he knew the rural students too.

00:17:15	Question: Teachers? Answer: He talked about his sophomore history teacher—it was during his class that President Kennedy was shot—and his wrestling coach.

00:18:20	Follow up: Interest in law? Answer: Not other than history—he intended to study medicine in HS. He explained the influence of the “Interact” program on him and the Rotary Club.

00:21:05	Question: You didn’t want to continue farming? Answer: Yes; he enjoyed farming, but had no interest in staying on the farm.

00:22:18	Question: Were you politically active early on? Answer: With his grandfather as an assemblyman, his father grew up in the capitol; and he was a page for the WI Senate.

00:23:36	Question: So you were a product of WI? Answer: Yes; he firmly believed in WI ideals. 

00:24:19	Question: You knew you were going to college? Answer: No question; he said while his brother went to LaCrosse, he only applied to Madison. Follow up: How competitive was it to get in? Answer: Not as much as now.

00:26:36	Question: Madison was relatively placid when you came? Answer: Yes, and he had an aunt here. He recalled privileges he had in HS that helped him get to know admin.

00:27:42	Question: Your first year? Answer: He found it exciting. He and Lange discussed student from the East Coast, though Hall related better with those from smaller communities. Follow up: Classes? Answer: He remembered calculus and English, which he loved. So he was moving toward the humanities. 

00:31:23	Follow up: Social involvement? Answer: He recalled being recruited for crew, but he had so much homework that he couldn’t do it. But he got involved in dorm politics and social activities, and later in his fraternity. He generally recalled studying a lot during that first year.

00:34:24	Question: Were you aware of war activism? Answer: Yes; they were all draft age so they were aware, but he didn’t become active until his junior year when he was introduced to work in the Senate as a state page. During those early years, he still supported the war, and remembered being tear-gassed out of a class, which irritated him since he felt he had a right to go to class.

00:38:49	Question: Elaborate on what that was like. Answer: Hall recalled going about his life while demonstrations were going on, recalling going through National Guardsmen to get to work and the irony of being in a class on political thought while tear gas was being thrown at students on Bascom Hill. He felt Kent State and Sterling Hall showed how out of control the movement had gotten, but regretted that someone had to die for it to be slowed down.

00:43:09	Question: Why a fraternity? Answer: He said he needed a place to live and get meals because he was busy studying. Follow up: Did you enjoy it? Answer: He said the location was beautiful, a Frank Lloyd Wright house right on the lake. He was also very social in college, so a fraternity was more appealing than an apartment. He talked about alcohol and drug consumption and social contract-like governance at the fraternity, in which he was a leader for some time.

00:49:23	Question: A major? Answer: He chose law because it allowed him flexibility to take the courses he wanted, and he was flirting with hospital administration at the time.

00:50:49	Question: Significant faculty? Answer: He remembered Stan Cutler, but also a visiting professor from Washington DC, from whom he gained an interest in Thomas Jefferson.  

00:53:04	Question: You were still politically conservative? Answer: Yes; he said he wasn’t actively supporting the war, but wasn’t protesting either. But he said he would have gone to Vietnam had he been drafted—he discussed Melvin Laird’s influence in implementing the lottery and the Vietnamization policy.

00:56:18	Question: Were your parents unhappy with you here? Answer: No; worried.

00:56:43	Question: Plans after senior year? Answer: He was thinking about law school, but naively applied to UVA, Marquette, and Denver, all competitive academic programs. While he’d been accepted to UW and North Dakota, he accepted at UND in order to do a summer program in 1970 in DC with Vernon Thompson. Since he did very well at UND, he decided to stay for the rest of his law degree.

00:59:43	[no question] He discussed the “wonderful” summer as an intern with Vernon Thompson, whom several members of his family knew.

01:01:01	[no question] He continued talking about his law school days at UND, during which time he and his wife were married. After his first year, he took a job at a professor’s prompting at the Bureau of Prisons (over a job he’d had with the attorney general of WI) working at Levenworth Prison and always wondered what would have happened had he worked in WI.

01:05:16	Question: How difficult was it living in ND? Answer: He said he “just studied.” The weather was worse than in WI, and he recalled the “snirt,” wearing air force parkas, and one’s car tires freezing. He discussed going to Winnipeg for social activity.

01:07:33	[no question] While he was basically just studying, he enjoyed law school, being intrigued by every class. He talked about getting to know professors and his develop-ping interests in hospital administration and classical law. He was also an editor of law review, in which he published his first article.

01:10:44	Question: You wanted to be in health law? Answer: Yes; after his second year of law school, he worked for NIH as an analyst for the Bureau of Health Manpower studying state licensing laws. 

01:12:15	Follow up: And you’re developing connections in DC? Answer: Yes; both in 1970—when interns were educated very well—and in 1972 he learned a great deal in DC. Follow up: Did you entertain a political future? Answer: Even in college he did, but as he learned what one had to do to attain that his “ardor waned.” 

01:16:53	Question: After UND? Answer: He wondered if he needed to continue for an addi-tional degree and applied to Harvard, UW, and the University of Pittsburgh, the latter of which the NIH funded. He got a MS in health law at Pitt, and his wife Ellie got a job at Carnegie-Mellon University.

01:20:45	Question: Getting a job? Answer: He remembered thinking about working for NIH, but eventually getting a position at Purtell, Purcell, Wilmot & Burrows, a hospital and health law firm. Follow up: Why not NIH? Answer: They wanted to come back to WI.

01:23:20	Follow up: What was the job? Answer: He was a research associate for the firm, and he said they enjoyed Milwaukee very much. After about a year and a half, he saw the ad for the general counsel position at Marshfield Clinic, which appealed to him and for which he felt very prepared because of his Pitt schooling.

01:26:26	Question: Were you doing anything at this point tying back to UW? Answer: Not really at this point. It wasn’t until they got to Marshfield that he rekindled his interest in Madison, partly because of the intensity of the work in Milwaukee. 

01:29:02	Question: Did you know what would be required of in-house counsel? Answer: He said he was naïve, but he had grown up near Marshfield and his father-in-law knew many of the senior physicians at Marshfield. He spoke about how the administrator at St. Joseph’s informed Purtell that he’d been offered the job before he had even decided on it, which underscored his position in the firm.

01:33:56	Follow up: Any hesitations? Answer: Not really; most of the people coming out of the Pitt program were going to hospitals as in-house counsel, so he’d trained for it. He quipped about promising his wife that Marshfield would be a 2, 3 yr stint.

01:36:43	Question: Was the small-town element attractive? Answer: No; they’d loved Milwaukee, but he was attracted to the challenge of being first counsel. He explained his interview process, making the decision to leave and breaking the news to the firm.

01:40:04	End of First Interview Session

Second Interview Session (December 3, 2009): Digital File

Time	Keywords
00:00:00	Start of Interview/Interviewer’s Introduction

00:00:25	Question: What were you hired to do at Marshfield. Answer: He offered some history of the clinic, which had been in town since 1916 and moved to a new location in 1975. He was the first general counsel in 1976, coming into a newly-created position. Ben Laughton was president and Russell Lewis was a major figure.

00:02:58	Question: Your job description? Answer: Patterned after Mayo Clinic’s general counsel at a time when Marshfield was growing, he was asked to do three projects—an informed consent manual, looking at self-insurance for medical malpractice, and investigating tax exempt status.

00:05:48	Question: Did you have a role with the whole body of physicians? Answer: He explained the shareholder and governance structure at MC and his secretarial, legal, and parliamentarian work at meetings. 

00:07:46	Question: Was it difficult to maintain good relationships with all the doctors? Answer: He couldn’t remember but once disagreeing with the chair.

00:09:06	Question: Talk about self-insurance. Answer: He said this was beginning to be a big issue for hospitals in the mid-1970s due to recent WI legislation making it possible and the fact that the clinic had paid $2 million in premiums while only receiving $26,000 in claims financed by their insurer. So they did a feasibility study, which indicated that their group was large enough to spread risk and make self-insurance feasible.

00:12:11	[no question] He explained the practicalities of starting the self-insurance plan, starting with $1 million (on a letter of credit), “coding” physicians according to risk, drafting insurance contracts, and have reserves made. He explained why Marshfield chose an “occurance policy” as opposed to “claims made policy.”

00:16:54	Follow up: Was the move controversial? Answer: The board was generally in favor of it because of the savings. He recalled doing the presentation at the board meeting, and only having one person vote against the measure because of the risk. By 1978 the clinic ran its own self-insurance plan.

00:19:08	Question: Who ran it? Answer: It was run out of his office, with the help of medical-legal nurses to do risk control. He explained the process of incident reporting, department chair meetings, and the professional practice committee’s role in running the system effectively.

00:21:02	Lange and Hall talked about how incidents were reported back. Hall emphasized that the system was very sensitive to patient unhappiness—billing, wait time, procedures, etc.—to minimize patient need to go to a “willing lawyer.” He said the goal was to avoid second incidents to provide better care and keep out of court.

00:23:42	Question: Was your role in professional practice to settle the waters? Answer: Some-what, though he qualified that it wasn’t usually department chairs. He told an anec-dote about how he defused a conflict with Ben Lawton in a meeting. He suspected that general counsel was accepted at MC because he worked for the group’s good.

00:25:29	Question: Did this establish your reputation? Answer: He thought so; as first general counsel, he tried to maintain good relationships with outside counsel.

00:26:55	[no question] He noted that self-insurance paid dividends for MC financially, but also paid attention to unhappy patients, which highlighted good service and built goodwill.

00:28:02	[no question] Hall explained how they quickly ate away at the letter of credit that started the plan by going through 3 years without having to pay a claim. He discussed the first claim, for $300, which was “hard money to part with” but settled out of court because the resident’s action was indefensible. But after several years, dividends on the principle of the self-insurance fund were able to pay claims.

00:32:33	Question: Since 1978, any major claims? Answer: He discussed embarrassing cases to MC, though these were understandable considering how many procedures doctors did. He cited the example of a woman paralyzed by a doctor’s mistake—they took care of her for the rest of her life.

00:34:29	Follow up: Were you always the lead negotiating settlement? Answer: He said it depended—the trial lawyer always did litigation, but he maintained relationships with them. He cited some examples of defense lawyers they retained.

00:36:07	Follow up: Was the exec. committee ever tempted to blame you for an incident? Answer: No; he was always well received, and doctors couldn’t veto settlements, but he emphasized that half of the years of the fund’s existence there were no settlements.

00:37:27	Question: Was the plan a leader in the state? Answer: It was the first clinic self-insurance plan in WI; others have adopted their model since.

00:38:13	Question: It’s interesting that a rural clinic was pre-eminent in the state. Answer: He noted how it was fortunate, since the physicians supported innovation and had vision. He said he never had any doubt that MC was better than the average clinic.

00:39:19	Question: What’s the social dynamic of settlement? Answer: He thought everyone knew that these things could happen, though it’s possible to get through a career without a malpractice settlement. He talked about the lack of no-fault litigation in WI.

00:42:19	Question: You’re really in the “guts” of the medical system? Answer: Through self-insurance and consent, yes. He discussed how highly regulated medicine is by the state and national government, which which they endeavored to comply.

00:43:46	Follow up: It must have lent you poise. Answer: He thought working with the insurance commissioner was enjoyable and helped his career.

00:45:17	[no question] Hall discussed the how they’d found that medical-legal nurses could accomplish more than legal assistants for the self-insurance plan, though they’d tried using legal assistants. Follow up: Was that an innovation? Answer: He thought so.

00:47:50	Question: Do you continue to keep your hand on self-insurance as director? Answer: He talked about it to all new doctors and allowed incidents to be reported to him.

00:49:32	Question: Tax-exempt status? Answer: The second issue MC asked him to work on, tax-exempt status became a possibility with the things it was doing in the 60s and 70s—equal salary, research, care to those unable to pay, etc. He explained the basis of tax-exempt, based on reasonable compensation. 

00:51:43	[no question] He detailed investigating tax-exempt status, contacting and retaining Bob Bromberg, who was an expert in tax exemption. Bromberg came to Marshfield and reported that it would be impossible, since it would have been a substantial expense to get converted over. But then he had a revelation that they could get 501(c)(4) status, retroactive to the 1960s, which they eventually applied for.

00:58:02	[no question] He explained how they proposed this 1024 (application for exemption) to the board, for which a big issue was whether the board would have to change. They accepted and the application was made and accepted. He explained why they applied to be exempt since 1960.

00:59:50	Follow up: Was it contentious at all? Answer: No; it worked well when it was clear the board could remain as it was. He explained how the IRS granted them 501(c)(4) because they’d already built safeguards into the system and didn’t pay dividends. He chronicled the application process, which was completed in 1980. They were also able to get sales tax exemption, though not real estate exemption.

01:04:24	[no question] He explained the benefits of tax exempt status, being able to keep reserves in the clinic for contingencies and fueling the growth of regional clinics.

01:05:38	[no question] He said in 1986, they then applied for 501(c)(3) status (under which they could get real estate tax exemption and direct charitable contributions) when they incorporated accounts receivable into the clinic. He explained the conditions they set for this application, which was premised on putting the Research Foundation out of business and merging it with the clinic for efficiency purposes.

01:08:55	[no question] He explained the difficult negotiations with the Foundation to merge it with the clinic. They were granted (c)(3) status in 1987, partly due to the efficiency of Robert Bromberg.

01:11:37	[no question] He discussed the modus operandi of MC since the board’s composition (all internal) required that they be above reproach. He also felt good about the amount of charity the clinic did compared with other similar clinics.

01:13:40	[no question] With (c)(3) status, he said, they were able to issue bonds that were able to build regional clinics.

01:14:45	Question: Was MC getting (c)(3) status an issue for the city? Answer: Yes because they claimed real estate tax exemption. He explained how they did this carefully, coming first to Madison to get the exemption approved and then going to the cities. But since it was a blow to their tax base, the move was controversial in the towns, though they voluntarily entered into agreements in lieu of taxes will all of them.

01:17:15	[no question] He detailed how they had to negotiate with the towns of Mosinee and Eau Claire, which didn’t want to approve tax exemption and filed a district case against them, which the towns won. Though Marshfield Clinic requested the Supreme Court review the case, a precedent set in a previous case against UW Foundation worked against them and the Supreme Court declined to review. So they lost their real estate exemption at an estimated cost of $2 to 4 million.

01:22:58	Question: You got access to donations when the Research Foundation was absorbed by the clinic? Answer: Yes; he discussed how the national advisory board had also moved over to the clinic more generally and had paid dividends over the years, especially in the insight it offered on trends elsewhere.

01:27:38	Question: How did the change from common salary to differential salary happen? Answer: Hall explained the context of the original system (paying everyone regardless of specialty equally) and why it changed in the late 1970s. This pertained especially to radiology, which claimed it needed higher salaries to survive and broke the system. Some thought it would be the end of (c)(3) status, but they were able to convince the IRS that it was necessary to recruit quality faculty. The next major break was the 4% rule, which he explained further, and the next the augmentation system.

01:33:29	[no question] He continued to talk about differential salaries, explaining the shift to salary ranges from the augmentation system. He also explained how this brought up questions about their tax-exempt status, though the IRS never challenged them.

01:36:31	Follow up: Did this change alter the climate at the clinic? Answer: Yes; as soon as radiology got different salaries, other departments wanted to be recognized as special too. So it was an annual review process to look at the salary plan, but he felt something had been lost in the group by these negotiations.

01:39:36	End of Second Interview Session

Third Interview Session (April 15, 2010): Digital File

Time	Keywords
00:00:00	Start of Interview/Interviewer’s Introduction

00:00:27	Question: Talk about the Wisconsin Alumni Association (WAA). Answer: Hall began by explaining how he was awarded WAA’s “outstanding junior man award” and his work with the new student program for the WAA.

00:02:08	[no question] When he and his wife moved to Marshfield, they then reinvigorated the Marshfield chapter of the WAA in 1982. He talked about former active members. Follow up: Why? Answer: It seemed that there were a number of graduates who were enthusiastic about it. They raised sponsors for scholarship, participated in Founders’ Day, and then he received the WAA’s “sparkplug” award.

00:06:43	Question: Were parent ambivalent about students coming to Madison? Answer: Yes, and guidance counselors, who often encouraged students to go to their institution. He said students were often encouraged to go to Eau Claire, which had a reputation for undergraduate education. 

00:08:39	[no question] He discussed events the Marshfield chapter hosted, like the summer student sendoff and Founders’ Day, which was often attended by important figures from around the state.

00:10:22	[no question] He recounted how in 1997 he was asked to become a member of the national board of directors for WAA. Follow up: Is that elected? Answer: He explained how the board was chosen by the outgoing board, with the incoming chair being the chair of the nominating committee. He explained the roles he’d served in since becoming part of the board as well as chairs of the board in those years—Gayle Langer, Arlie Mucks, Paula Bonner.

00:15:34	Question: Was there a designation of how many board members had to come from WI? Answer: He thought this was informal, and opined about the benefits of having a mix of people with the chair fairly close to WI.

00:17:26	[no question] He recalled enjoying being chair of the board of the WAA. Follow up: Why was that? Answer: He thought he enjoyed the opportunities it presented, remembering a graduation ceremony speeches, in which he emphasized that your relationship with UW doesn’t end at graduation.

00:20:17	Question: Do the chair have a formal relationship with the Regents or UW Foundation? Answer: Not the Regents, though one saw them; but the heads of the WAA and UW Foundation were ex officio members of each other’s boards.

00:21:58	[no question] He said other events he enjoyed were board meetings and getting to travel to see one away football game per year.

00:24:20	Question: What are the difficult issues to face the WAA? Answer: He thought his chairmanship was difficult because of the economic state of the country. He recalled struggling to balance the budget, be frugal, and determine one’s role, noting that WAA relies on the UW Foundation for fund-raising rather than duplicating.

00:27:19	Question: What percentage of alumni are members? Answer: He thought about 30,000 were members, remarking that it had to stay relevant.

00:28:22	[no question] He and Lange talked about WAA’s lobbying activity.

00:29:02	Question: Badger Action Network? Answer: He thought it was a good way for legislators to get to know UW.  He recalled a postcard campaign, noting that WAA could be a serious political force when mobilized, but this could be difficult when alumni ranged across the political spectrum.

00:32:06	He and Lange talked about interaction between local Marshfield representatives and senators and the WAA chapter in Marshfield.

00:34:14	Question: Is there an effort to build a WAA endowment? Answer: Yes; through the UW Foundation, and they were also working on a major gift for the 100 year anniversary of WAA.

00:36:05	Question: How does the WAA compare to other Big-10 universities? Answer: He thought it wasn’t as big as some others, but was active, emphasizing the idea of WAA membership, the endowment concept, and how WAA used its resources.

00:39:45	Question: Other issues facing WAA today? Answer: Continuing to be relevant. Follow up: How do you do that? Answer: He thought one had to rely the allegiance of grateful alumni, emphasizing how memories of college get created and the need to generate an emotional draw to WI.

00:43:16	Question: Does the board overlap much with UW Foundation or boards of visitors? Answer: Not with the Foundation or Regents, but sometimes visitors, because of the time commitment. Question: Typical agenda? Answer: Normally reports by the chancellor and UW Foundation, then they talk about programming at WAA. He and Lange talked about the anniversary and the founding year of WAA.

00:46:51	Question: Are board members expected to contribute to the WAA? Answer: Never formally, but they often donated generously.

00:48:11	Question: Will you stay active with WAA? Answer: Yes; there was a past presidents board and he would continue working on the anniversary.

00:48:53	Question: Alumni awards? Answer: He said the hardest part was narrowing it down. He emphasized his desire to write his own speeches for the event, and they talked about it being the premier event on campus and its long-term payoff.

00:54:16	Question: Are you optimistic about the future of the WAA? Answer: Yes; they came through some struggles, but the finances looked better now.\

00:55:48	Question: Successor search? Answer: He thought if something happened to Bonner, one of the vice presidents could carry on. They talked about the contribution of Gayle Langer, helping to professionalize it; he supposed his contribution was turning it toward relevance, financial diversity, and serving the university.

00:59:27	End of Third Interview Session

Fourth Interview Session (April 23, 2010): Digital File

Time	Keywords
00:00:00	Start of Interview/Interviewer’s Introduction

00:00:19	Question: How do you see the Alumni Assn (WAA) in the governance of UW in the next decades. Answer: Hall saw WAA as one of the “legs” that supports UW, complementing the administration and athletics, thus he saw it as critical to UW as state funding became less central to the funding of the university.  WAA served building long-term relationships that could be turned into gifts. While he never saw UW becoming private, he did see private giving as becoming more important.

00:05:32	Question: Talk about the Blue Cross episode for the Marshfield Clinic. Answer: Hall explained the background of the lawsuit—in 1972, a trial joint venture was formed for an HMO between MC and Blue Cross/Blue Shield.  Though there were minor difficulties, the partnership worked well for some time.

00:09:46	[no question] He recounted how in the mid-1980s, when Blue Cross was going through a major computer reorganization, it became obvious that the two organiza-tions were interested in different things and in 1987 the partnership was dissolved and the contract was rolled over into a smaller HMO managed by MC (Security Health Plan [SHP]). Since then, the health plan had grown significantly.

00:12:35	Follow up: That dissolution was cordial? Answer: Yes; everyone felt it was time to move on, though there were some discussions over assets. 

00:13:53	[no question] After the conversion of SHP to tax exempt status, Thomas R. Hefty became president of Blue Cross and in 1993 proposed a new understanding with MC like the one they’d had before 1987. When that failed, Hefty felt that MC had become too large and needed to be broken up as AT&T had been in an antitrust suit. Blue Cross then threatened “a firestorm of litigation” if MC didn’t accept the proposal.

00:17:13	Follow up: Was it “take it or leave it”? Answer: He further detailed negotiations with Blue Cross’ board, at the heart of which was who could control the price of medicine. Also implicit in the complaint was the claim that MC had created a monopoly in central WI over an essential service and was charging excessive fees.

00:21:10	Follow up: File in federal court? Answer: The lawsuit was filed in Judge Shabaz’ court in Madison in Feb. 1994—he explained details of the filing. At the same time, a public relations campaign was unleashed even before MC had received the complaint.

00:23:20	[no question] He reviewed the response MC issued to the case, noting that the clinic had previously conducted an antitrust review out of due diligence. He explained the “rocket docket,” the lawyers they brought in to litigate, and how the summer of 1994 was devoted to the case and to producing documentation for it. They moved for summary judgment

00:26:32	Follow up: What does Blue Cross “lacking standing” mean? Answer: He explained that as a private competitor, Blue Cross couldn’t show they’d been aggrieved by MC, and thought a public agency should have brought the case.

00:27:16	Follow up: Were you besieged by questions from MC personnel? Answer: He said it was a huge news item and took up a lot of attention that summer.

00:28:12	[no question] Continuing with the narrative of the case, he said Judge Shabaz refused their summary judgment motion in July and September, so the case went to district court in late December—not a good time to hear a very complex antitrust case. On Dec 30, the jury ruled down the line in favor of Blue Cross.

00:31:01	Follow up: Were you apprehensive about the jury? Answer: Yes, because antitrust was a very complex legal argument and none of the jurors were college-educated.

00:32:48	[no question] He recounted going back for the damage verdict on January 4, noting that it was a runaway jury believing everything Blue Cross said and ignoring MC’s witnesses. The damages were over $48 million, though jurors felt tricked and remorseful that the judge didn’t remind them that original damages were tripled.

00:34:48	[no question] With a Jan. 4 damage verdict, they had a month to file the largest appeal bond in WI to date, which was difficult since so much of their assets were tied up. They also had difficulties getting banks to sign on to the bond, but eventually were able to file it. He described the uneasy atmosphere at the clinic during that time, and preparations they made should the appeal bond fail. At this point, Blue Cross was playing hardball, trying to force a settlement and refusing to stay enforcement.

00:39:10	[no question] Continuing with his narrative, he talked about the turnaround after the appeal bond was field.  Only after this did Judge Shabaz reduced the verdict by $31 million, but they also knew the case was going to 7th circuit appeals court (Chicago). He detailed other legal specifics of Shabaz’ reduced verdict and talked about some critical witnesses in the first case.

00:44:12	[no question] Filing the appeal in April 1995, MC was granted a stay of the injunction by Judge Posner (a noted antitrust scholar). Follow up: Was this a message that you’d win this case from 7th circuit? Answer: Yes; MC had already put together strong anti-trust compliance, but couldn’t afford supra-competitive pricing, which he detailed.

00:46:58	[no question] He continued to explain Judge Posner’s taking on the case, the court taking a personal interest in, and fast-tracking, the case. They were getting huge national press at the same time. He explained the legal arguments MC made to the appeals court and “friends of the court” briefs that were coming in.

00:50:56	[no question] On Sept. 18, 1995, the 7th circuit court of appeals ruled that SHP was not monopolist, a decision Hall felt Shabaz should have made originally on legal grounds, not allowing the trial to go to jury. He read a number of passages from Posner’s decision that emphasized legal issues and mistakes that had been made, though Posner did find evidence for division of markets based on some “hot documents” that had been unwisely produced by some MC doctors. This verdict was essentially a scolding for Shabaz, thus the division of markets case was remanded, but not to Shabaz’ court.

00:58:42	[no question] He outlined events succeeding the appeal—an unhappy Blue Cross petitioned the US Supreme Court for a writ of certiorari, which Atty. Gen. Jim Doyle supported (much to MC’s chagrin, but he suspected due to political pressure).

01:02:02	[no question] When the Supreme Court denied Blue Cross’ petition, the case was remanded to Judge Barbara Crabb, whose pre-trial statement he read from. Much of this decision had to do with the way Blue Cross was trying to “swing wide” of the damages awarded even by the first district court case, and throwing out their damage calculations and experts, which hurt Blue Cross’ case.

01:08:04	Follow up: Why is Blue Cross continuing? Answer: He thought to save face.

01:08:34	[no question] He continued by recounting how Tim Cullen (their atty) filed for summary judgment against Blue Cross, which Crabb awarded. He opined that Blue Cross came away with nothing because they had been greedy.
 
01:11:01	Follow up: Did you think this was the end? Answer: No; they anticipated an appeal because Blue Cross had too much invested. This they did, but because Blue Cross’ damage experts were poorly received, Posner did not reverse Crabb’s ruling. Blue Cross petitioned the US Supreme Court, was denied, and Crabb again enforced a 3-year injunction against division of markets. The final award to Blue Cross was only $654,000 for lawyer expenses (of a total of $5 to 10 million) for division of markets, a huge embarrassment for Blue Cross.

01:16:37	[no question] Following the Blue Cross suit, class action lawsuits started to come in piggybacking off Blue Cross, starting with Rozema v. Marshfield Clinic (1997) and followed by two others, which were consolidated with the first. He believed that Blue Cross had influenced this move.

01:20:36	[no question] As the case progressed, he said, what hurt MC was that Rhinelander Medical Center and Northcentral Health Protection Plan (two other defendants) got nervous and settled out from underneath MC and started to cooperate with the plaintiffs, which funded litigation against MC. MC then weighed the cost of litigating and decided to settle at $4 million, which he lamented went mostly to lawyers and not to patients. He detailed the settlement.

01:25:17	[no question] Continuing to discuss the litigation, he explained the implications of trying to take over the Wausau Medical Center at the same time that all these lawsuits were being tried.

01:28:47	[no question] Finding a silver lining to the whole affair, he noted that MC had signed a contract with Blue Cross in 1999 and had a good working relationship since. 

01:29:25	[no question] Continuing, he recounted how MC filed a complaint against Aetna-Travelers in March 1999 for not paying the full 2 $10 million policies, which was tried, ironically, in Judge Shabaz’ court.

01:32:09	[no question] He reflected on what MC had learned through the litigation process—who one’s friends were, the need for a D&O policy, the integrity of integrated system at the clinic despite the human impact of the cases. He listed people who had had to give depositions.

01:34:36	Follow up: Did you ever do a “post-mortem” with Blue Cross staff? Answer: Not specifically. He didn’t hold ill-will against them, and they worked together, but he was pleased that MC won.

01:36:06	Follow up: Reaction at the clinic? Answer: He remembered the great relief of MC staff, observing that it had paid dividends there in terms of antitrust compliance policy, contract negotiations, and patient care. He discussed the size and reach of Marshfield Clinic.

01:40:28	End of Fourth Interview Session

End of Oral History #1058