On June 9, the Department of Justice (DOJ) filed a civil antitrust lawsuit against Carolinas HealthCare System (CHS). The suit alleges CHS used its market power to force major insurers into contracts with steering restrictions. According to the DOJ, the contracts have prevented insurers from steering patients toward other hospitals that offer lower priced, higher-quality services, among other things.
“Americans should be able to choose a healthcare provider that gives them and their families the most cost-effective and appropriate treatment,” Principal Deputy Assistant Attorney General Renata Hesse, head of the Justice Department’s Antitrust Division, said in a press release.
The health system has denied the allegations. “Our arrangements with insurers are similar to those in place between insurers and healthcare systems across the country,” CHS said in a statement. “We have neither violated any law nor deviated from accepted healthcare industry practices for contracting and negotiation.”
Robert Jaffe, Senior Litigation Counselor in Kutak Rock LLP’s Washington, D.C. office, says that all healthcare providers are subject to antitrust laws and a provider’s belief that a proposed practice is "good medicine" or is consistent with "the way things have always been done" is not sufficient to protect it from government investigations or civil suits.
CHS controls a large share of the market
According to the lawsuit, insurers have tried to negotiate the removal of steering restrictions from their contracts, but have been unsuccessful because CHS has so much bargaining power. The health system owns 10 local hospitals and controls around half the region's market.
In a related article for The Charlotte Observer, Ames Alexander and Karen Garloch said some of the payer contracts allow CHS to terminate the agreements if the insurers try to steer patients to hospitals outside the system. This effectively gives CHS the ability to deny the payer and its customers access to the area’s largest health system.
Jaffe says the larger the provider entity, or the greater the impact of its practices on consumers or competitors, the more likely it will invite unwanted antitrust scrutiny. According to Jaffe, statements made during the 2015 DOJ/FTC joint workshop on the state of healthcare competition in the U.S. indicate that “anti-steering and most favored nation clauses in insurance company contracts with healthcare providers will receive particular antitrust attention.”
Tips for ensuring antitrust compliance
To ensure your organization is in compliance with antitrust laws, Jaffe recommends three basic steps for both payers and providers:
- Have a definite, written antitrust compliance policy, including a ban or red-flag on steering-type clauses.
- Institute training for employees that are in a position to run afoul of the antitrust laws, including all agents who negotiate with payer-provider counter-parties.
- Have all significant or problematic contracts and policies reviewed by experienced antitrust counsel, prior to signing.
Jaffe says that payer-provider agreements should leave each side free to make medical and referral decisions based on the patient’s health issues and the price and quality of services being offered, not on contractual restrictions or market power. “An affirmative contractual statement that each party is free to make referral decisions based solely on medical considerations can help avoid inadvertent antitrust problems,” he says.