DOJ files suit against health system over antitrust concerns

The health system strongly disagrees with the allegation, attorney says

The U.S. Justice Department and the North Carolina Attorney General have filed an antitrust lawsuit against Carolinas HealthCare System, alleging it uses its market power in the state to illegally reduce competition.

Carolinas is one of the largest not-for-profit health care systems in the United States, with 10 hospitals and revenue of about $8.7 billion in 2014. In a civil complaint filed Thursday, the Justice Department and North Carolina's attorney general say that the system controls about 50 percent of the relevant local market and uses its market power to negotiate terms with insurers that are anticompetitive.

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According to Modern Healthcare, the lawsuit may be a signal that regulators are planning to increase their scrutiny of so-called "anti-steering" practices in the industry.

Details of the complaint

The complaint alleges that Carolinas barred insurers that contract with it from providing financial incentives that could steer patients away from the health system. Specifically, the complaint states that the systems' contracts with insurers require they not offer tiered insurance plans that allow competing health care providers to be included in top tiers.

The insurers named in the complaint are Blue Cross and Blue Shield of North Carolina, Aetna Health of the Carolinas, Cigna Healthcare of North Carolina, and United Healthcare of North Carolina. Together, those four insurers cover about 85 percent of the commercial insurance market in the Charlotte area.

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State Attorney General Roy Cooper in a statement argues the arrangements reduce competition and increase costs. "Consumers who need health care deserve accurate information and access to quality, affordable options," he says.

Pushing back

In a statement, Carolinas forcefully defended the arrangements, saying they are common in the health care industry. "We have neither violated any law nor deviated from accepted health care industry practices for contracting and negotiation," the statement says. "In fact, we have been applauded by the U.S. government for the quality care and cost reduction programs we've implemented, programs it hopes to model in other parts of the country."

"I think it's fair to say that [Carolinas] strongly disagrees with the allegation that this is anticompetitive behavior," says Jim Cooney, an attorney with Womble, Carlyle, Sandridge & Rice LLP who is representing the health system (Evans, Wall Street Journal, 6/9; Schencker, Modern Healthcare, 6/9; Alexander/Garloch, Charlotte Observer, 6/9

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