Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Justice Department, North Carolina allege hospital blocked insurers from ‘steering’, (Jun 9, 2016)

By Jeffrey May, J.D.

Charlotte-Mecklenburg Hospital Authority has used contract restrictions that prohibit commercial health insurers from "steering" patients to use less-expensive health care services offered by its competitors in violation of Section 1 of the Sherman Act, according to a complaint filed today by the Department of Justice Antitrust Division and the State of North Carolina in the federal district court in Charlotte. The government seeks an injunction, prohibiting the hospital authority, which operates Carolinas Medical Center and nine other hospitals in the Charlotte area, from enforcing contract provisions that prohibit insurers from steering customers towards other health care providers or from retaliating against an insurer for steering (U.S. v. Charlotte-Mecklenburg Hospital Authority, Case 3:16-cv-00311).

According to the complaint, "steering typically occurs when an insurer offers consumers a financial incentive to use a lower-cost provider or lower-cost provider network, in order to lower their healthcare expenses." The government contends that the defendant imposed these restrictions in its contracts with insurers in an effort "to protect itself against steering that would induce price competition and potentially require [it] to lower its high prices."

The defendant's market power enabled it to negotiate high "reimbursement rates" for treating insured patients, the complaint alleged. Because steering threatened these higher prices, the authority allegedly encouraged insurers to steer patients toward it by offering health insurers modest concessions on its prices and blocked insurers from allowing its competitors to do the same.

The suit appears to be the Antitrust Division’s first challenge to the practice of imposing steering restrictions in the health care sector. In 2010, however, the government challenged efforts by American Express (AmEx), MasterCard, and Visa to prevent merchants from encouraging consumers to use lower-cost payment methods when making purchases. MasterCard and Visa settled the suit, and AmEx's "anti-steering" rules were found to violate Sec. 1 of the Sherman Act and were enjoined by the federal district court in Brooklyn, New York.

Acting antitrust chief's comments. "This lawsuit will stop a dominant hospital from using its market power to undermine its smaller competitors’ efforts to attract patients by competing on the price and quality of their services," said Renata B. Hesse, Principal Deputy Assistant Attorney General in charge of the Antitrust Division in announcing the action. "Americans should be able to choose a healthcare provider that gives them and their families the most cost-effective and appropriate treatment," she added.

North Carolina attorney general's statement. Charlotte consumers face higher health care costs and fewer choices because of efforts by Carolinas HealthCare System to prevent competition, according to North Carolina Attorney General Roy Cooper. "Pushing medical costs artificially higher and limiting choices harms North Carolina families," Cooper said in announcing the action.

This is Case No. 3:16-cv-00311.

Companies: Charlotte-Mecklenburg Hospital Authority

News: Antitrust AntitrustDivisionNews