Antitrust Law Daily U.S. consent decree barring hospital system’s anti-steering provisions approved
Thursday, April 25, 2019

U.S. consent decree barring hospital system’s anti-steering provisions approved

By Stephanie K. Mann, J.D.

The Department of Justice Antitrust Division and State of North Carolina claimed that the dominant hospital system prevented insurers from steering patients toward less-expensive health care services.

The federal district court in Charlotte, North Carolina, approved a consent decree, resolving claims by the U.S. Department of Justice and North Carolina Attorney General’s Office that the dominant hospital system in the Charlotte, North Carolina, area, exploited its market power to force insurers to agree to contract provisions that prohibited them from steering patients toward less-expensive health care services offered by its competitors. Under the final judgment, the health system was prohibited from enforcing anticompetitive steering restrictions in contracts between commercial health insurers and its providers and also bars the hospital system from seeking contract terms or taking actions that would prohibit, prevent, or penalize steering by insurers in the future (U.S. v. Charlotte-Mecklenburg Hospital Authority, April 24, 2019, Conrad, R.).

In their complaint against Atrium, the federal and state enforcers explained that "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." They asserted that Atrium’s anti-steering provisions prevented health insurers from encouraging consumers to choose healthcare providers offering better overall value and even constrained them from providing consumers and employers with information regarding the cost and quality of alternative health benefit plans.

According to the Justice Department, Atrium’s steering restrictions, however, curbed comparison shopping and thereby interfered with the competitive process, resulting in fewer choices and higher costs for consumers. The government further contended that Atrium imposed the restrictions in an effort "to protect itself against steering that would induce price competition and potentially require [it] to lower its high prices." Atrium’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 health insurers to steer patients toward it by offering the insurers modest concessions on its prices. Atrium’s contract provisions blocked insurers from allowing its competitors to do the same.

A proposed settlement was reached on November 15, 2018. A modified Final Judgment was then filed on April 11, 2019, but the unopposed motion to enter the modified agreement notes that the modifications to the original proposed Final Judgment do not change the structure or substance of the remedy in the original proposed Final Judgment or implicate the interest of any non-party.

Comment. Under the Antitrust Procedures and Penalties Act, the Justice Department received one comment letterfrom the North Carolina State Health Plan for Teachers and State Employees and the State Treasurer of North Carolina. While the State Health Plan agreed with the purpose of the proposed settlement, it offered limited changes relating to the monitoring of Atrium’s compliance with the settlement, the extent of price transparency, and the possible preclusions of monetary relief and penalties.

In its response, the government expressed its belief that the proposed settlement provided strong mechanisms for monitoring Atrium’s conduct and ensuring its compliance with the final judgment, allowed effective transparency that patients can use to compare quality and out-of-pocket costs, and does not preclude the State Health Plan or any other party from pursuing an action to recover monetary damages or other relief against Atrium.

Additionally, State Health Plan recommended and independent auditor due to its belief that the compliance mechanisms in the proposed settlement were insufficient. However, the government responded that the requirement in the settlement that Atrium provides a copy of the Final Judgment to all of the major insurers in the Charlotte area to notify those insurers of the settlement terms is sufficient to ensure compliance. Namely, because those insurers are incentivized to alert the government bodies if Atrium takes any action deemed to constitute a violation. Additionally, the Justice Department and North Carolina can demand access to Atrium’s books and records; interview Atrium’s officers, employees, or agents; and require Atrium to submit written reports or responses to interrogatories to ensure compliance.

The State Health Plan also urged an expedited timeline for implementation of procedures and compliance with the final judgment, but given the size of Atrium as well as the time and effort required to develop and approve a compliance plan, the government noted that the timeline contained in the settlement is a "reasonable period."

Turning to the issue of pricing transparency, the government concurred with State Health Plan’s statement that price information enables consumers to make informed healthcare decisions, but disagreed with the belief that the Final Judgment should not allow Atrium to place any limitations on health insurers’ ability to disseminate Atrium’s prices. Publicly disclosing this information would impact competitively sensitive price information, said the response.

The case is No. 3:16-cv-00311-RJC-DCK.

Attorneys: Eric Damian Welsh, U.S. Department of Justice, for the United States. K. D. Sturgis, North Carolina Attorney General's Office, for State of North Carolina. Hampton Y. Dellinger (Boies, Schiller & Flexner, LLP) and James P. Cooney, III (Womble Bond Dickinson [US] LLP) for Charlotte-Mecklenburg Hospital Authority d/b/a Carolinas Healthcare System.

Companies: Charlotte-Mecklenburg Hospital Authority

MainStory: TopStory Antitrust AntitrustDivisionNews NorthCarolinaNews

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