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From Antitrust Law Daily, November 15, 2018

Charlotte’s Atrium Health agrees to scrap anti-steering provisions imposed on insurers

By E. Darius Sturmer, J.D.

Atrium Health, the dominant hospital system in the Charlotte, North Carolina, area, has agreed to a settlement with the Department of Justice and the North Carolina Attorney General’s Office that will prohibit it from enforcing anticompetitive steering restrictions in contracts between commercial health insurers and its providers, the Justice Department announced today. The proposed consent decree would resolve a civil antitrust lawsuit filed by the federal and state governments in June 2016 alleging that Atrium—then known as Carolinas HealthCare System—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 (U.S. v. The Charlotte-Mecklenburg Hospital Authority, Case No. 3:16-cv-00311-RJC-DCK).

Atrium is North Carolina’s largest healthcare system and one of the largest not-for-profit healthcare systems in the United States. Its flagship facility is Carolinas Medical Center, the largest hospital in North Carolina. Atrium also operates eight other general acute-care hospitals in the Charlotte area and owns, manages, or has strategic affiliations with more than 40 hospitals in the Carolinas. Atrium provides healthcare services throughout the Carolinas, including in freestanding emergency departments, urgent care centers, physician practices, outpatient surgery centers, imaging centers, nursing homes, and laboratories. In 2017, Atrium’s owned, managed, and affiliated hospitals and other healthcare providers earned net operating revenue of close to $10 billion.

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.

The complaint noted that insurers are increasingly designing health benefit plans that incentivize patients to choose more cost-effective hospitals and physicians. "Increased consumer access to these health benefit plans invigorates competition between providers to offer lower premiums and better overall healthcare services," the government remarked.

Atrium’s steering restrictions, however, curbed comparison shopping and thereby "interfered with the competitive process, resulting in fewer choices and higher costs for consumers," according to Makan Delrahim, Assistant Attorney General in charge of the Department of Justice Antitrust Division. The government 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.

The proposed settlement, filed today in the federal district court in Charlotte, not only prevents Atrium from enforcing steering restrictions in its contracts with health insurers, but also bars the hospital system from seeking contract terms or taking actions that would prohibit, prevent, or penalize steering by insurers in the future.

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

Attorneys: Andrew J. Ewalt, 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 The Charlotte-Mecklenburg Hospital Authority d/b/a Carolinas HealthCare System d/b/a Atrium Health.

Companies: Charlotte-Mecklenburg Hospital Authority

MainStory: TopStory Antitrust AntitrustDivisionNews NorthCarolinaNews

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