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From Antitrust Law Daily, March 5, 2019

Former patient cannot sue for monetary damages in antitrust suit against healthcare provider

By Gregory Kane, J.D., M.B.A.

An individual was unable to bring an antitrust claim for monetary damages against a healthcare provider who was deemed a special function government unit and thereby shielded by the Local Government Antitrust Act of 1984.

Healthcare provider The Charlotte-Mecklenburg Hospital Authority was not liable for monetary damages in an antitrust suit filed by a patient alleging that the provider enforced anticompetitive steering restrictions in contracts between commercial health insurers and its providers, according to the federal district court in Charlotte, North Carolina. A former patient who made co-insurance payments to a North Carolina healthcare provider brought antitrust claims against that healthcare provider identical to those brought by the Department of Justice and the State of North Carolina in a proceeding that was currently pending before the court. The only difference between the suits was the claim for monetary damages due to violations of antitrust law which were barred by the Local Government Antitrust Act of 1984 as the defendant is deemed a special function government unit. The claim for monetary damages was dismissed in a motion for judgment on the pleadings while the claims for injunctive relief were stayed pending the outcome of the governments’ suit (Benitez v. The Charlotte-Mecklenburg Hospital Authority, March 4, 2019, Conrad, R.).

Background. Atrium, formerly the Charlotte-Mecklenburg Hospital Authority and previously doing business as Carolinas HealthCare System, 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-owned, managed, and affiliated hospitals and other healthcare providers earned net operating revenue of close to $10 billion.

On June 19, 2016, the Justice Department and the State of North Carolina filed suit against Atrium alleging unlawful contract restrictions that prohibit commercial health insurers in the Charlotte area from offering patients financial benefits to use less-expensive healthcare services offered by competitors. In its complaint, 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. While a settlement between the governments and Atrium was announced in November, the suit remains pending.

The present suit was brought by a former patient who used Atrium general acute care inpatient hospital services for seven overnight stays. After incurring more than $3,000 in co-insurance payments, the patient filed suit alleging that Atrium’s anti-competitive steering restrictions, as detailed in the government suit, drove up prices for inpatient services and thereby inflated his co-insurance payments. Plaintiff seeks classwide damages and injunctive relief under Section 1 of the Sherman Act and Section 4 and 16 of the Clayton Act, identical charges as in the government suit with the exception of the request for monetary damages. The defendant filed a motion for judgment on the pleadings.

Monetary damages. Defendant’s motion for judgment on the pleadings regarding the claims for monetary damages was granted by the court. The Local Government Antitrust Act of 1984 (LGAA) provides statutory immunity from antitrust claims seeking monetary damages brought under Section 4 of the Clayton Act when acting in an official capacity. Defendant was created under Chapter 131E of the North Carolina General Statutes as a public hospital authority and is recognizes as a body corporate and politic under North Carolina law. The Fourth Circuit has previously granted absolute antitrust immunity from damages to a municipal hospital established under Chapter 131E, determining it protected as a special function government unit under the LGAA. The defendant, similarly formed for a public purpose to benefit the state, was also immune from antitrust claims seeking monetary damages via the LGAA.

Injunctive relief. The request to enjoin the defendant from using and enforcing the anti-steering provisions in its contracts with insurers was identical to the requested relief in the government suit. Resolution there would resolve the present matter. Therefore, in order to avoid duplicative litigation, the injunctive relief claim was stayed by the court pending a resolution in the government action.

This case is No. 3:18-cv-00095-RJC-DCK.

Attorneys: Benjamin Thomas Sirolly (MoloLamken LLP) for Raymond Benitez. 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: The Charlotte-Mecklenburg Hospital Authority d/b/a Carolinas HealthCare System d/b/a Atrium Health

MainStory: TopStory Antitrust NorthCarolinaNews

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