Advocate Aurora Health Faces Allegations of Anticompetitive Practices
Anticompetitive practices such as “all-or-nothing” contracts and excessive merger activity have caused Wisconsin employers to pay higher healthcare prices.
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- A self-insured pharmacy has filed a class action lawsuit against Advocate Aurora Health, alleging that the health system engaged in anticompetitive practices that raised healthcare prices for Wisconsin employers.
Uriel Pharmacy, located in East Troy, Wisconsin, submitted the complaint to the US District Court of the Eastern District of Wisconsin.
The business claimed that Advocate Aurora used an “all-or-nothing” approach and required commercial health plans to contract with all of its facilities—including those with high prices—in their networks if they wanted to include any facilities.
In addition, Advocate Aurora prevented employers and health plans from directing individuals to receive higher value care at hospitals outside of Advocate Aurora’s network, according to the court documents.
“AAH has gone to extraordinary lengths to suppress innovative insurance products, such as tiered plans, that would reduce costs for employers,” the lawsuit stated. “And it has used a combination of acquisitions, referral restraints, non-competes, and gag clauses to suppress competition from other healthcare providers and attempt to expand its monopoly over acute inpatient hospital services into other, separate markets.”
High prices at large hospital systems due to industry consolidation among providers have been the driving factor behind rising healthcare costs for Wisconsin employers, the plaintiffs wrote. By continuing to acquire new facilities, Advocate Aurora expands the scope of its high prices.
In addition, the frequent acquisitions give the health system more power to enforce its “all-or-nothing” contracts with employers and health plans.
Advocate Aurora recently announced plans to merge with Atrium Health and provide care for patients across Illinois, Wisconsin, North Carolina, South Carolina, Georgia, and Alabama. The lawsuit raised concerns about this potential merger due to Advocate Aurora’s current behaviors that are already harming competition.
As a result of Advocate Aurora’s anticompetitive practices, employers, unions, and local governments have been overpaying for healthcare by hundreds of millions of dollars. Services at Advocate Aurora facilities have significantly higher price tags compared to competing health systems.
For example, joint replacements at Milwaukee-based Advocate Aurora facilities cost $21,000 more than they do at a nearby competitor, the complaint noted. According to the plaintiffs, these price increases have not been associated with higher quality care.
The class action also highlighted how Advocate Aurora operates under a nonprofit status but does not direct adequate savings to charity care. According to a report from the Lown Institute, Advocate Aurora spent $498 million less per year on charity care and community investment than it received in tax breaks.
Instead, the health system directed these profits to further its merger and acquisition plans, the plaintiff alleged.
What’s more, the health system used the savings to compensate its chief executive officer $13.4 million, its chief business development officer over $2.5 million, and 15 executives over $1 million.
“Without intervention, AAH will continue to use anticompetitive contracting and negotiating tactics to raise prices on Wisconsin employers and use those funds for aggressive acquisitions and executive compensation,” Uriel Pharmacy wrote. “This will reduce economic growth in Wisconsin, harm patients and taxpayers, and drive employers out of Wisconsin.”
Due to Advocate Aurora’s unlawful conduct, Wisconsin employers have been subjected to high prices for acute general care hospital services, the lawsuit stated. The plaintiffs are seeking monetary relief, injunctive, declaratory, and other equitable relief, and attorney fees and costs through the class action lawsuit.
“All-or-nothing” contracts have been a common aspect of recent antitrust lawsuits. In February 2022, six Connecticut residents alleged that Hartford HealthCare used this approach and required health plans to include hospitals with higher prices in their networks.
The lawsuit also claimed that the health system used anti-steering practices to prevent consumers from seeking care at other low-cost, high-quality facilities.
