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Atrium Health Settles Anticompetitive Hospital Contracting Claims

The North Carolina health system agreed to a settlement that will prohibit it from engaging in anticompetitive hospital contracting practices, like anti-steering.

Hospital contracting

Source: Thinkstock

By Jacqueline LaPointe

- Atrium Health in North Carolina recently agreed to a settlement with the Department of Justice (DoJ) and the North Carolina Office of Attorney General that prohibits the health system from using anticompetitive hospital contracting terms with payers.

Specifically, the settlement forbids the health system formerly known as Carolinas HealthCare System from using anticompetitive steering terms in their contracts between commercial payers and its providers in the Charlotte, North Carolina metropolitan area.

“With healthcare costs rising, vigilant antitrust enforcement is an essential tool for protecting consumers,” Assistant Attorney General Makan Delrahim stated in an official press release. “By eliminating restrictions that curb comparison shopping and interfere with competition among healthcare providers, today’s resolution of our antitrust action allows consumers in the Charlotte area to benefit from competition when making critically important healthcare choices.”

In response, Atrium Health emphasized in in its own press release its commitment to competition based on value. “Competition drives improvements in healthcare quality and services – ultimately benefitting every patient,” the release stated.

The health system added that the settlement is not an admission of wrongdoing on the health system’s part and the organization will not have to pay any fines or penalties.

If approved by the court, the settlement will resolve civil antitrust litigation from June 2016. The DoJ filed the lawsuit against Atrium Health to challenge contract provisions that prohibited steering with major private payers.

Payers use steering to offer consumers lower cost healthcare options. Through the narrow networks, payers aim to incentivize consumers to seek care at more cost-effective hospitals and physician offices, resulting in increased competition between providers, lower premiums for consumers, and overall improved healthcare services, the DoJ explained.

The department alleged that Atrium Health used its market power as the dominant health system in the Charlotte area to restrict private payers from encouraging their beneficiaries from choosing healthcare providers outside of the system even if the providers offered lower cost, higher quality care.

Atrium Health is based in Charlotte, North Carolina and operates, manages, or has strategic affiliations with 47 hospitals and more than 900 care sites throughout the Carolinas. Eighteen of those care sites are in the Charlotte metro area.

The DoJ also accused Atrium Health of use anticompetitive, anti-steering hospital contracting practices to restrict commercial payers from offering consumers and employers with the cost and quality information for alternative health plan benefits.

“Competition encourages healthcare providers to reduce costs, lower prices, and increase quality,” said Delrahim. “Atrium’s steering restrictions interfered with the competitive process, resulting in fewer choices and higher costs for consumers.”

Atrium Health asserted in its press release that the hospital contracting practices in question in the lawsuit stemmed from contracts created as long ago as 2001. And the health system originally negotiated for the language in question to “ensure Atrium Health was provided an equal opportunity to compete for patients.”

But the settlement would clarify that Atrium Health cannot enter contracts with private payers that would penalize the insurers for establishing narrow networks that do not include the health system’s hospitals or physicians. The contracts also cannot contain language that prevents the payers from disclosing prices to consumers and employers.

Atrium Health responded by noting that its hospital contracting practices have evolved since 2001.

“As the healthcare landscape continues to rapidly evolve, Atrium Health's contracting language has also evolved to reflect current healthcare practices,” the health system stated. “Throughout the litigation, Atrium Health has shared its perspective and position with the DOJ and the North Carolina Office of Attorney General, and is pleased to be able to reach a mutually acceptable settlement agreement.”

In light of the Atrium Health lawsuit and several studies, policymakers are putting hospital contracting practices on the front burner.

Senate Judiciary Committee Chairman Chuck Grassley (R-IA) recently urged the Federal Trade Commission (FTC) to investigate whether hospitals are deliberately engaging in anticompetitive hospital contracting practices, such as using anti-steering terms.

“If true, these practices undermine Congress’s efforts to lower the cost of, and increase access to, health care for millions across the country…The last thing American patients and consumers need at this time is a healthcare system that permits or encourages anticompetitive agreements that hinder access to lower cost care,” Grassley wrote to the FTC in October 2018.

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