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Regional News/Midwest: Hospital goes after rival
Suit claims St. Francis is violating antitrust laws

By Joe Carlson
Posted: February 9, 2013 - 12:01 am ET

Methodist Health Services Corp. in Peoria, Ill., is suing its larger local competitor for more than $300 million, saying the bigger hospital is breaking state and federal antitrust laws in contracts with insurance companies.

The complaint filed in U.S. District Court in Peoria is a variation on a type of dispute at issue in several antitrust cases in recent years involving exclusionary terms in contracts between hospitals and insurers.

Methodist Medical Center, a 282-bed hospital, says the parent company of 574-bed OSF St. Francis Medical Center has contracts with four insurance companies that compel the payers not to sign contracts with St. Francis' competitors. St. Francis has threatened to pull out of insurers' networks or impose financial penalties if the companies do business with its competitors, the lawsuit alleges.

“St. Francis has leveraged its size and status as a 'must-have' hospital to enter, maintain and enforce these exclusionary contracts,” the lawsuit says. “Because St. Francis is the most expensive hospital in the area, this drives up healthcare costs and harms consumers.”

Jim Farrell, senior vice president and spokesman for St. Francis' parent, nine-hospital OSF Healthcare System in Peoria, declined to comment on the lawsuit at deadline. “It will take some time for our legal counsel to review the 39-page complaint,” Farrell said in an e-mail the day the lawsuit was filed.

Methodist alleges that St. Francis' conduct is violating the federal Sherman Act, the Illinois Antitrust Act and the Illinois Consumer Fraud Act, and has interfered with its ability to do business with four insurers: Aetna, Blue Cross and Blue Shield of Illinois, Health Alliance and Humana.

In 2011, the Justice Department settled similar allegations of anti-competitive conduct between a hospital and insurers in Wichita Falls, Texas.

In that case, United Regional Health Care System settled the case without admitting to the allegations that its contracts with payers illegally excluded competitors and ultimately drove up consumer costs. Hospital officials disputed the government's assertions, but agreed to a seven-year moratorium on exclusionary pricing contracts.

In Michigan, the Justice Department is headed for trial later this year in a civil case in which Blue Cross and Blue Shield of Michigan is accused of using exclusionary terms in its contracts with hospitals that force the healthcare providers to give Blue Cross the lowest prices in the market—terms that competitors say drive up their costs.

Methodist Medical Center, above, says St. Francis is interfering with its ability to do business with four insurers.

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