North Carolina's largest healthcare system has kept medical costs high and suppressed competition by illegally imposing certain requirements on insurers with which it contracts, the U.S. Justice Department and state attorney general alleged in a lawsuit filed last week.
Carolinas HealthCare System places restrictions in its contracts with insurers that bar them from offering tiered networks that include competing hospitals in their top tiers, according to the lawsuit. The system also forbids the insurers from offering narrow networks that include only its competitors, the lawsuit alleges.
Carolinas said in a statement Thursday that it hasn't broken any laws or deviated from accepted industry practices for contracting.
“In fact, we have been applauded by the U.S. government for the quality care and cost reduction programs we've implemented, programs it hopes to model in other parts of the country,” according to the statement.
Antitrust experts say the suit may be one of the first out of the Justice Department against a provider over so-called anti-steering provisions in contracts. The Justice Department has, however, targeted a similar issue in the past, contracts that included most-favored-nation clauses, said Barak Richman, a Duke University law professor. Such clauses may require a provider to give a particular insurer the lowest contracted rate on services. A number of states have now outlawed these clauses, Richman said. He suspects that anti-steering provisions in contracts between insurers and providers may be next.
This latest lawsuit's biggest implications would likely be for hospitals that have the same kind of market power as Carolinas and that also enter into such arrangements with multiple, large insurers, said Jeff Miles, an antitrust expert with law firm Ober Kaler.