North Carolina's largest healthcare system is fighting back against a lawsuit by the U.S. Justice Department that alleges the system imposed anti-competitive contract requirements on insurers, saying a federal appeals court has completely rejected the government's arguments.
Carolinas HealthCare System urged a North Carolina federal judge on Wednesday to toss out Justice Department's suit after the U.S. Court of Appeals for the 2nd Circuit rejected the government's arguments against similar contract arrangements in a case involving American Express.
Although the North Carolina judge is not bound to follow the 2nd Circuit's judgment, Carolinas maintains the appellate ruling is a crushing blow for the Justice Department's arguments, and the government has failed to show how the steering arrangements will harm competition.
The Justice Department claims Carolinas' narrow network agreements with four insurers could hinder competition in the market. The system argues they will instead promote competition.
“The government does not contend that the hospital authority has secured steering restrictions through coercion,” Carolinas' brief said. “Rather, what the government does point to is the hospital authority earning consumer loyalty and discounting prices. These activities are the hallmark of competition – the polar opposite of an exercise of market power.”
In the American Express case, the credit card company added steering restrictions to its contracts with merchants that would prevent them from encouraging consumers to use cash or other credit cards with lower merchant fees. A district court initially ruled the provisions were anti-competitive, but the 2nd Circuit overturned that decision last month. The Justice Department had heavily relied on the Amex win as support for its case against Carolinas.
The 10-hospital system has steering provisions in contracts with Aetna Health of the Carolinas, Blue Cross and Blue Shield of North Carolina, Cigna Healthcare of North Carolina and United Healthcare of North Carolina. Those insurers make up 85% of the commercially insured market in the Charlotte area, the Justice Department said.
In exchange for the steering provisions, Carolinas provided the insurers with discounted rates for its facilities and services. Without the arrangements, the health system claims the insurers would take advantage of its inclusion in their networks.
The case is one of the first from Justice Department targeting anti-steering provisions in hospital contracts. In the past, the agency has attacked the issue by challenging contracts with most-favored-nation clauses.