The U.S. Justice Department urged a North Carolina federal judge to take a closer look at Carolinas HealthCare System's steering provisions in insurer contracts and to ignore the health system's pleas for a quick escape from the suit.
Although the feds recently suffered a loss in a similar contract arrangement suit involving American Express in the 2nd U.S. Circuit Court of Appeals, the Justice Department says that decision holds no bearing on the Carolinas case and doesn't undermine their challenge against these deals. The Justice Department alleges that the 10-hospital system used anti-competitive steering provisions in its contracts with four major North Carolina insurers to ensure patients would come to their hospitals.
Aetna Health of the Carolinas, Blue Cross and Blue Shield of North Carolina, Cigna Healthcare of North Carolina and UnitedHealthcare of North Carolina hold 85% of the commercial insurance market in the Charlotte area, according to the feds.
Carolinas maintained that their arrangements with the insurers promote competition, because the health system is providing discounted services in exchange for “customer loyalty.” It urged the court to consider the American Express decision as a “fatal blow” to the Justice Department's case.
But the Justice Department says that's a “baseless assertion,” as the credit-card industry is set up completely differently than the healthcare industry. What's more, the feds claim the American Express decision shows the need for a deep dive into the facts surrounding Carolinas' steering arrangements rather than a quick end to the suit – the American Express case went all the way to trial before the judgment was finalized and appealed.
“Here, there is no record at all – much less one establishing that CHS's steering restrictions are lawful,” according to the Justice Department. “CHS' motion raises highly fact-intensive arguments that cannot be resolved without fact and expert discovery, and an evidentiary record.”
In the Carolinas case, the health system alleges it needed the steering provisions in order to prevent insurers from using its inclusion in their plans as a marketing ploy. This is one of the first instances where the Justice Department has challenged anti-steering provisions in the industry.