A self-insured pharmacy sued Advocate Aurora Health on Tuesday for allegedly using all-or-nothing contracts to force Wisconsin employers to pay inflated prices rather than steer patients to lower-cost hospitals outside the health system.
Advocate Aurora allegedly charges more than its competitors for routine services like a colonoscopy with a biopsy, which costs $10,700 at Advocate Aurora compared to $4,700 at Froedtert & the Medical College of Wisconsin, according to the lawsuit filed Tuesday in a Wisconsin federal court by Uriel Pharmacy, which offers a self-funded health plan for its employees in East Troy, Wisconsin. The not-for-profit health system operates 27 hospitals in Wisconsin and Illinois.
The plaintiff seeks to represent a class for all businesses, unions and local governments with a self-funded health plan who paid for services from Advocate Aurora in Wisconsin in the last six years. The pharmacy also requested damages and an injunction preventing anticompetitive behavior.
"(Advocate Aurora Health) has gone to extraordinary lengths to suppress innovative insurance products, such as tiered plans, that would reduce costs for employers. And it has used a combination of acquisitions, referral restraints, non-competes and gag clauses to suppress competition from other healthcare providers and attempt to expand its monopoly over acute inpatient hospital services into other, separate markets," the complaint said.
Advocate Aurora said in a statement that it is "mounting a vigorous defense."
"Our data continues to demonstrate the added value we provide for our patients, communities and team members by growing as a system. Through our population health model, we drive efficiency and quality improvements, enhance health outcomes and bend the cost curve," the company said.
The complaint included a range of allegations from forcing all-or-nothing contracts on employers and making employed physicians sign non-compete contracts to rejecting any reference-based pricing models.
Advocate Aurora allegedly told a large vendor during contract discussions that, "you need us more than we need you," illustrating their market power. The health system has the only center offering hyperbaric oxygen therapy in Washington County, the only onsite heart-care team in the Milwaukee region and the only psychiatric hospital in Sheboygan.
Uriel Pharmcy alleged those competitive advantages led to a 20% increase in inpatient prices in the Milwaukee area from 2015 to 2019, according to Health Care Cost Institute data. In 2019, utilization across inpatient and outpatient services in the Milwaukee area were 14% below than the national average, while prices were 44% above the average, HCCI found.
A consultant who has negotiated contracts with Advocate Aurora described the company's negotiating posture is, "you either sign it or we don't do business," the lawsuit alleged.
Advocate Aurora allegedly implemented a policy on Oct. 1, 2020 that refused to accept payment from or submit claims to self-funded health plans that use reference-based pricing, where payments are based on a percentage above the hospital's Medicare rates.
Anthem, one of the largest insurers in Wisconsin, told a local self-funded health plan that its contracts with Advocate Aurora prevented them from allowing local employers to offer health plans that would incentivize employees to seek lower-cost, higher-quality care outside of the system, the lawsuit alleged.
Both federal and state regulators are eying anticompetitive contracting policies. There are at least 10 proposed bills and lawsuits that aim to limit all-or-nothing, anti-steering or exclusionary provisions in provider contracts.
All-or-nothing contracting policies were the main focus of one of the lawsuits involving Northern California-based Sutter Health, which agreed to pay $575 million last year to compensate payers who allegedly had to pay inflated rates because of practices like all-or-nothing contracting. Then-California Attorney General and the current Health and Human Services Department Secretary Xavier Becerra joined the case in 2018.
But less than a dozen states currently have laws related to anticompetitive contracting in place, according to 2020 data from UC Hastings and UC Berkeley. Only three states have completely banned non-compete provisions in physician contracts; more than a dozen states have some limitations on non-compete clauses.
The lawsuit comes on the heels of Advocate Aurora announcing plans to join forces with Atrium Health, a 40-hospital system based in Charlotte, N.C. The combined organization would have 67 hospitals, an estimated $27 billion in revenue and nearly 150,000 employees across Illinois, Wisconsin, North Carolina, South Carolina, Georgia and Alabama.
Advocate Health Care and Aurora Health Care merged in 2018, and the organization has since looked for merger partners outside of Illinois and Wisconsin.