More states are trying to limit hospitals' anticompetitive contracting policies through lawsuits or legislation while federal antitrust agencies revamp their regulations.
One of the most recent examples is in Connecticut, where Saint Francis Hospital and Medical Center sued Hartford HealthCare for allegedly protecting their acute-care monopoly by bullying physicians into anticompetitive contract terms, which inflated prices. It is the latest in a series of lawsuits that look to curb dominant health systems' market power.
Saint Francis is seeking financial damages, a permanent injunction preventing Hartford's alleged anticompetitive conduct and a court order to divest physician practices that Hartford has purchased since 2020.
"These actions do not involve competition to attract patients based on price and quality. Instead, they prevent such competition, by controlling large numbers of physicians and effectively locking up referrals of their patients," the complaint reads.
Hartford HealthCare denies the "meritless" allegations and will continue to focus on "serving the needs of our patients and our communities during this raging pandemic, as we care for more hospitalized COVID-19 patients than ever before," the organization said in a statement.
Inpatient services at Hartford's flagship hospital were 15% more expensive than at St. Francis as of 2018, even though it didn't perform as well as St. Francis on quality measures, according to the lawsuit filed in a Connecticut federal court this month. The price difference was mainly due to their contract provisions, St. Francis executives claim.
Hartford HealthCare allegedly penalized physicians in their affiliated physician group if they didn't refer patients to facilities within the system, would interfere with health plans' tiered networks that prioritize high-quality, low-cost hospitals and threaten to cut off independent physicians if they didn't refer patients to them.
Hartford Hospital priced its inpatient services at 199% the average national Medicare rate, according to 2018 RAND Corp. data, revealing that Hartford Hospital had the highest prices in the county. Inpatient prices in hospitals throughout Hartford, Connecticut were 24% higher than the national median, 2019 data from the Health Care Cost Institute show. The area inpatient market was highly concentrated, according to HCCI.
Sutter Health recently settled a major lawsuit with similar anticompetitive contracting allegations, but few states have laws that prevent those practices.
While there are at least 10 proposed bills and lawsuits that aim to limit all-or-nothing, anti-steering or exclusionary provisions in provider contracts, less than a dozen states currently have laws 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.
One of the several related lawsuits was in California, where Sutter 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. Sutter is now barred from penalizing insurers or self-funded employers for choosing to include some, but not all, of its facilities in their networks.
Proposed federal legislation introduced by Sens. Mike Braun (R-Indiana) and Tammy Baldwin (D-Wisconsin) looks to prevent health systems from forcing payers to contract with an affiliated hospital or physician group. The Healthy Competition for Better Care Act is currently in a Senate subcommittee.
The Federal Trade Commission and Justice Department are also overhauling antitrust regulations, which in part try to limit health systems' market power through closer scrutiny of physician acquisitions.
Physician consolidation and dominant health systems' exclusionary contract schemes have increased healthcare costs, research shows. Even though hospitals' patient volumes decreased by 11% from 2002 to 2016, total payments by commercial health plans to hospitals increased by 167% over that span, a 2018 study led by University of Southern California academics published in Health Affairs found.
While hospitals claim that they are charging more because patients are sicker, policy experts point to health systems' anticompetitive contract provisions.