DOJ Deal Ends Monopoly for Texas Health System

United Regional Health Care System has agreed to a demand from federal prosecutors that it no longer block health plans from contracting with other hospitals in the Wichita Falls, TX area, the Department of Justice has announced.

Federal prosecutors said URHCS illegally used contracts to maintain its monopoly for hospital services in violation of the Sherman Act, which meant that consumers paid more for healthcare. This is the first case brought by DOJ since 1999 that challenges a monopoly with in traditional anticompetitive unilateral conduct.

"Unfettered competition among hospitals is vital to ensuring that patients receive high-quality, low-cost healthcare," said Christine Varney, assistant Attorney General in charge of the Department of Justice's Antitrust Division. "Today's settlement prevents a dominant hospital from using its market power to harm consumers by undermining its competitors' ability to compete in the marketplace."

Phyllis Cowling, president/CEO of URHCS, said the private, nonprofit health system "was pleased with the resolution" of the investigation.

"While we disagree with the Department's interpretation of the facts and would have welcomed the opportunity to address this matter in a court of law, we believe it is in the best interest of United Regional and our patients to instead move forward with our total attention and resources focused on our passion of providing excellence in healthcare for the communities we serve," Cowling said in a statement posted on the URHCS Web site.

URHCS is the largest hospital in Wichita Falls, controlling about 90% of general acute-care inpatient hospital services, and 65% of outpatient surgical services. It is the region's only provider of cardiac surgery, obstetrics and high-level trauma care. URHCS's average per-day rate for inpatient hospital services sold to commercial health insurers is about 70% higher than its closest competitor for the services that are offered by both hospitals.

DOJ said URHCS systematically demanded most commercial health insurers to sign contracts that required the insurers to pay significantly higher prices if they contracted with a nearby competing healthcare facility. Since URHCS is a must-have hospital for any insurer that wants to sell health insurance in the Wichita Falls area, and because the penalty for contracting with the health system's rivals was significant, almost all insurers offering health insurance in Wichita Falls entered into exclusionary contracts with URHCS.

The proposed settlement -- now under consideration by a U.S. District Judge in North Texas -- would be in effect for seven years. It would ban URHCS from using agreements with commercial health insurers that improperly inhibit insurers from contracting with competitors. In particular, URHCS would be banned from conditioning the prices or discounts that it offers to commercial health insurers based on exclusivity. URHCS also would be banned from taking retaliatory actions against an insurer that contracts with a rival provider.