Federal and state officials claim that the healthcare system used its market power to leverage steering restrictions in its contracts with major insurers, resulting in higher costs for consumers.
Federal and state officials in North Carolina on Thursday filed a civil suit against Charlotte, NC-based Carolinas HealthCare System, alleging that the state's largest healthcare system used its market power to dictate "steering restrictions" in contracts with commercial health insurance companies that ultimately led to higher costs for consumers.
In a complaint filed in U.S. District Court in Charlotte, the U.S. Justice Department Antitrust Division and North Carolina regulators allege that CHS used the 50% market share of its nine acute care inpatient hospitals in the Charlotte area "to require steering restrictions in its contracts with every major insurer. "
"These provisions," the complaint continues, "have prevented insurers from, among other things, introducing health plans that encourage patients to use medical providers that offer lower-priced, higher-quality services."
"Americans should be able to choose a healthcare provider that gives them and their families the most cost-effective and appropriate treatment," Principal Deputy Assistant Attorney General Renata B. Hesse, head of the Justice Department's Antitrust Division, said in prepared remarks.
"This lawsuit will stop a dominant hospital from using its market power to undermine its smaller competitors' efforts to attract patients by competing on the price and quality of their services."
CHS Responds
In a statement released to the media Thursday, CHS said it will contest the allegations, which the health system characterized as "a dispute over certain language" in contracts with insurance companies.
"Our arrangements with insurers are similar to those in place between insurers and healthcare systems across the country. We have neither violated any law nor deviated from accepted healthcare industry practices for contracting and negotiation," CHS said.
Incoming Carolinas HealthCare CEO Driven by Community, Mission
"In fact, we have been applauded by the United States government for the quality care and cost reduction programs we've implemented, programs it hopes to model in other parts of the country."
"Carolinas HealthCare System is strongly committed to providing accurate and useful information to consumers and patients as it relates to cost, quality and overall value of the care they receive. We remain dedicated to making healthcare more affordable, while ensuring that we fulfill our mission. We provide financial assistance to patients in need, as well as medical education and research in the communities we serve. These and other mission-based service totaled over $1.65 billion or 19% of total operating expenses in 2015," CHS said.
In March, 2015, a contract between CHS and UnitedHealth expired, effectively rendering all Carolinas HealthCare facilities and physicians "out of network" for United Healthcare customers. They agreed to a new contract the following month.
CHS is the largest healthcare system in North Carolina and one of the largest not-for-profit healthcare systems in the United States. The health system operates 39 hospitals in North Carolina and South Carolina and reported net operating revenues of $8.7 billion in 2014.