North Carolina Hospital Chain Carolinas HealthCare Faces Antitrust Lawsuit

North Carolina Flag, MalletThe U.S. Justice Department and the North Carolina Attorney General’s Office have filed suit against Carolinas HealthCare System (CHS), alleging that the hospital chain has been illegally reducing competition in the local health care market.

Lawsuit Claims CHS Drives Up Costs and Limits Consumer Choice

The lawsuit claims that Carolinas HealthCare uses unlawful contract restrictions, prohibiting health insurers in the area from encouraging customers to use the less expensive services that are offered by its competitors. The lawsuit further alleges that CHS encourages insurers to steer patients toward the hospital, giving them the right to terminate their contracts if the insurer tries to steer patients away from CHS. Carolinas HealthCare has included these types of restrictive clauses in its contracts with four major health insurance carriers: Blue Cross Blue Shield of North Carolina, Aetna Health of the Carolinas, Cigna Healthcare of North Carolina, and United Healthcare of North Carolina. These insurers cover 85% of the commercially insured residents in the Charlotte area.

The lawsuit contends that an insurer selling in the Charlotte area must have CHS as a participant in order to have a viable business in the area. This gives CHS leverage in negotiating with the insurers. 

The lawsuit asks the District Court in the Western District of North Carolina to prevent Carolinas HealthCare from "using unlawful contract restrictions that prohibit commercial health insurers in the Charlotte area from offering patients financial benefits to use less-expensive health care services offered by CHS' competitors."

According to state Attorney General Roy Cooper, “Pushing medical costs artificially higher and limiting choices harms North Carolina families…Consumers who need health care deserve accurate information and access to quality, affordable options.”

CHS Claims Commitment to Fair Competition

Carolinas HealthCare issued a response stating:

Carolinas HealthCare System is committed to fair competition and looks forward to presenting our position in court.Our arrangements with insurers are similar to those in place between insurers and health-care systems across the country. We have neither violated any law nor deviated from accepted health-care industry practices for contracting and negotiation.

Carolinas HealthCare is a Charlotte-based nonprofit hospital system that operates Carolinas Medical Center and nine other area hospitals. It controls approximately 50 of the local markets, generating $8.7 billion in revenue in 2014. Carolinas HealthCare employs 60,000 people in 40 hospitals and 900 health care locations in North and South Carolina. 

In 2012, the Charlotte Observer and Raleigh News and Observer published an investigation on large non-profit hospitals. The study reported that Carolinas HealthCare was among the large nonprofit hospitals that pushed up healthcare costs and paid executives millions, leaving its patients with bills that they struggle to pay. The investigation brought to light the fact that North Carolina hospitals receive enormous tax breaks, but do very little to help the indigent and uninsured. This was in stark contrast to states like Texas and Washington, where hospitals are regulated and required to provide a minimum amount of charity care. Following the investigation, state Attorney General Cooper indicated that he would examine whether to use antitrust laws or new legislation to regulate the state’s hospitals.

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