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DOJ Reaches Proposed Settlement in Anti-Steering Case Against Atrium Health (f/k/a Carolinas HealthCare)

The Antitrust Division of the Department of Justice (the “DOJ”) announced a proposed settlement in its anti-steering case against Atrium Health (formerly known as Carolinas HealthCare System) (“Atrium”). US v. The Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System, No. 3:16-cv-00311 (W.D. N.C., Nov. 15, 2018). In its complaint filed in 2016, the DOJ had alleged that Atrium used its market power to insist on contract provisions with payors that limited or prohibited steering by the payors to lower-cost providers. The proposed settlement prohibits Atrium from using anticompetitive steering restrictions in its payor contracts.

According to the DOJ’s complaint, Atrium is the largest hospital system in the Charlotte area, with a 50 percent share of the inpatient hospital market. The DOJ alleged that Atrium used its market power to insert provisions in its contracts with payors that ranged from an outright prohibition on payors steering patients away from Atrium to lower-cost providers, to granting Atrium the right to terminate the contract for such steering. Steering is a method used by payors to offer consumers options to reduce some of their health care expenses. In March 2017, the district court denied Atrium’s motion for judgment on the pleadings. Atrium had argued that the complaint failed to demonstrate that the contract provisions actually lessened competition, adversely reduced the prices paid, or lacked procompetitive effects.

The proposed settlement contains the following prohibitions:

  • Atrium may not enforce the anti-steering provisions contained in its existing contracts with payors.

  • Atrium may not prohibit, prevent, or penalize a payor for the use of a narrow or tiered network in existing contracts and may not seek to obtain such provisions in new contracts.

  • Atrium may not prohibit, prevent, or penalize a payor for transparency — communication to consumers of price, cost, quality, or patient experience information — in existing contracts and may not seek to obtain such provisions in new contracts.

  • Atrium may not seek or obtain any contract provision that requires prior approval for the introduction of new benefit plans (except in the case of a co-branded plan).

  • Atrium may not seek or obtain any contract provision that requires it to be included in the most preferred tier (except under the same terms and conditions as any other provider in the Charlotte area).

  • Atrium may not take any action that penalizes a payor for providing transparency, or for designing, offering, expanding, or marketing a narrow or tiered network.

The proposed settlement also specifically identifies the following conduct as permitted:

  • Atrium may enforce contract provisions, including those that otherwise prohibit, prevent, or penalize narrow or tiered networks and transparency, to protect against carve outs — arrangements by which a payor unilaterally removes a particular health care service from coverage.

  • Atrium may restrict steering by a payor for any co-branded plan or narrow network in which Atrium is the most prominently featured provider.

  • Atrium may review prior to dissemination any of its information to be disseminated as part of a payor’s transparency effort, provided such review does not delay the dissemination. Atrium may also challenge the accuracy of any of its information to be disseminated and may enforce confidentiality provisions.

The proposed settlement would also require Atrium to ensure compliance by providing notice of the settlement to its officers and commissioners, to develop and implement compliance procedures, and to submit a written report of its compliance.

This case stands in contrast to the Supreme Court’s 5-4 American Express opinion, where the Court rejected DOJ’s challenge to the anti-steering rules American Express imposes upon merchants who accept its card. Ohio, et al., Petitioners v. American Express Company, et al., 138 S. Ct. 2274 (2018). Atrium had attempted to use the American Express case to end this challenge as well, but the DOJ vigorously attempted to distinguish American Express, including based upon Atrium’s much greater market share; prior to the settlement, the court had been unwilling to end the Atrium case at an early stage. For those who hoped this case would provide some guidance on the reach of American Express or the status of steering provisions in the health care context, there will be no guidance forthcoming here. Nonetheless, providers and insurers should assume that the DOJ will still be willing to carefully examine anti-steering provisions, particularly where higher market shares are involved.

The district court may enter the proposed settlement upon finding that it serves the public interest following a 60-day public comment period.

 

 

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Authors

Bruce D. Sokler

Member / Chair, Antitrust Practice

Bruce D. Sokler is a Mintz antitrust attorney. His antitrust experience includes litigation, class actions, government merger reviews and investigations, and cartel-related issues. Bruce focuses on the health care, communications, and retail industries, from start-ups to Fortune 100 companies.

Farrah Short

Special Counsel

Farrah Short is a Mintz Special Counsel who advises clients on antitrust and competition law, including merger review, competitor collaborations, government investigations, and private class action litigation. She specializes in counseling clients through the Hart-Scott-Rodino merger review process.