Health & Family

Class-action lawsuit joins attack on Carolinas HealthCare over costs

Carolinas Medical Center is the flagship of Carolinas HealthCare System, which is the subject of an antitrust lawsuit by the federal and state governments.
Carolinas Medical Center is the flagship of Carolinas HealthCare System, which is the subject of an antitrust lawsuit by the federal and state governments. mhames@charlotteobserver.com

Three months after the state and federal and government sued Carolinas HealthCare System over alleged antitrust violations, a San Francisco law firm has filed a class action lawsuit alleging the hospital system engaged in illegal and anti-competitive actions.

The suit named Mecklenburg County resident Christopher DiCesare as its lead plaintiff, but gave no specifics about how he was damaged, except to say he’s a customer of Cigna Healthcare of North Carolina, one of four large companies that provide 85 percent of the commercial insurance in the Charlotte area.

In its June antitrust suit, the federal Department of Justice and the state attorney general claimed Carolinas HealthCare has driven up health care costs through illegal efforts to prevent competition.

Carolinas HealthCare has denied the allegations and asked the federal court to dismiss the complaint. In a recent statement, the hospital system said the government’s complaint is baseless.

Before filing the class-action suit late last week, the 65-lawyer California firm of Lieff Cabraser Heimann & Bernstein had advertised on its web page that it was looking for people who might have been harmed – by paying higher prices for insurance or having limited health care options – because of Carolinas HealthCare’s alleged anti-competitive actions.

Charlotte-based Carolinas HealthCare is the region’s largest hospital system, a public nonprofit with $9 billion in annual revenue and more than 60,000 employees at more than 40 hospitals and 900 medical offices.

Both the governments’ suit and the class-action suit allege that Carolinas HealthCare uses its dominance to persuade insurers to include language in its contracts that encourages consumers to use Carolinas HealthCare and discourages or forbids consumers from choosing Charlotte-area competitors, such as Novant Health and CaroMont Health.

As a result, the suit alleges DiCesare and other consumers “pay higher prices for health insurance coverage, have fewer insurance plans from which to choose, and are denied access to consumer comparison shopping and other cost-saving innovative and more efficient health plans than would be possible if insurers could steer freely.”

The class-action suit alleges that Carolinas HealthCare “purports to be a nonprofit working in the public interest” but “in fact operates in its own interest, leveraging market power to maximize revenues at the expense of its patients.” The suit describes the system as having “expanded aggressively,” growing by 50 percent since 2011, reporting average annual profits of more than $300 million, having more than $2 billion in investments.

Some allegations in the suits reflect points made in a 2012 newspaper series, “Prognosis: Profits,” by The Charlotte Observer and The (Raleigh) News & Observer. It found that Carolinas HealthCare and other large nonprofit hospitals in North Carolina have pushed up health care costs, paid executives millions and left thousands with bills they struggle to pay.

After acquiring new physician practices, the class-action suit says, “Carolinas HealthCare immediately increases the billing rates for the same services those practices offered before. These price increases are often devastating for families struggling to pay for life-saving health care.”

For example, the suit says the hospital system’s Levine Cancer Institute last year collected nearly $4,500 per dose for irinotecan, a drug used for rectal cancer, when the average sales price was less than $60. Meanwhile, 2015 compensation for retired Carolinas HealthCare CEO Michael Tarwater rose by 26 percent to $6.6 million, and nine other top executives at Carolinas HealthCare were each paid more than $1 million last year.

Brendan Glackin, a partner and antitrust specialist with the San Francisco law firm, said he could not provide more information about the named plaintiff DiCesare or disclose names of other plaintiffs in the class action. He also said he couldn’t give an estimate of the amount of damages being sought.

Karen Garloch: 704-358-5078, @kgarloch

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