Here’s why Carolinas HealthCare could settle federal lawsuit

The main entrance to Carolinas Medical Center, owned by Carolinas HealthCare System, is shown in this file photo.
The main entrance to Carolinas Medical Center, owned by Carolinas HealthCare System, is shown in this file photo.

Carolinas HealthCare System could strike a settlement in a pending federal antitrust lawsuit, an outcome that might be influenced by its proposed combination with hospital system UNC Health Care, a former U.S. Justice Department attorney told the Observer.

Jon Jacobs was a trial attorney in the Justice Department’s antitrust division for 27 years before leaving this year to join Seattle-based law firm Perkins Coie. During his time at the Justice Department, Jacobs helped investigate and try hospital merger cases.

The lawsuit at issue was filed last year against Carolinas HealthCare by the Justice Department and the North Carolina Attorney General’s office. The civil suit alleges Charlotte’s dominant hospital system reduces competition through illegal contract restrictions that ban insurers from steering customers to lower-cost competitors.

In a statement, Carolinas HealthCare said it has not violated any law in its dealings with insurers, which it claimed did not deviate from accepted health care industry practices for contracting and negotiation. The Charlotte-based system also said it disagrees with the suit’s allegations that it imposed terms on insurance companies in contracts.

Jacobs said several factors might increase the odds of a settlement, including the fact that most civil antitrust suits end up settling before trial.

Also, Carolinas HealthCare could push for a settlement to help win government clearance for the combination with UNC Health, Jacobs said. But he also noted that he doesn’t think the proposed combination itself will result in a settlement.

That’s because regulatory approval for the combination is more likely to come from a different agency, the Federal Trade Commission, which generally investigates hospital mergers, he said.

Jacobs said he did not have any insider knowledge of settlement talks and that he did not work on the Justice Department suit before leaving the department.

For consumers, a settlement would probably require an end to Carolinas HealthCare’s restrictions on insurers, Jacobs said in an Observer interview. He made similar observations on the case in an analysis published last month by Bloomberg BNA, a Bloomberg service that provides industry analysis.

For Carolinas HealthCare, a settlement could be viewed as way to help improve its image in the wake of the lawsuit – as it seeks approval for the UNC deal, Jacobs said.

“If there is public relations pressure, I think it’s always possible that an entity like CHS might think the good will it will obtain by settling the DOJ lawsuit will help it win approval of its merger – or at least win more public support for the merger,” he said.

Jon Jacobs

The Justice Department did not respond to requests for comment. The FTC declined to comment.

The closely watched steering lawsuit marks the first antitrust challenge of steering limitations on health insurers, Jacobs said. Three months after the government suit, a San Francisco law firm filed a class-action case making similar allegations.

Those cases, which both allege Carolinas HealthCare takes advantage of its dominance with insurers, continue working their way through court at the same time the system looks to combine with Chapel Hill’s UNC Health.

The systems said they must enter into a final agreement to combine, which they have a goal of signing by the end of this year. The new public, nonprofit corporation would run more than 50 hospitals and employ more than 90,000 people, making it one of the nation’s largest hospital chains.

Last month, North Carolina’s attorney general office said it has begun examining whether the deal will harm health care competition in the state. Those reviews continue, the office said last week.

Deon Roberts: 704-358-5248, @DeonERoberts