Atrium Health to settle federal antitrust suit over health care costs

North Carolina and federal authorities say they have settled an antitrust lawsuit against Atrium Health, reaching an agreement that could help lower health care prices for patients.

The 2016 lawsuit filed against Atrium Health, formerly Carolinas HealthCare System, alleged that the multi-billion-dollar hospital chain illegally reduced competition in the Charlotte health care market.

In the proposed settlement, Atrium will be banned from entering into contracts with insurance companies that would limit transparency and curb the ability of insurers to offer lower cost benefit plans.

“By eliminating restrictions that curb comparison shopping and interfere with competition among healthcare providers, today’s resolution of our antitrust action allows consumers in the Charlotte area to benefit from competition when making critically important healthcare choices,” said Assistant U.S. Attorney General Makan Delrahim.

In a separate statement, N.C. Attorney General Josh Stein agreed: “We can’t allow Atrium to use its size and market dominance to the detriment of healthcare consumers ... Together, we have been able to achieve greater competition and price transparency for healthcare consumers in the Charlotte area.”

Atrium is North Carolina’s largest health care system and Charlotte’s largest employer. It operates Carolinas Medical Center and 43 other hospitals. With nearly $6 billion in operating revenue last year, it is one of the nation’s largest nonprofit health care systems.

Atrium admitted no wrongdoing and said it did not violate the law. In a statement issued Thursday, the system said it will pay no penalties or fines as part of the settlement.

“Atrium Health has always been a champion for patient choice, and believes its unparalleled quality, value and world-class services are the reason why more people continue to choose Atrium Health over any other healthcare provider in the region,” the system said in its news release. “Atrium Health’s focus remains on providing an individualized care experience for the thousands of patients who rely on its services for health, hope and healing each and every day.”

Dwarfing its competitors

Atrium’s closest competitor is Novant Health, which owns five hospitals in the Charlotte area and has less than half of Atrium’s revenue, the lawsuit said at the time.

Atrium used its dominance to get its way with insurers, the lawsuit alleged.

In a 2012 investigation, The Charlotte Observer and The (Raleigh) News & Observer found that Atrium 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.

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At issue in the antitrust lawsuit are contract restrictions that Atrium negotiated with major health insurance companies.

Insurers often use a technique called “steering,” giving consumers a financial incentive to use a lower-cost health care provider. For instance, consumers are often given the option of paying lower premiums or out-of-pocket expenses if they agree to choose from a small network of lower-cost providers.

The lawsuit alleged that Atrium used its market power to negotiate “unlawful contract restrictions,” which prevent consumers from taking advantage of lower prices at other hospitals, the Observer reported in 2016. The lawsuit also contended that Atrium encouraged insurers to steer patients its way and used its influence to prevent insurers from giving the same deal to competing hospitals.

Under the proposed settlement, Atrium will be banned from:

  • Restricting insurance companies from offering consumers financial incentives to use lower-cost, high-quality providers.
  • Preventing insurers from disclosing health care prices to consumers.
  • Requiring insurers to get Atrium’s approval before introducing lower-cost benefit plans.

“Increasing transparency and competition helps lower prices,” Blue Cross and Blue Shield of North Carolina said in a statement Thursday. “We will continue working with Atrium, and providers across the state, to deliver high-quality, more affordable health care.”

Barak Richman, a Duke University law professor with expertise in antitrust enforcement, said that the settlement will likely lead to more competition in Charlotte’s health care market.

“It should give consumers an opportunity to economize in ways that were previously foreclosed,” Richman said. “It’s quite possible it will have a very significant impact because this involves a very large hospital market. It involves a hospital system that has a very significant dominance in that hospital market, and it involves conduct that has been deemed to be very damaging to competition.”

Whether the settlement will help lower health care prices elsewhere may depend on whether state and federal authorities choose to pursue similar actions against other hospital systems.

“I really hope they do,” Richman said. “These kinds of enforcement actions can be very, very important in restoring competition to hospital markets that are currently monopolized.”

Atrium: We welcome competition

The suit contended Atrium has “long had a reputation for being a high-priced healthcare provider.” In a 2013 presentation, an internal strategy group recognized that Atrium “has enjoyed years of annual reimbursement rate increases that are premium to the market,” the lawsuit states.

In its Thursday statement, Atrium said it “welcomes competition based on value. Competition drives improvements in healthcare quality and services – ultimately benefiting every patient.”

The settlement will become final once it is approved by the courts.

“The resolution of this antitrust enforcement action gives Charlotte-area consumers what they did not have before: the ability to receive the appropriate, high-quality treatment they need, from a healthcare provider they choose, at a fair price,” said Andrew Murray, U.S. Attorney for the Western District of North Carolina. “Today’s enforcement action will restore competition in the Charlotte area, resulting in lower healthcare costs and increased healthcare access for consumers and their families.”

A separate class-action lawsuit, filed on behalf of three former Atrium patients, is still being litigated. That suit also alleges that Atrium engaged in illegal and anti-competitive actions that have resulted in higher insurance premiums for many people.

“We are grateful to the Justice Department and North Carolina Attorney General lawyers for their work on behalf of the people of North Carolina,” said Brendan Glackin, a San Francisco lawyer who is representing the former patients. “We will continue to press forward on our case to achieve monetary relief for the same people.”

Cope: 704-358-5926; @cassielcope

Alexander: 704-358-5060; @amesalex