On February 25, 2011, the U.S. Department of Justice Antitrust Division (DOJ) filed its first case since 1999 that alleges a monopolist is engaging in traditional anticompetitive unilateral conduct. The DOJ filed a complaint and proposed consent decree alleging that United Regional Healthcare System (United Regional), a health system in Wichita Falls, Texas, violated Section 2 of the Sherman Act by offering special discounts to health insurers in exchange for an agreement not to contract with United Regional’s competitors.
Coming on the heels of the DOJ’s pending lawsuit against Blue Cross Blue Shield of Michigan based upon the reimbursement rates in its contracts with various hospitals, this new case is yet more evidence of the DOJ’s aggressive enforcement approach in health care and, in particular, its willingness to challenge the terms of contracts between providers and insurers that could prevent competition at either the provider or the payor level.
According to the DOJ’s complaint, United Regional has a 90 percent share (measured by admissions) of the market for inpatient hospital services within the Wichita Falls Metropolitan Statistical Area (MSA) that are provided to members of commercial health insurance plans, and a 65 percent share (measured by visits) of the market for outpatient surgeries within the Wichita Falls MSA that are provided to members of commercial health insurance plans. The DOJ alleged that it was not feasible for a commercial health insurer to assemble a marketable insurance product for Wichita Falls without United Regional being among the network of participating providers. The DOJ alleged that United Regional exploited this "must have" status to charge some of the highest hospital prices in Texas.
To keep smaller competitors from expanding their facilities and range of services to the point where they could pose a competitive threat, United Regional provided extra discounts to commercial health insurers in exchange for an agreement not to contract with its competitors. The DOJ alleged that these agreements made United Regional’s competitors unable to access the most profitable commercial contracts in the market and prevented them from access to the capital needed to grow.
Under the proposed consent decree, United Regional agreed to stop entering into contracts with discounts conditioned upon the payor’s refusal to contract with any other health care provider. The consent decree would permit United Regional to provide certain volume-based discounts.