Charlotte-Mecklenburg Hospital Authority

On March 30, 2017, in a closely watched case, a federal district court denied the Motion for Judgment on the Pleadings filed by Carolinas Healthcare against a Complaint filed by the DOJ Antitrust Division and the State of North Carolina. The Complaint alleged that Carolinas Healthcare insisted on contract provisions with payors that limited or prohibited steering to lower-cost providers.  In its motion, Carolinas Healthcare relied heavily on the Second Circuit decision in United States v. American Express Co., 838 F.3d 179 (2d Cir. 2016), where the Second Circuit had reversed a trial verdict condemning steering restrictions in Amex’s contracts with merchants.  This alert reviews the court’s ruling and considers its implications for future health care antitrust cases.

A popular weapon used to contain health care expenditures is the creation by payors and employers of tiered provider networks, which by differentiated co-pays attempt to steer insureds to less expensive choices.  In connection with such networks, providers will often provide better pricing in order to be placed on more favorable tiers.  In a new antitrust suit, the Antitrust Division of the Department of Justice (“DOJ”) and the State of North Carolina have challenged the attempt by the dominant health care system in North Carolina to use contractual anti-steering provisions to avoid being disfavored.  This Alert analyzes the Government’s complaint and how this lawsuit fits into the DOJ’s views of contractual restraints of this type.