U.S. Department Of Justice Settles Anti-Steering Suit Against Hospital System; First Such Settlement After Amex SCOTUS Decision Mr David Garcia and Nadezhda Nikonova

Author:Mr David Garcia and Nadezhda Nikonova
Profession:Sheppard Mullin Richter & Hampton

On November 15, 2018, the Antitrust Division of the U.S. Department of Justice settled a two-and-a-half year long lawsuit against Atrium Health, a North Carolina hospital system formerly known as the Carolinas HealthCare System, enjoining Atrium's anti-steering provisions against health plans. This article discusses the DOJ/Atrium settlement in light of the recent Ohio v. American Express Supreme Court decision, which concerned anti-steering provisions in the two-sided credit card network services market. We previously reported on the DOJ's suit against Atrium here, and analyzed the implications of the SCOTUS Amex decision on health insurance here.

In U.S. v. Charlotte Mecklenburg Hospital Authority d/b/a Carolinas Healthcare System, the DOJ challenged Atrium's contractual provisions restricting health insurance plans from steering patients away from the hospital system - also known as "anti-steering" provisions - as an anticompetitive restraint of trade under Section 1 of the Sherman Act. The DOJ alleged that plans in the Charlotte area that steer patients to cheaper hospitals and physicians result in more cost-effective healthcare services, and that Atrium's anti-steering provisions caused higher prices for customers. According to a DOJ press release, Atrium's anti-steering provisions "prevent health insurers from promoting innovative health benefit plans and more cost-effective healthcare services to consumers," especially "plans that give patients financial incentives to choose cheaper hospitals and physicians."

Pursuant to the settlement, Atrium agreed to drop its anti-steering provisions without admitting guilt or paying a fine. The Proposed Final Judgment specifically enjoins Atrium from enforcing anti-steering provisions described above against the major commercial insurers in the Charlotte area, including without limitation Aetna, Blue Cross and Blue Shield of North Carolina, MedCost, and UnitedHealthcare.

The two-and-a-half year long DOJ/Atrium legal battle came at a time of great uncertainty over anti-steering provisions in two-sided markets, paralleling the American Express case that ultimately went up to the Supreme Court. The DOJ tried to distinguish Amex in prior briefing (on which the district court did not rule), arguing that Amex is "inapplicable" and "wrongly decided." But it appears to us that the DOJ's claims in this case, which must be taken as...

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