Lieff Cabraser Civil Justice Blog
Carolinas HealthCare Anti-Competition Lawsuit Allowed to Proceed

Carolinas HealthCare Anti-Competition Lawsuit Allowed to Proceed

As reported by The Charlotte Observer, North Carolina Business Court Judge Michael Robinson has denied the Carolinas HealthCare System’s motion to dismiss a lawsuit accusing the hospital giant of driving up health care costs through illegal efforts to prevent competition. The lawsuit, filed by Lieff Cabraser and co-counsel in September of 2016, accuses CHS of placing improper contract restrictions on insurers forbidding them from guiding customers to lower-cost competing hospitals.

The class action complaint alleges that Carolinas HealthCare imposed its “steering restrictions” in contracts with insurers starting in 2013. The complaint notes that “These restrictions impeded, and continue to impede, insurers from providing financial incentives to patients to encourage them to use lower-cost but comparable or higher-quality alternative healthcare providers.”

The plaintiffs allege that for years, insurers have tried to work to remove the steering restrictions from contracts with Carolinas HealthCare, but have been unsuccessful because of the hospital system’s market power.

The result, notes the complaint, is that consumers are “pay[ing] higher prices for health insurance coverage, have fewer insurance plans from which to choose, and are denied access to consumer comparison shopping and other cost-saving innovative and more efficient health plans than would be possible if insurers could steer freely.”

The complaint also alleges Carolinas HealthCare “purports to be a nonprofit working in the public interest” but “in fact operates in its own interest, leveraging market power to maximize revenues at the expense of its patients.” The suit notes that the system has “expanded aggressively,” growing by 50 percent since 2011, reporting average annual profits of more than $300 million and possessing more than $2 billion in investments.

Carolinas HealthCare is the region’s largest hospital system, with a 50 percent share of the market. The system has $9 billion in annual revenue and more than 60,000 employees at more than 40 hospitals and 900 medical offices.

Lawyers for the hospital criticized the plaintiffs’ case for what they termed a failure to specify the damages suffered; Lieff Cabraser partner Brendan Glackin noted that the plaintiff consumers would love to know how much they have been over-charged, but that such damages can’t be specified without going through formal discovery, where the parties provide information in response to particularized requests via both documents and witness depositions. “This is not a question to be answered today,” noted Glackin, pointing to separate issues that have to be resolved first. Glackin further noted that at least one major health insurer has reported that Carolinas HealthCare demands reimbursement at rates up to 150 percent more than other Charlotte-area hospitals for identical services.

Learn more about the Carolina HealthCare System antitrust lawsuit.