The Department of Justice is taking aim at two large health systems over contracts that the agency says stifle competition and keep patients from receiving affordable care. The lawsuits, both filed earlier this year, signal a broader crackdown on how hospitals use contracting practices to shape their market positioning. <\/p>\n\n\n\n
The complaints claim that OhioHealth<\/a> and NewYork-Presbyterian Hospital<\/a> forced payers to contract with their entire health systems, rather than allowing them to pick and choose individual facilities. The Justice Department argues that these \u201call-or-nothing\u201d contracting tactics block payers from steering patients to lower-cost providers.<\/p>\n\n\n\n Federal regulators launched the first antitrust lawsuit<\/a> in February against OhioHealth, and followed with a second one<\/a> in March against NewYork-Presbyterian. OhioHealth is one of the largest health systems in Ohio, spanning 16 hospitals, three joint venture hospitals and more than 200 ambulatory care sites. NewYork-Presbyterian is the largest health system in New York City, operating eight hospitals and dozens of outpatient care sites.<\/p>\n\n\n\n Essentially, the agency is saying that this allegedly anticompetitive conduct insulates these health systems from price competition and allows them to maintain high prices. <\/p>\n\n\n\n The Justice Department claims that payers would have designed narrower, lower-cost networks if they had the option. These affordable providers are not identified explicitly in the complaints, but the agency generally refers to alternative, non-system providers and independent practices.<\/p>\n\n\n\n OhioHealth and NewYork-Presbyterian are cooperating with the reviews of their managed care agreements, but they both maintain that their contracting practices are lawful and benefit patients by ensuring broad access to care.<\/p>\n\n\n\n However, experts \u2014 including an antitrust lawyer, healthcare economist, patient advocate and frontline physician \u2014 believe that these types of contracting practices do drive up healthcare costs and squeeze independent doctors, as well as leave patients with fewer choices. And they say the stakes go far beyond New York and Ohio.<\/p>\n\n\n\n These cases are about competition suppression, not just high prices, said attorney Cory Talbot, a partner at Holland & Hart<\/a> specializing in healthcare antitrust law. <\/p>\n\n\n\n The Justice Department is arguing that all-or-nothing contracts prevent patients from seeing cheaper or higher-quality providers, alleging that this practice decreases competition on both the price and quality fronts.<\/p>\n\n\n\n Contrast that with health systems, who think such contracting practices could expand patient access across facilities, Talbot noted.<\/p>\n\n\n\n \u201cSomebody doesn’t have to, for instance, bypass multiple NewYork-Presbyterian facilities to get to a facility where they have coverage. They can go to any one that provides the services that they need. So from the health system perspective, that provides them with a good ability to provide a broad range of services at a number of facilities, and that provides a benefit to the patient,\u201d he explained.<\/p>\n\n\n\n He added that he thinks this contracting behavior is \u201cpretty common\u201d among large health systems.<\/p>\n\n\n\n \u201cThis is not something that NewYork-Presbyterian and OhioHealth just came up with \u2014 a lot of health systems are negotiating like this,\u201d Talbot remarked.<\/p>\n\n\n\n While these practices are common, he and the other experts still believe that the tactic does in fact raise costs and lower competition.<\/p>\n\n\n\n In order to prove that these arrangements can violate antitrust law, the Justice Department will have to show that the health system defendants have enough market power to meaningfully influence local prices and limit competition, he said.<\/p>\n\n\n\n The agency has already begun this effort in its two initial complaints. The first lawsuit<\/a> stated that OhioHealth accounts for more than 35% of general acute care hospital stays in the Columbus area, and the second lawsuit<\/a> said NewYork-Presbyterian\u2019s handles more than 25% of such admissions across Manhattan, Brooklyn, Queens, and the Bronx.<\/p>\n\n\n\n Talbot said those figures are central to the Justice Department\u2019s argument, but not sufficient on their own without showing they translate into real-world pricing power.<\/p>\n\n\n\n \u201cIs that enough of a market that a patient would be able to say, \u2018Can I go elsewhere?\u2019 At the same time, is a patient limited by what the payer can do or what the payer can negotiate? Can a patient get services more cheaply, or is the patient stuck with what the payer negotiated with? I think the first thing [the Justice Department] needs to prove is how [the defendants] fit in the market,\u201d Talbot declared.<\/p>\n\n\n\n Beyond proving the health system\u2019s market dominance, the Justice Department will also need to provide evidence that the all-or-nothing contracts actually result in higher prices and severed access to better and cheaper care, he stated.<\/p>\n\n\n\n The lawsuits against OhioHealth and NewYork Presbyterian signify a shift in the nation\u2019s healthcare antitrust enforcement. Historically, the focus has been on hospital mergers, but these two cases are scrutinizing contracting behavior.<\/p>\n\n\n\n Health systems have adapted to merger scrutiny, so regulators are now targeting what happens after consolidation, Talbot said.<\/p>\n\n\n\n He thinks both the lawsuits will likely end up in some kind of a settlement. <\/p>\n\n\n\n \u201cI think that you’ll probably see both OhioHealth and NewYork-Presbyterian take a shot at getting these cases dismissed early on. And if that fails, I think you’ll see them negotiate with the DOJ and with the state to try to come up with a resolution,\u201d Talbot remarked.<\/p>\n\n\n\n He said the lawsuits are \u201cdesigned to send a message\u201d and are likely to push health systems to rethink or abandon their all-or-nothing tactics in negotiations.<\/p>\n\n\n\n Another expert \u2014 Katie Keith, founding director at Georgetown University\u2019s Center for Health Policy and the Law at the O’Neill Institute<\/a> \u2014 agreed, saying that hospitals using these tactics \u201cshould be on notice that this might not be a sustainable strategy under this Department of Justice.\u201d<\/p>\n\n\n\n Keith thinks the back-to-back cases signal a serious focus on contracting practices at the Justice Department. She noted that this is especially true in New York, allegations have been public for years and complaints from union health plans<\/a> have helped drive scrutiny.<\/p>\n\n\n\n For years, union health plans have raised concerns<\/a> that dominant health systems force them into all-or-nothing contracts, making it difficult to steer their members to affordable providers \u2014 a dynamic they say contributes to rising premiums and out-of-pocket costs<\/a> for workers.<\/p>\n\n\n\n Keith also pointed out that there\u2019s a notable amount of internal documents and communications in the Justice Department\u2019s lawsuits, pulling back the opaque veil of contract negotiations.<\/p>\n\n\n\n \u201cI feel like we don’t normally see that stuff in a complaint. Normally you see it after discovery, for example, but it seemed like the department already had its hands on a bunch of inside information to make its case,\u201d Keith said.<\/p>\n\n\n\n For instance, one lawsuit cited data showing that preventing one payer from shifting colonoscopy procedures to another provider could be worth about $250,000 in retained revenue for NewYork-Presbyterian.<\/p>\n\n\n\n Citing this data shows that hospitals are financially motivated to restrict patient movement and that the Justice Department is building a data-driven case, Keith explained.<\/p>\n\n\n\n More importantly, the Justice Department is likely expanding investigations beyond these two health systems, she added.<\/p>\n\n\n\n Like Talbot, Keith thinks OhioHealth and NewYork-Presbyterian will file motions to dismiss, and then settlement is likely after that. This follows a pattern present in the other two high-profile lawsuits challenging all-or-nothing contracting in the past decade: Atrium Health\u2019s case in 2018<\/a> and Sutter Health\u2019s case in 2021<\/a>. <\/p>\n\n\n\n Atrium settled its lawsuit with the Justice Department with no financial penalty. Sutter, on the other hand, had to pay the state of California $575 million.<\/p>\n\n\n\n The lawsuits come as part of a larger affordability push by the presidential administration. Dr. David Eagle, a hematologist-oncologist at New York Cancer & Blood Specialists<\/a>, applauded these efforts for going after hospital consolidation and contracting practices, which he said are directly raising costs and diminishing patient access every day.<\/p>\n\n\n\n Dr. Eagle noted that independent practices are being pushed out or absorbed, which reshapes the market in ways that hurt patients.<\/p>\n\n\n\n He described a before-and-after scenario from his oncology practice. It involved the same doctor, same location and same care.<\/p>\n\n\n\n Before joining a large health system, the doctor\u2019s patients typically paid $50 to $70 per visit \u2014 but after the practice was acquired, those same visits often came with $300 co-pays and additional facility fees. Despite receiving care from the same doctor in the same location, some patients could no longer afford to return and were forced to seek care elsewhere or go without.\u00a0<\/p>\n\n\n\n Dr. Eagle pointed out that independent practices typically have lower co-pays and often accept more insurance plans. His independent physician group accepts all insurance, unlike many large systems. Yet, it lacks hospital negotiating leverage and financial advantages.<\/p>\n\n\n\n \u201cWe don’t get the benefit of 340B<\/a>. We don’t have the same commercial contracts. We don’t get programs like Medicaid 1115 waivers<\/a>. But we’re the only major cancer provider [in the area] that accepts all Medicaid plans and accepts all insurance plans. I think that’s part of the perspective too,\u201d Dr. Eagle remarked.<\/p>\n\n\n\n He said the disparity shows how market dynamics \u2014 not differences in care \u2014 are what is causing costs to climb and hurting access for patients.<\/p>\n\n\n\nInside the complaints<\/strong><\/h6>\n\n\n\n
Sending a message<\/strong><\/h6>\n\n\n\n
Consolidation leads to higher costs<\/strong><\/h6>\n\n\n\n
Chipping away at the affordability crisis<\/strong><\/h6>\n\n\n\n