The Justice Department has reached a settlement with the United Regional Health Care System of Wichita Falls, Tex., that prohibits it from entering into contracts that prevent commercial health insurers from contracting with the system's competitors.
The DOJ's Antitrust Division, along with the Texas Attorney General's office, had filed a civil antitrust lawsuit in U.S. District Court for the Northern District of Texas. The proposed settlement, if approved by the court, would resolve the lawsuit.
The proposed settlement, which would be in effect for seven years, restores lost competition by prohibiting United Regional from using agreements with commercial health insurers that improperly inhibit insurers from contracting with United Regional's competitors. In particular, United Regional is prohibited from conditioning the prices or discounts that it offers to commercial health insurers based on whether those insurers contract with other healthcare providers and inhibiting insurers from entering into agreements with United Regional's rivals. United Regional is also prohibited from taking any retaliatory action against an insurer that enters into an agreement with a rival provider.
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"Unfettered competition among hospitals is vital to ensuring that patients receive high-quality, low-cost healthcare," said Christine Varney, Assistant Attorney General in charge of the DOJ's Antitrust Division. "Today's settlement prevents a dominant hospital from using its market power to harm consumers by undermining its competitors' ability to compete in the marketplace."
Federal investigators had charged United Regional with using these contracts to maintain its monopoly for hospital services in violation of Section 2 of the Sherman Act, causing consumers to pay higher prices for healthcare services.
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United Regional is a private Texas nonprofit and by far the largest hospital in Wichita Falls. The system had net patient revenues of approximately $265 million for 2009. Its share of general acute-care inpatient hospital services is approximately 90 percent, and its share of outpatient surgical services is more than 65 percent. It is the region's only provider of certain essential services such as cardiac surgery, obstetrics and high-level trauma care. In Wichita Falls, United Regional's average per-day rate for inpatient hospital services sold to commercial health insurers is about 70 percent higher than its closest competitor for the services that are offered by both hospitals.
According to investigators, in order to maintain its monopoly in the provision of inpatient hospital and outpatient surgical services, United Regional required most commercial health insurers to enter into contracts that effectively prohibited them from contracting with United Regional's competitors. Those contracts required insurers to pay significantly higher prices if they contracted with a nearby competing facility. This resulted in almost all insurers offering health insurance in Wichita Falls to enter into exclusionary contracts with United Regional.