The large New York City hospital system used its market power to restrict contacts with insurers, insulating it from price competition, or “erosion of rates of payment,” says DOJ.
The Department of Justice’s Antitrust Division has filed a civil lawsuit challenging NewYork-Presbyterian’s contract restrictions that the DOJ claims deny New Yorkers the choice of lower-cost healthcare options.
The complaint, filed Thursday in the U.S. District Court for the Southern District of New York, claims NewYork-Presbyterian – one of the largest and most powerful health systems in New York City – uses its market power to force insurers into contracts that prevent payers from offering plans that do not include New York-Presbyterian or from offering lower copays when patients chose to receive care from lower-priced rivals.
“These unlawful restrictions insulate NewYork-Presbyterian from price competition, limiting its rival hospitals from competing for patients based on lower prices or better value, and prevent the development of budget-conscious plans for New Yorkers that are available in other parts of the United States,” the DOJ said.
The lawsuit seeks to prevent NewYork-Presbyterian from imposing contractual restrictions that preclude insurers and employers from offering lower-cost health insurance plans.
NewYork-Presbyterian released this statement: “NewYork-Presbyterian is disappointed that the Department of Justice has filed this lawsuit, which we think is without merit. We have been cooperating with the Department’s inquiries into our contracting practices and had begun what we thought were productive discussions with the Department’s leadership. As we have explained to the Department, NewYork-Presbyterian complies fully with all applicable federal and state laws and regulations. We stand behind our policies and processes, which we believe are pro-competitive.”
The health system further said: “We do not seek to exclude any other hospital from any insurer’s network. Nor do we require more favorable treatment than any other hospital. In our contract negotiations with insurers, we seek to maximize access to the highest quality of care. Insurance companies hold the market power and use it to restrict patient choice. The obligation of insurance companies is to their shareholders, while ours is to our patients. We believe all New Yorkers should be able to choose their health care provider.”
WHY THIS MATTERS
NewYork-Presbyterian operates eight acute care hospitals in the New York City area. Six are in New York City and four are in Manhattan. Its two flagship facilities are New York-Presbyterian/Columbia University Irving Medical Center and New York-Presbyterian/Weill Cornell Medical Center.
Competitors include Mount Sinai, NYU Langone and Northwell, but NYP is the largest and most powerful hospital system in Manhattan and throughout New York City, the DOJ said.
NYP has substantially higher prices than its competitors, even though its major competitors offer similarly high-quality healthcare, the lawsuit said.
“For decades, NYP has used its market power to protect its position – as well as its high prices – by using its leverage over commercial health insurers (‘payors’) to block them from selling health insurance plans that feature hospitals and other providers that offer lower prices,” the lawsuit said. “Rather than compete on price to serve patients who seek healthcare in New York City, NYP has chosen to prevent competition from rival providers.”
NYP has market power over payors, which it uses to extract high reimbursement rates for treating commercially insured patients, the DOJ said. NYP’s market power is built on the scale, breadth and configuration of its providers, including, among other things, its large size, many locations, and strong brand and reputation.
Payors cannot resist this exercise of market power because they cannot viably do business in New York City without at least one plan that includes access to NYP’s hospitals, the lawsuit said.
“NYP leverages its market power to effectively force the major payors that offer commercial insurance to patients in New York City to contract with it on an all-or-nothing basis, which means that the payor must include all of NYP’s hospitals (including associated outpatient facilities and other healthcare services) in its networks if it wants to have any NYP facilities or services in its network,” the lawsuit said. “NYP’s anticompetitive conduct insulates it from price competition – or, as NYP calls it, ‘erosion of rates of payment’ – and helps it to maintain its high prices.”
THE LARGER TREND
This is the second case the division has brought this year over what it called anticompetitive contracts.
In February, the Justice Department’s Antitrust Division filed a civil antitrust lawsuit against OhioHealth Corporation for alleged anticompetitive contract restrictions. The complaint sought to stop the largest healthcare system in central Ohio from using its dominant market power to enforce anticompetitive contractual terms.
ON THE RECORD
Acting Assistant Attorney General Omeed A. Assefi of the Justice Department’s Antitrust Division said: “New York-Presbyterian has known for years that the American consumer wants budget-conscious health plans that reduce healthcare costs. But rather than offer consumers choice, New York-Presbyterian uses its market power to protect its margins, impede competition from rival hospitals, and prevent employers and unions from creating these plans.”
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