AG Roy Cooper will seek ways to curb N.C. hospital prices

Cooper to look at using antitrust laws or suggesting legislation

aalexander@charlotteobserver.comOctober 6, 2012 

  • U.S. hospital mergers under scrutiny As the number of hospital mergers across the U.S. climbs, regulators are giving those deals closer looks. In California, the state attorney general is investigating whether mergers have given hospitals power to increase prices in a way that violates antitrust law, the Wall Street Journal reported recently. The office has sent subpoenas to several large hospital chains, including Dignity Health in San Francisco and Scripps Health in San Diego. Earlier this year, the Pennsylvania attorney general stepped in as Geisinger Health System acquired a nearby hospital. Authorities negotiated an agreement, requiring the two merging hospitals to contract separately with insurers for eight years, thereby reducing their power to demand higher payments. The Federal Trade Commission has also fought some proposed hospital mergers, including one between OSF HealthCare and Rockford Health System in Illinois. OSF abandoned its plans to buy Rockford following the FTC’s lawsuit. Ames Alexander
  • More information On the web • To read The News & Observer’s “Prognosis: Profits” series, go to www.newsobserver.com/prognosisprofits

Calling the state’s health care costs artificially high, state Attorney General Roy Cooper said he will examine whether to use antitrust laws or new legislation to reduce them.

“I’m concerned about this issue,” Cooper said in an interview. “Health care costs are high enough without artificial boosts that could come from lack of competition.”

Cooper’s announcement comes amid antitrust investigations into hospitals in other states. It also follows a News & Observer story showing that large nonprofit hospitals are dramatically inflating prices on chemotherapy drugs at a time when they are cornering more of the market on cancer care.

In a joint investigation published last month, The N&O and The Charlotte Observer found that hospitals are routinely marking up prices on cancer drugs two to 10 times over cost. At the same time, hospitals are increasingly buying the practices of independent oncologists, then charging far more for the same chemotherapy in the same office.

A previous investigation by the two newspapers, published in April, showed that consolidation has given hospitals leverage to demand higher payments from insurance companies.

That investigation also found that North Carolina hospitals are among the most powerful interest groups in state politics, which could neutralize any push for legislative reform.

Cooper, a Democrat, said there’s little question health care costs too much. The issue, he says, is whether a recent increase in consolidation has contributed. His staff will study whether antitrust laws – which are designed to prohibit monopolies and other anti-competitive arrangements – are the right tool for reducing costs.

Cooper said his lawyers will talk with officials from the Federal Trade Commission and with attorneys general in other states who have used antitrust laws to investigate consolidation.

A number of hospital systems in North Carolina have grown into profitable, fast-growing giants.

Duke University Health System and UNC Health Care have both posted record profits in recent years. Duke’s total profit last year, including investment income, was $542 million.

Meanwhile, a number of small, rural hospitals in North Carolina are struggling financially, and are feeling pressure to join up with larger hospital systems.

The N.C. Hospital Association says the state’s hospitals are committed to complying with antitrust laws. Consolidation hasn’t driven up prices inordinately, the association says.

The group pointed to data showing that hospital costs in North Carolina are below those in most other states. By one measure – hospital expenses per inpatient day – North Carolina was 15 percent below the national average in 2010, according to American Hospital Association figures.

“Consolidation in North Carolina healthcare is being driven by an evolving regulatory and market environment, one that demands higher quality and lower costs,” the hospital association said in a statement. “These two goals can be achieved only through economies of scale and greater efficiency among providers.”

Push for new laws?

Cooper’s staff will likely meet with insurance company officials who complain that they’re in a bind: unable to do without the hospitals in large systems and forced to pay them too much.

The staff also plans to meet with hospital industry representatives, who argue that consolidation has led to fewer administrative costs, lower prices and better service. A meeting with hospital association lawyers should happen in the next two weeks, Cooper said.

Antitrust laws are “difficult to enforce,” Cooper said. For that reason, he said, his office will also examine whether new legislation would be a better remedy.

“You may be able to accomplish with a piece of legislation much more than you could accomplish with a protracted antitrust lawsuit,” he said.

Cooper said it’s premature to speculate about what such legislation might look like. But he suggested that new rules could be aimed at structuring hospital mergers so they’re less likely to drive up prices.

The hospital association said new legislation isn’t needed, and “could be harmful to advancing the goals of health care reform.”

If lawmakers attempt to change the system, they may face an uphill fight.

The newspapers’ April investigation found that the hospital association rarely loses when it comes to protecting the financial interests of its members. Last year, for example, a senior state legislator proposed limiting sales tax refunds to the state’s largest hospitals. The hospital association fought him, and the bill was never discussed in committee.

“The hospitals constitute one of the strongest political forces in the state,” said Adam Searing, director of the N.C. Health Access Coalition. “Unless legislation is structured so that most hospitals think it’s a pretty good idea, it’s going to be difficult to get that legislation passed.”

The hospital association has been generous to people in power. Since 2000, for example, it has contributed $21,000 to Cooper’s election campaigns.

More info for patients?

Most oncologists in the Charlotte area work for hospitals, the newspapers’ most recent investigation found. And in the Triangle, nearly 90 percent of oncologists are employed by hospitals.

The newspapers found that two of the state’s largest hospital systems – Carolinas HealthCare and Duke University Health System – appear to charge more than most hospitals for common cancer drugs.

Cooper said he is troubled by apparent inequities in billing practices, with some North Carolina patients being charged “significantly more than others based upon their insurance or lack thereof, or whether their insurance company has been able to negotiate a better deal than someone else’s.”

“I’m concerned about the consumer who … is not on Medicare, who may have an insurance company that has not negotiated as good a rate with a provider – and who cannot afford a particular treatment to save their life,” said Cooper, a former state lawmaker who is serving his 12th year as attorney general. “We’ve seen those instances. I’ve read about those instances.”

Hospital officials acknowledge they must charge higher prices on some patients and services to cover losses on others. They have a name for the practice: cost-shifting.

The attorney general said that the current system also makes it hard for many prospective patients to determine what procedures will cost them. That, in turn, makes it hard for patients to shop around, he said.

“Consumers should have more information about the ultimate cost of potential procedures,” he said.

Some top state lawmakers – including House Speaker Thom Tillis and Senate President Pro Tem Phil Berger, both Republicans – have agreed that patients need an easier way to find key information about hospital pricing. Tillis said previously that lawmakers will likely work with the hospital industry to make more data available.

But in May, a House subcommittee rejected a plan by Gov. Bev Perdue to make hospital bills more transparent and understandable. Database editor David Raynor contributed to this report.

Alexander: 704-358-5060

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