Implications of AG Ferguson’s anti-trust suit against CHI Franciscan

Attorney General Bob Ferguson filed a lawsuit last week against CHI Franciscan for violating anti-trust laws when it affiliated and merged with other local providers.  From the release.

Attorney General Bob Ferguson filed a federal lawsuit today against CHI Franciscan, The Doctors Clinic and WestSound Orthopaedics seeking to undo two unlawful agreements that have raised prices and decreased competition for healthcare on the Kitsap Peninsula.

Thousands of Kitsap Peninsula patients have faced higher prices, increased wait times, difficulty in scheduling procedures, and a reduction in their choice of services and locations. As a result, CHI Franciscan has netted well over $1 million in ill-gotten gains so far.

These transactions were intentionally made to decrease competition, increase prices, and pad CHI Franciscan’s bottom line at the expense of its patients,” Ferguson said.

This represents a major shift in health policy.  For the last few decades, and particularly after the passage of the Affordable Care Act, it was common for hospitals to merge with one another.  The primary purpose of the merger in the board room was often – though not always – to drive higher reimbursement through greater market leverage.

This was never in the press release that came out about the merger, but this was so commonly known, it wasn’t really even a trade secret.

Bradford Koles is the Executive Director of the Advisory Board. At a recent health care conference hosted by Moss Adams, he made the following statement (according to my notes of his presentation):

I’ve been in hospital board rooms across the country, of all sizes and in all types of markets.  And in practically every board room, you’ll see on their white board their strategy: 1) merge, 2) consolidate, 3) demand higher reimbursements.

I’ll tell you, that’s not a strategy if everyone in the industry is doing it.

What’s different now is that regulators are responding.  This lawsuit by Ferguson on behalf of consumers falls in line with other trends among Democratic politicians.

In June, Senate Democrats in Washington DC revealed their economic agenda. Squarely in the middle of that agenda was an agenda for new anti-trust legislation.  I highlight what that could mean for health care here.

Rather than wait until new laws are crafted, however, Attorney General Ferguson is addressing consolidation now.

However, he isn’t doing it in such a way that it will stop consolidation. He’s doing it after damage has been allegedly committed against consumers.  In other words, he’s going after providers that are demonstrating (in his judgement) malfeasance against the market and/or consumer interests.

And, let’s face it, if Ferguson decides to start reviewing health care organizations for acting against consumer interests, we could be on the threshold of an amazing time of regulatory oversight in Washington State healthcare.  Because he’s going to have a lot of potential targets to consider…