Monopolistic Hospital Settles With Feds

DALLAS (CN) – United Regional Health Care System settled a federal antitrust complaint accusing it of abusing its regional monopoly to fix prices in the Wichita Falls area. The United States and Texas accused it of forcing health insurers to exclude competitors, and charging insurers 13% to 27% more if they did not use United Regional exclusively.

     United Regional is the largest hospital in Wichita Falls. It has 90 percent share of the regional market for inpatient hospital services, and 65 percent of the market for outpatient surgical services, according to the settled complaint.
     One health insurance company “estimated that it pays United Regional almost 70% more than what it pays hospitals in the Dallas-Fort Worth area for inpatient hospital services,” the complaint states. “This insurer’s analysis found that the “inpatient allowed per day adjusted for case mix” (a measure that adjusts for differences in the type and severity of services performed) was $4,143 on average in Wichita Falls, compared to $3,254 in Dallas-Fort Worth. The analysis also found that hospital prices in Wichita Falls are, on average, significantly higher for inpatient services than prices in five other comparable MSAs in Texas. United Regional is also significantly more expensive than Kell West, its primary competitor in Wichita Falls. For services that are offered by both hospitals, United Regional’s average per-day rate for inpatient services sold to commercial health insurers is about 70% higher than Kell West’s.” (Parentheses in complaint.)
     “United Regional has maintained its monopoly power in the relevant markets by entering into contracts with commercial health insurers that exclude United Regional’s competitors in the Wichita Falls area from the insurers’ health-care provider networks (“exclusionary contracts”). These exclusionary contracts effectively prevent insurers from contracting with hospitals and other health-care facilities that compete with United Regional by requiring the insurers to pay a substantial pricing penalty if they also contract with United Regional’s competitors. Most commercial health insurers must pay United Regional 13% to 27% more for its services if they do not use United Regional exclusively. The effects of this pricing penalty are to make the cost of including a competing hospital or other health-care facility in an insurer’s network prohibitively expensive and not commercially viable, and to exclude equally-efficient rivals.”
     The settlement prohibits United Regional from enforcing its exclusionary contracts, or from entering into new ones.
United Regional Health Care System is a private Texas nonprofit corporation, based in Wichita Falls. It had net patient revenue of $265 million in 2009.
     If accepted by the court, the settlement would be in effect for 7 years.

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