Plaintiffs,
`
`
`
`v.
`
`Case No. _________
`
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF WISCONSIN
`______________________________________________________________________________
`
`URIEL PHARMACY HEALTH AND WELFARE PLAN;
`and URIEL PHARMACY, INC., on their own behalf and
`on behalf of all others similarly situated,
`
`
`
`
`
`ADVOCATE AURORA HEALTH, INC.
`and AURORA HEALTH CARE, INC.
`
`Defendants.
`
`
`______________________________________________________________________________
`
`
`CLASS ACTION COMPLAINT
`
`
`
`
`BELL GIFTOS ST. JOHN LLC
`Kevin M. St. John, SBN 1054815
`5325 Wall Street, Suite 2200
`Madison, WI 53718
`Ph: (608) 216-7990
`Email: kstjohn@bellgiftos.com
`
`
`
`
`
`FAIRMARK PARTNERS, LLP
`Jamie Crooks
`Alexander Rose
`1825 7th Street NW, #821
`Washington, DC 20001
`Ph: (617) 642-5569
`Email: jamie@fairmarklaw.com
`alexander@fairmarklaw.com
`
`
`
`
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`

`

`
`CLASS ACTION COMPLAINT .................................................................................................... 1
`
`TABLE OF CONTENTS
`
`I.
`
`II.
`
`NATURE OF THE ACTION ....................................................................................... 1
`
`PARTIES ...................................................................................................................... 6
`
`A. Plaintiffs .................................................................................................................. 6
`
`B. Defendants .............................................................................................................. 6
`
`III.
`
`JURISDICTION AND VENUE ................................................................................... 6
`
`IV. OVERVIEW OF HOSPITAL/INSURANCE MARKETS
`AND CONSOLIDATION ............................................................................................ 7
`
`A. Hospital/Insurance Negotiations Within a Functioning Market ............................. 7
`
`B. Hospital/Insurance Negotiations in a Market Distorted by
`Anticompetitive Behavior ..................................................................................... 11
`
`V.
`
`RELEVANT MARKETS ........................................................................................... 15
`
`A. Relevant Product Markets ..................................................................................... 15
`
`B. Relevant Geographic Markets ............................................................................... 17
`
`VI. AAH’S MARKET POWER ....................................................................................... 23
`
`A. AAH’s Ownership of “Must-Have” Hospitals Provides Its
`Enormous Market Power ...................................................................................... 25
`
`B. AAH’s Ownership of Many Specialty Services in Eastern
`Wisconsin Increases Its Market Power ................................................................. 27
`
`VII. AAH’S ANTICOMPETITIVE CONDUCT ............................................................... 27
`
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`A. AAH Imposes “All Or Nothing” and “All Plans” Contract Language
`and Uses Other Tactics to Force Inclusion of Its Overpriced
`Hospitals in Insurance Networks .......................................................................... 27
`
`B. AAH Punishes Innovative Insurance Products to Suppress Competition ............ 30
`
`C. AAH Engages In “Anti-Steering” and “Anti-Tiering” ......................................... 32
`
`D. AAH Uses Non-Competes, Referral Restrictions, and Other Tactics
`to Suppress Competition and Increase Prices ....................................................... 34
`
`E. AAH Uses Gag Clauses to Suppress Competition and Further Its Other
`Anticompetitive Schemes ..................................................................................... 36
`
`F. The Combination of AAH’s Anticompetitive Conduct is Especially Harmful .... 38
`
`G. AAH’s Acquisition Strategy Suppresses Competition and Allows
`AAH to Impose Broader Anticompetitive Contractual Terms ............................. 38
`
`VIII. AAH’s ANTICOMPETITIVE CONDUCT CAUSES HIGHER PRICES AND
`SUPPRESSES QUALITY .......................................................................................... 48
`
`A. AAH’s Prices Drive Costs for Self-Funded Commercial Health Plans ................ 48
`
`B. AAH Charges Supracompetitive Prices in Milwaukee ......................................... 49
`
`C. AAH Charges Supracompetitive Prices in Green Bay ......................................... 56
`
`D. AAH Charges Supracompetitive Prices Throughout Wisconsin .......................... 57
`
`E. AAH Raised Prices In Illinois Substantially After Merger .................................. 57
`
`IX. ADDITIONAL FACTS REGARDING NAMED PLAINTIFFS ............................... 58
`
`X.
`
`CLASS ALLEGATIONS ........................................................................................... 59
`
`XI.
`
`CLAIMS FOR RELIEF .............................................................................................. 62
`
`COUNT ONE................................................................................................................ 62
`
`COUNT TWO ............................................................................................................... 63
`
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`COUNT THREE ........................................................................................................... 65
`
`COUNT FOUR ............................................................................................................. 66
`
`COUNT FIVE ............................................................................................................... 67
`
`COUNT SIX ................................................................................................................. 68
`
`COUNT SEVEN ........................................................................................................... 69
`
`XII.
`
`JURY DEMAND ........................................................................................................ 70
`
`XIII. PRAYER FOR RELIEF ............................................................................................. 70
`
`
`
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`

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`CLASS ACTION COMPLAINT
`
`Plaintiffs Uriel Pharmacy Health and Welfare Plan and Uriel Pharmacy, Inc. (collectively
`
`“Uriel”), individually, and on behalf of all others similarly situated, bring this action against
`
`Aurora Health Care, Inc. and Advocate Aurora Health, Inc. (collectively, “AAH”) and state as
`
`follows:
`
`I.
`
`NATURE OF THE ACTION
`
`1.
`
`This is an action for restraint of trade, unlawful monopolization, and unfair methods
`
`of competition seeking classwide damages and injunctive and equitable relief under the Sherman
`
`Act, 15 U.S.C. §§ 1 et seq., and Wisconsin’s antitrust laws, Wis. Stat. §§ 133.01 et seq.
`
`2.
`
`For the past several years, AAH has engaged in anticompetitive methods to restrain
`
`trade and abuse its market dominance for the purpose of foreclosing competition and extracting
`
`unreasonably high prices from the Plaintiffs and other Wisconsin businesses, unions, and
`
`taxpayers. These abuses include unlawfully forcing commercial health plans to include in their
`
`networks all of AAH’s overpriced facilities even if they would rather only include some, and
`
`aggressively blocking employers and insurers from directing individuals to higher value care at
`
`non-AAH facilities. AAH has gone to extraordinary lengths to suppress innovative insurance
`
`products, such as tiered plans, that would reduce costs for employers. And it has used a
`
`combination of acquisitions, referral restraints, non-competes, and gag clauses to suppress
`
`competition from other healthcare providers and attempt to expand its monopoly over acute
`
`inpatient hospital services into other, separate markets.
`
`3.
`
`Rising healthcare costs have had a significantly negative impact on Wisconsin
`
`employers, workers, and taxpayers. According to national academic studies and state-specific
`
`research in Wisconsin, those rising healthcare costs are primarily driven by the rapidly increasing
`
`1
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`

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`prices charged by large hospital systems, and these price increases are driven primarily by
`
`consolidation among hospital providers.
`
`4.
`
`There is a bipartisan consensus among healthcare policy experts that consolidation
`
`of hospitals causes higher prices without resulting in corresponding increases in quality or patient
`
`satisfaction. This is because hospital systems with greater market power are able to extract higher
`
`prices by engaging in anticompetitive behavior, such as imposing vertical restraints that leverage
`
`the market power they have over one market to extract supracompetitive profits from other markets
`
`in which the systems face greater competition.
`
`5.
`
`AAH has used its vast market power to engage in anticompetitive behavior that
`
`allows it to charge extremely high prices for healthcare services in Wisconsin. These prices would
`
`not be possible without AAH’s anticompetitive behavior and have resulted in Wisconsin
`
`employers, unions, and local governments overpaying for healthcare by hundreds of millions of
`
`dollars in recent years.
`
`6.
`
`AAH’s high prices are apparent in routine, high-volume procedures like joint
`
`replacements, which at AAH’s facilities in Milwaukee cost $21,000 more than a competitor
`
`located only minutes away, a 50% higher price. And they are manifested in cumulative numbers
`
`that show AAH is by far the most expensive hospital system in Eastern Wisconsin.
`
`7.
`
`AAH’s anticompetitive behavior is a direct contributor to Eastern Wisconsin’s high
`
`healthcare prices. According to a recent study, healthcare prices in Milwaukee are the fourth
`
`highest in the entire country; they are higher even than those in New York City.
`
`8.
`
`AAH has been able to impose these eye-watering prices on employers in Wisconsin
`
`by using its market power to suppress competition. Specifically, AAH:
`
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`• Forces employers’ health plans to include its overpriced facilities in-
`
`network even when they do not want to;
`
`• Goes to extreme efforts to drive out innovative insurance products that save
`
`employers and patients money;
`
`• Suppresses competition on price and quality through secret and restrictive
`
`contract terms that have been the subject of bipartisan criticism;
`
`• Acquires new facilities to raise prices for the same services;
`
`9.
`
`Individually and in combination, this anticompetitive conduct results in higher
`
`prices paid by Wisconsin employers for healthcare.
`
`10.
`
`In 2019, AAH had $12.8 billion in revenue and earned $1.5 billion in profit. By
`
`that same year, AAH had built up about $12 billion in assets. AAH’s high profits are a major
`
`outlier from other hospital systems.
`
`11.
`
`AAH has used its unlawfully inflated profits to engage in an acquisition spree of
`
`competitor hospitals and independent facilities—a spree AAH has made clear it plans to continue
`
`in the years to come. These acquisitions offer AAH two self-reinforcing anticompetitive financial
`
`benefits: (1) the ability to impose higher prices at the acquired facilities than the previous owners
`
`could, and (2) even greater systemwide power that AAH can leverage to force employers and
`
`patients to pay higher prices at all of its facilities.
`
`12.
`
`As the Milwaukee Business Journal summarized: “Advocate Aurora Health is
`
`embarking on what it calls a ‘bold new strategy’ to more than double its annual revenue by 2025
`
`via mergers and acquisitions of healthcare systems, health insurers and consumer-facing health
`
`products.” AAH’s CEO speculated that the system’s profits could be used to acquire more
`
`3
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`hospitals “a thousand miles away,” and AAH’s Executive Vice President publicly stated AAH’s
`
`business practice is to be a “multi-market consolidator.”
`
`13.
`
`And that’s exactly what AAH has done this month as it announced a merger with
`
`Atrium, a multi-billion dollar hospital system based in Charlotte with operations in North Carolina,
`
`South Carolina, Georgia, and Alabama. AAH has proposed to move its headquarters to Charlotte
`
`only a few years after promising to its community that it was committed to Wisconsin as part of
`
`an effort to push through a previous merger.
`
`14.
`
`That previous merger in 2018 combined Aurora Health Care of Wisconsin and
`
`Advocate Health Care of Illinois and created one of the largest hospital chains in the country. The
`
`merger created the renamed Advocate Aurora Health. The transaction increased both the new
`
`system’s market power in Southeastern Wisconsin as well as the system’s overall leverage with
`
`employers who pay for medical services in both states and with the companies that design many
`
`commercial health plan networks that must span the Wisconsin-Illinois border.
`
`15.
`
`AAH—a nominal “non-profit”—recently established its own investment and
`
`buyout fund to engage in further acquisitions, venture capital investments, and other financial
`
`transactions where, according to the new fund’s president, “there’s a lot of growth opportunity.”
`
`He also stated that the fund would “invest in, acquire, do a transaction with a company where there
`
`are synergy or cross-pollination opportunities with our core business.” Betraying just how far AAH
`
`has strayed from its non-profit status, the “core business” referred to is the supposedly charitable
`
`provision of healthcare services to Wisconsin families by AAH. And within that “core business,”
`
`the buyout fund president was remarkably candid about AAH’s goals: “One way we measure that
`
`is what we call ‘share of wallet,’ which is a sort of a retail measure of how many times and in what
`
`4
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`ways are we interacting with the people we serve beyond just traditional care delivery, and does
`
`that generate more revenue?”
`
`16.
`
`By claiming non-profit status despite being a multistate, multibillion dollar
`
`profitable enterprise, AAH avoids hundreds of millions in federal, state, and local taxes on profits
`
`by promising to pursue a primarily charitable purpose. However, a study by the independent Lown
`
`Institute released in April 2022 comparing non-profit hospital systems’ charitable impact found
`
`that AAH spent $498 million per year less on charity care and community investment than the
`
`estimated taxes AAH avoided through their non-profit, tax-exempt status. This “fair share deficit”
`
`at AAH was the eighth worst out of 275 non-profit hospital systems evaluated.
`
`17.
`
`In addition to using profits for an aggressive merger and acquisition strategy, AAH
`
`pays extraordinary amounts to the executives of this supposed charitable institution. The CEO of
`
`AAH paid himself over $13.4 million dollars from the charity in the most recent full year of
`
`reporting, more compensation than most CEOs of Fortune 500 corporations received. Fifteen of
`
`AAH’s “non-profit” executives were paid over $1 million in 2019. The “Chief Business
`
`Development Officer” was paid over $2.5 million.
`
`18. Without intervention, AAH will continue to use anticompetitive contracting and
`
`negotiating tactics to raise prices on Wisconsin employers and use those funds for aggressive
`
`acquisitions and executive compensation. This will reduce economic growth in Wisconsin, harm
`
`patients and taxpayers, and drive employers out of Wisconsin. This case seeks to compensate the
`
`employers, unions, and local governments that have been directly harmed by AAH’s past illegal
`
`activity, and to enjoin AAH from continuing unlawful practices that harm Wisconsin’s economy
`
`and healthcare system.
`
`
`
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`

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`II.
`
`PARTIES
`
`A.
`
`19.
`
`Plaintiffs
`
`Plaintiff Uriel Pharmacy, Inc. is a business in East Troy, Wisconsin with a self-
`
`funded health plan for its employees. Uriel has paid AAH for healthcare at the rates negotiated by
`
`its Network Vendor, Cigna.
`
`20.
`
`B.
`
`21.
`
`Plaintiff Uriel Pharmacy Health and Welfare Plan is Uriel’s self-funded health plan.
`
`Defendants
`
`Defendant Advocate Aurora Health, Inc. is a Delaware non-profit corporation. On
`
`April 1, 2018, Advocate Aurora Health, Inc. became the sole corporate member of Advocate
`
`Health Care Network, an Illinois non-profit corporation and Aurora Health Care, Inc., a Wisconsin
`
`nonstock non-profit corporation. It may be served with process through its registered agent, The
`
`Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware, 19801.
`
`22.
`
`Defendant Aurora Health Care, Inc. is a Wisconsin non-profit corporation. Its
`
`principal place of business is 750 W Virginia Street, Milwaukee, Wisconsin, 53204. It may be
`
`served with process through its registered agent at 301 S Bedford St, Ste 1, Madison, Wisconsin,
`
`53703.
`
`III.
`
`JURISDICTION AND VENUE
`
`23.
`
`This Court has personal jurisdiction over AAH, because AAH is a resident of
`
`Wisconsin, and because the anticompetitive conduct at issue in this litigation took place primarily
`
`in Wisconsin.
`
`24.
`
`This Court has subject matter jurisdiction over Plaintiffs federal claims under 15
`
`U.S.C. § 15 and 28 U.S.C. § 1331. The Court has jurisdiction over Plaintiffs state-law claims under
`
`28 U.S.C. § 1367, because they arise out of the same transactions and occurrences.
`
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`25.
`
`Venue is appropriate in this Court under 28 U.S.C. § 1391 and 15 U.S.C. § 15,
`
`because AAH is domiciled in this judicial district, and/or because a substantial part of the events
`
`or omissions giving rise to this action occurred in this judicial district.
`
`IV. OVERVIEW OF HOSPITAL/INSURANCE MARKETS AND CONSOLIDATION
`
`A.
`
`26.
`
`Hospital/Insurance Negotiations Within a Functioning Market
`
`The market for hospital services is different from other product/services markets
`
`because the person consuming the hospital services (the patient) does not negotiate—and in many
`
`cases, does not even know beforehand—the prices of the services they are consuming.
`
`27.
`
`Instead, hospitals negotiate the prices that commercial health plans pay for medical
`
`services before they are consumed. These negotiated prices for in-network care are called “allowed
`
`amounts.”
`
`28. Many businesses, local governments, and unions have commercial health plans in
`
`which the employers directly pay the vast majority of the healthcare expenses their employees (and
`
`their dependents) incur. These “self-funded” plans rely on insurance companies to administer the
`
`plans and negotiate on their behalf with hospitals. But the self-funded commercial health plans
`
`directly pay bills from hospitals for services used by their employees or members. This is distinct
`
`from the more commonly understood “fully insured” commercial health plans, in which companies
`
`or individuals pay premiums to an insurance company and that insurance company pays most of
`
`the bills from hospitals.
`
`29. When an insurance company, such as Blue Cross or Cigna, manages a self-funded
`
`health plan on behalf of an employer—rather than actually underwriting the risk itself, as it does
`
`for fully insured plans—the insurance company is acting as a third-party administrator (“TPA”).
`
`TPAs are in charge of processing claims and managing the day-to-day affairs of the self-funded
`
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`health plan. TPAs may also help self-funded health plans select “networks,” which are groups of
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`healthcare providers. This leads to the commonly used term of a provider being “in-network” for
`
`a health plan—a term that is well-understood by employees to mean facilities where their insurance
`
`will be accepted and their costs as an employee will be determined by plan documents they can
`
`consult beforehand. Going to an “out of network” provider generally means much higher costs and
`
`uncertainty for both the employee (in terms of out-of-pocket costs, frequent surprise bills, and
`
`paperwork burden) and their health plan (in terms of substantially higher prices than those offered
`
`to plans that include the provider in-network and significant administrative burden).
`
`30.
`
`For both obvious practical reasons and because of contractual restrictions, self-
`
`funded health plans can almost never assemble their own “networks” of providers. This is
`
`primarily because of the practical impossibility of employers conducting individual negotiations
`
`with hundreds of providers across all the geographies where an employer has employees and
`
`dependents, and because providers would refuse to negotiate thousands of contracts with
`
`individual self-funded health plans.
`
`31.
`
`Therefore, another set of companies assemble networks of facilities through
`
`negotiation with healthcare providers. Those “Network Vendors” then allow self-funded health
`
`plans to “rent” or access the network they have assembled. Network Vendors tend to be large,
`
`well-known insurance companies like Aetna, Anthem Blue Cross Blue Shield, and Cigna that have
`
`the scale and technical knowledge to build networks. In some cases, a Network Vendor and TPA
`
`are two divisions of the same company. A self-funded health plan can therefore contract with a
`
`company both to use its network and to administer the plan.
`
`32.
`
`Network Vendors negotiate with hospitals and other providers to create networks.
`
`For a network to be commercially viable (i.e., for it to be one an employer would choose to offer
`
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`its employees), it must include enough providers throughout the geography where the network is
`
`offered and across the full spectrum of healthcare services patients may need, from primary care
`
`to complicated inpatient hospital surgical care to specialty practices.
`
`33.
`
`Network Vendors negotiate with providers on price, attempting to balance the need
`
`to build networks with an adequate number of providers and the need to build networks that offer
`
`reasonable prices for their potential customers, i.e., self-funded health plans.
`
`34.
`
`Network Vendors generally do not negotiate with hospitals on a service-by-service
`
`basis. Rather, Network Vendors generally negotiate with hospitals for bundles of services that will
`
`be available to many self-funded health plans that “rent” the network from the Network Vendor.
`
`Those self-funded health plans then offer that bundle of services to their members as “in-network”
`
`benefits. Critically, self-funded health plans do not have control over the prices negotiated by their
`
`Network Vendors that they are responsible for paying.
`
`35.
`
`If a self-funded health plan’s Network Vendor and a hospital reach a deal for a
`
`bundle of services (for instance, all acute inpatient hospital services), the hospital will generally
`
`be considered in-network for every service in that bundle. This means that for any service in that
`
`bundle, if a self-funded health plan’s member receives that service from the hospital, the plan will
`
`pay the hospital the allowed amount that the Network Vendor negotiated for that service, after the
`
`patient has paid their required out-of-pocket costs.
`
`36.
`
`In competitive markets—markets with multiple hospitals providing the services
`
`commercial health plans need or want to offer their members—a Network Vendor will contract
`
`with a hospital for a bundle of services only when the hospital offers services that are competitively
`
`priced and sufficiently high quality. The Network Vendor may include as in-network only some
`
`bundles of services at any given hospital. For instance, the network may have one hospital be in-
`
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`network for all acute inpatient hospital services but may choose not to include that hospital in-
`
`network for some acute outpatient hospital services (visits not requiring an overnight stay) because
`
`the Network Vendor has identified ways for plans to purchase higher quality and/or less expensive
`
`versions of those outpatient services from a nearby competing hospital or other outpatient provider.
`
`Similarly, in a competitive market, a Network Vendor may decline to include any services from a
`
`hospital “in-network” if the Network Vendor determines that the hospital’s price or quality of care
`
`are not competitive with other nearby providers.
`
`37.
`
`If a Network Vendor wishes to offer viable networks for self-funded health plans,
`
`the Network Vendor must construct networks that include a comprehensive bundle of services that
`
`employees/members of a plan can access in their region. Members generally insist on receiving
`
`their healthcare near where they live or work. A plan will not be viable—for either employers or
`
`their employees—if it does not offer in-network services that individuals commonly desire or need.
`
`Similarly, a plan will not be viable if employees can only receive services at in-network rates at a
`
`hospital that is a long distance from the employer’s office or many employees/members residences,
`
`because individuals may not be able or willing to travel so far to receive those services.
`
`38.
`
`The self-funded commercial health plans directly pay the costs for in-network
`
`services at the prices negotiated by the Network Vendor. Self-funded health plans also pay the
`
`Network Vendors for access to the network and pay TPAs a fee for the administration of the plan.
`
`39.
`
`In a competitive market, hospitals compete on price and quality to be selected by
`
`Network Vendors for inclusion in networks. Then, Network Vendors compete to have their
`
`networks selected by self-funded health plans of employers, local governments, and unions.
`
`
`
`
`
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`B.
`
`
`40.
`
`Hospital/Insurance Negotiations in a Market Distorted by Anticompetitive
`Behavior
`
`The unique mechanics of the healthcare market provide an opportunity for hospital
`
`conglomerates with significant market power to anticompetitively restrain trade through unduly
`
`restrictive negotiations and agreements with Network Vendors and TPAs in order to extract
`
`supracompetitive prices. Supracompetitive prices are rates that are higher than what would be
`
`found in the context of normal competition. In the market for hospital services, supracompetitive
`
`prices come in the form of inflated allowed amounts, which are negotiated by Network Vendors
`
`but paid by self-funded health plans.
`
`41. When a Network Vendor seeks to construct a network in a region where a
`
`significant geographic area is monopolized by a single hospital system, that hospital system is in
`
`effect a “must-have” for the network. Self-funded health plans with significant members in that
`
`area will not choose a Network Vendor whose network does not include necessary services
`
`provided by that hospital system.
`
`42.
`
`A system with must-have facilities that engages in anticompetitive behavior can
`
`cause significant financial harm to self-funded health plans. First, in negotiations with Network
`
`Vendors, a hospital system with must-have facilities can demand allowed amounts that are grossly
`
`above what the hospital could obtain if it faced competition. This is true both by virtue of the
`
`hospital’s extant market power, as well as the enormously high barriers to entry when it comes to
`
`many services hospitals provide, such as acute inpatient hospital services. These barriers to entry,
`
`which include spending significant time and money to build facilities and hire skilled staff (such
`
`as surgeons and anesthesiologists) as well as regulatory hurdles such as obtaining approval from
`
`state and local officials before opening a new facility, prevent new entrants from entering the
`
`market and reining in prices charged at must-have facilities. Wisconsin requires detailed regulatory
`
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`oversight and approval of new hospital construction, creating another headwind for new facilities.
`
`And Wisconsin has a cap on the total number of hospital beds in the state.
`
`43.
`
`Second, if the must-have facilities are part of a larger hospital system that has other
`
`facilities that do face competition, the hospital system can refuse to offer in-network services at
`
`the must-have facility unless Network Vendors also agree to include in their networks services the
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`system’s other facilities, at higher allowed amounts than those other facilities could normally
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`demand standing alone. When negotiating with Network Vendors, a hospital system with must-
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`have facilities can link those facilities to the system’s facilities that would normally face more
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`competition, and by doing so extract supracompetitive prices from self-funded health plans.
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`Importantly, this results in the self-funded health plans paying supracompetitive allowed amounts
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`not only for services obtained at the must-have facilities but also for services at the system’s
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`“linked” facilities, which face more competition.
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`44.
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`These factors and others have led to a consensus in the field of healthcare
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`economics that monopolization of hospital markets significantly increase prices for hospital
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`services paid directly by self-funded health plans. As the Kaiser Family Foundation wrote, “A
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`wide body of research has shown that provider consolidation leads to higher health care prices for
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`private insurance; this is true for both horizontal and vertical consolidation.” And the economic
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`literature strongly suggests that there are no concomitant improvements in quality from such
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`monopolization.
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`45.
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`Another anticompetitive
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`tactic used by dominant hospitals
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`to extract
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`supracompetitive rates is the imposition of “anti-steering” and “anti-tiering” provisions in their
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`contracts with Network Vendors, TPAs, or health plans. In a competitive market, a Network
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`Vendor may include both high-cost and low-cost hospitals in network but individual TPAs or
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`Case 2:22-cv-00610-LA Filed 05/24/22 Page 16 of 76 Document 1
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`health plans can take measures to incentivize employees/members to choose the lower-cost,
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`higher-quality provider where possible. These measures can include providing truthful information
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`about the cost of care and offering financial benefits (e.g., lower co-pays or more preferential risk-
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`sharing) when patients choose lower-cost providers. Such measures undertaken by health plans are
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`called “steering.” Another form of steering is the creation of “tiered” networks or “tiered” plans,
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`in which low-cost, high-quality providers are in a higher tier than more expensive and/or lower
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`quality competitors, and the plan’s members are financially incentivized to choose providers in a
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`higher tier. This form of steering is often referred to as “tiering.”
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`46.
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`Academic research by health economists has demonstrated that when commercial
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`health plans, TPAs, and Network Vendors are free to engage in steering and tiering, the plans pay
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`significantly lower costs for healthcare, with no corresponding reduction in health outcomes.
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`47. When a dominant hospital system—particularly a system with one or more must-
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`have facilities—negotiates with Network Vendors, the system can force the Network Vendor and
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`its health plan clients not to engage in these cost-saving measures by requiring “anti-steering” or
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`“anti-tiering” provisions in their contracts. Such provisions essentially require commercial health
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`plans to grant the dominant provider a “most favored nation” status, preventing the plans from
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`favoring other systems through financial incentives, information sharing, or placing any other
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`system in a plan’s higher “tier.” As detailed below, AAH engages in this anticompetitive conduct.
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`48.
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`In 2016, former President Obama’s Department of Justice brought a Sherman Act
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`suit against a dominant North Carolina hospital system that imposed anti-steering and anti-tiering
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`provisions on commercial health plans. The government alleged that the sy