DOJ accuses New York health system of engaging in anticompetitive business practices

The U.S. Department of Justice (DOJ) announced on Thursday that it’s filed a lawsuit against NewYork-Presbyterian Hospital, alleging that the nonprofit organization uses its size and influence to pressure insurance companies into favoring its facilities over those of competitors, even when doing so drives up costs.  

The issue surrounds the development of health plans that would include in-network options for members. The DOJ alleges that NewYork-Presbyterian is effectively making it impossible for insurers to develop low-cost plans, driving up medical coverage premiums in the process. If true, authorities contend this type of market manipulation violates federal antitrust law, particularly the Sherman Act. 

In a statement, the U.S. Attorney’s Office for the Southern District of New York joined the DOJ in announcing the lawsuit, which names the entire NewYork-Presbyterian organization as a defendant, including its eight hospitals and numerous outpatient centers. The health system is accused of “imposing contractual restrictions that preclude insurers and employers” from offering “budget-conscious health insurance plans.”

“Healthcare is a vital sector of our nation’s economy that touches the lives of every single American,” Acting Assistant Attorney General Omeed A. Assefi of the Justice Department’s Antitrust Division said in the statement. “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.”

‘Scale, breadth and configuration’

In the full text of the court filing, the government lays out its case, arguing that NewYork-Presbyterian has “substantially higher prices than its competitors” despite other hospitals and provider groups in New York City offering similar services at no measurable reduction in quality.

“For example, NewYork-Presbyterian’s prices are significantly higher than its two largest rivals, NYU Langone and Mount Sinai, which are both academic medical centers with prestigious medical schools, significant research programs, and strong reputations for quality,” the lawsuit reads.

Despite being itself an academic nonprofit, the complaint accuses NewYork-Presbyterian of leveraging its “scale, breadth and configuration of its providers” along with its “strong brand and reputation” to pressure insurance companies into contracting with it on an “all-or-nothing basis”—meaning that payers must include all of the health system in a network, otherwise it must exclude it entirely.

Given the reach and size of NewYork-Presbyterian, plaintiffs from the U.S. Attorney’s Office and the DOJ argue that it is effectively impossible to exclude the health system entirely while offering coverage to patients who live and work in New York City.

Further, the lawsuit alleges that the academic hospital group acknowledged as such in an official document, which authorities cite as evidence of anticompetitive business practices.

“In a recent strategic planning document, NewYork-Presbyterian acknowledged that there is ‘consumer price sensitivity’ among patients,” the lawsuit states. “If consumers could act on this sensitivity through budget-conscious plans, NewYork-Presbyterian may experience ‘pricing pressure’ because of its high prices, which may ‘impact [NewYork-Presbyterian] margins”—that is, the profits it garners from treating patients.”

In a statement sent to a number of media outlets, the health system denied accusations made in the lawsuit, calling the complaint meritless.

“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,” a spokesperson said.

“Insurance companies hold the market power and use it to restrict patient choice,” they added.