Mercy Health?s Physician Deselection Not Antitrust, Justice Department Says

Mercy Health System’s selective contracting with Benton County physicians is apparently not anti-competitive or illegal under federal law, the U.S. Justice Department has said.

Congressman Asa Hutchinson asked the Justice Department for its opinion concerning recent actions by Mercy Health System of Northwest Arkansas. The Mercy system, which owns St. Mary’s Hospital in Rogers, has contracted with Arkansas Blue Cross and Blue Shield to administer the insurance company’s health maintenance organization and preferred provider plans.

Under that agreement, Mercy was responsible for submitting a list of physicians who would be providers under those plans. At least 12 Benton County physicians, all of whom are independent practitioners, were excluded from the provider list. That means any patients who are covered by the Blue Cross HMO or PPO plans and who choose those physicians must pay a larger share of the cost or, in some cases, the entire expense.

In a letter to the Justice Department seeking an opinion, Hutchinson noted that the doctors who were deselected by Mercy “are now at a serious competitive disadvantage as [Blue Cross and Blue Shield] covers 36,000 policy holders in Benton County.” He asked the department to review whether the Mercy system was using its market power to limit patient choice.

Joel Klein, assistant attorney general, responded in a letter dated Dec. 29 that a health plan generally has the right to limit its provider panel, to select the providers with whom it will contract and to set requirements for providers as a condition for contracting.

“Such selective contracting is often pro-competitive because it may enable the plan to achieve quality and cost containment goals, which enhance the plan’s ability to compete with other health plans,” Klein wrote. “By limiting its provider panel and thus channeling a sufficient patient volume to its providers, a health plan can create incentives for the providers to accept lower prices and to provide higher quality services. This may result in lower priced, higher quality health insurance for consumers.”

Klein says the Justice Department uses a “rule-of-reason” analysis in evaluating selective contracting. That analysis considers all market conditions and circumstances surrounding the health plan’s practices. “The focus of the analysis is not on whether particular providers have been harmed by the selective contracting, but on whether the conduct reduces competition among providers in the market and thereby harms consumers.”

His letter notes that the evaluation of Mercy Health’s actions is limited to publicly available information.

While Blue Cross and Blue Shield appears to be the largest managed care company in Benton County, there are competing plans in the region, Klein notes. Additionally, managed care plans apparently cover only half the health care provided in Arkansas. That suggests, he continues, “that physicians are providing a substantial portion of their services through other channels.”

He concludes that it’s unlikely a court would find Mercy’s actions antitrust violations, unless there are factors he’s unaware of.

Rep. Hutchinson and Sen. Tim Hutchinson are both expected to attend a Jan. 29 public forum organized by state Rep. Cecile Bledsoe, a Republican from Rogers who represents District 3, and the Northwest Arkansas Independent Physicians Association. That forum is scheduled for 9 a.m. at NorthWest Arkansas Community College in Bentonville.