Mountain Health Care ordered to dissolve

By Clarke Morrison
POSTED: Dec. 13, 2002 10:45 p.m.

ASHEVILLE - The U.S. Justice Department on Friday ordered an Asheville-based physicians network to cease operations and dissolve, saying the organization had engaged in price- fixing that resulted in higher health care costs.

The department said under its proposed settlement with Mountain Health Care, the network must stop negotiating health-care plans on behalf of its 1,200 member physicians.

The doctor-owned network agreed to the settlement, saying it could not afford expensive and lengthy litigation against the federal government.

The Justice Department has been investigating Mountain Health Care for more than two years. The organization has more than 80 percent of Buncombe County's physicians in its network.

Some area employers said they are hopeful the government's actions will stem the region's skyrocketing health care and insurance costs. Many local businesses were socked with premium increases of 30 percent or more this year.

"If they break that up maybe we can get some more competitive costs," said Debbie Ewald, co-0wner of Skyland Tool & Mold. "If they are price-fixing, how much is that hurting a company like mine?"

The Justice Department Antitrust Division filed a lawsuit in U.S. District Court in Western North Carolina Friday. At the same time, it filed a proposed consent decree that, if approved by the court, would resolve the lawsuit and the department's competitive concerns.

"The Antitrust Division is committed to ensuring that consumers buying health care services receive the benefits of competition," said Constance Robinson, the division's director of operations. "This settlement ensures that the agreement used to raise the costs of health care to consumers in North Carolina is eliminated."

Mountain Health Care admits no wrongdoing by agreeing to the consent order, said Dr. Todd Guthrie, an orthopedic surgeon and chairman of the organization founded in 1994 to negotiate fees with employers and insurance companies.

"Obviously we're disappointed," he said. "We felt what we've been doing is positive for the community. We've been providing a broad panel of providers, which is what patients and employers want.

"We feel we've been doing that in a competitive manner with a sound business model. We don't feel we've done the harm to the community that government alleges."

Guthrie said the agreement requires Mountain Health Care to sell its assets within 120 days and terminate its contracts with employers and insurance companies.

The organization is negotiating with a prospective buyer that should be able to set up new contracts before the current ones are terminated, he said.

"Our anticipation is that coverage will not be disrupted," Guthrie said. "There is no reason that any patient can't continue to see their provider."

Jeff Imes, president of W.P. Hickman Co., a sheet metal manufacturing operation on Sweeten Creek Road, said he hopes the demise of Mountain Health Care will help bring more competition to the health-care market.

"We're optimistic that in the future this will be beneficial to all employers and citizens of Western North Carolina, that there will be fair and competitive insurance rates for all of us affected," he said.

"I think there could be some other insurance companies that would be willing to come in and compete."

But Larry Modlin, vice president for business at Warren Wilson College, said he would be sorry to see Mountain Health Care dissolved. The network has been serving the college for about five years.

"They are a great outfit," he said. "They have served the public incredibly well. They provide the widest array of doctors of any organization in the Asheville area."

According to the Justice Department complaint, Mountain Health Care restrained price and other forms of competition among physicians by adopting a uniform fee schedule governing the prices of its participating physicians.

"The use of this uniform fee schedule has resulted in increased physician reimbursement fees throughout Western North Carolina," the complaint states. "Physicians and practice groups that normally would have competed with each other set the same price for their services. Thus, Mountain Health Care is a price-setting organization."

Clark Havighurst, an antitrust expert and professor at Duke University's School of Law, said there probably are five or six cases a year in the country in which the Justice Department cracks down on physician networks perceived to be monopolistic.

"Physicians have with some regularity attempted to organize themselves to bargain collectively with health plans," he said. "And the government has found it necessary on many occasions to intervene.

"Their standards for deciding whether a particular collaboration is lawful or not is often based on whether they think doctors have organized for the purpose of improving their ability to render cost-effective care or are merely trying to exercise bargaining power. The government is watching physician networks."

Ellen Wells, chief executive officer of Mountain Health Care, said the government holds physician-owned networks to a higher standard when it comes to antitrust laws, and she believes that's unfair. But she said fighting the department in court wasn't feasible.

"It would be ethically and morally wrong for us to pass costly legal expenses on to our customers, and ultimately to patients," Wells said.

The department's investigation of the region's medical community for possible antitrust violations began more than two years ago.

It demanded thousands of pages of documents from a wide array of health care institutions, including all 16 private hospitals, physician practices, managed care organizations and group purchasers of medical services. Mountain Health Care submitted some 30,000 pages of documents.

Carol Hensley, small business director at the Asheville Area Chamber of Commerce, said its hard to know whether the break up of Mountain Health Care will help to constraint the rapidly rise health insurance premiums that the chamber's members have been so concerned about.

"The whole thing is very complex," she said. "I think we'll have to wait and see how it all plays out before we know if it will affect the cost of health care in this area."