payment

Plaintiff state sought to enjoin two transactions. The first was the acquisition by CHI Franciscan, a health system on the Kitsap Peninsula, of WestSound, an orthopedic physician practice. The second was CHI’s agreements with The Doctors Clinic (TDC), a multispecialty physician practice, under which TDC would receive CHI Franciscan’s negotiated reimbursement rates with payers. TDC and CHI Franciscan remain separate entities. The state alleged that the purpose of these transactions was to “win the ability to charge higher rates for physician services, and to collectively gain negotiating clout over healthcare payers by removing head-to-head competition.” The state also alleged that the affiliation between Franciscan and TDC is a price-fixing agreement which has led to increased wait times, difficulty in scheduling procedures, and a reduction in patient choice of services and locations. The parties reached a settlement that 1) bars CHI Franciscan from entering into similar agreements in the future; 2) requires the health system to give the Attorney General’s Office advanced notice of future arrangements that could decrease competition; 3) divest its controlling interest in an outpatient surgery center it acquired in Silverdale; 4)requires primary care physicians and orthopedists at The Doctors Clinic to contract with insurers separately from CHI Franciscan if the insurers desire; 5) forces CHI Franciscan to allow for incentive-based payments to The Doctors Clinic physicians for providing higher quality of care, instead of higher patient volume; 6) requires Franciscan and The Doctors Clinic to notify Kitsap Peninsula imaging patients of imaging facility options available to them other than Harrison Medical Center and 7) pay up to $2.5 million as a cy pres distribution, to be distributed by the Attorney General’s Office among at least four health providers to increase access to health care on the Kitsap Peninsula. The grant money will go toward direct patient services.