FTC Issues Challenge to Carilion Acquisitions

The Federal Trade Commission issued an administrative complaint last week challenging Carilion Clinic’s 2008 acquisition of two outpatient clinics in Roanoke. Prior to the acquisition, the Center for Advanced Imaging (CAI) and the Center for Surgical Excellence (CSE) had reputations for offering high-quality care and convenient services at prices much lower than Carilion’s.

The complaint alleges that Carilion’s acquisition of these outpatient centers eliminated vital competition in violation of federal antitrust laws, and will lead to higher health care costs and reduced incentives to maintain and improve service and quality of care for patients in the Roanoke area. The complaint seeks divestiture of these centers and related assets necessary to restore the competition eliminated by the acquisition.

“Competition among health care providers can help contain costs and improve quality of care,” said Bureau of Competition Director Richard Feinstein. “The elimination of competition between Carilion and CAI and CSE will result in higher health care costs at a time when such costs already cause serious financial hardship for consumers in the Roanoke area and throughout the country.”

Carilion spokesman Eric Earnhart had this e-mail response to the charge: “We are currently reviewing the FTC complaint and preparing our response. We are concerned that the complaint appears to be based on inaccurate information. The Center for Advanced Imaging and Center for Surgical Excellence will continue to operate normally. There have been no changes in the Centers’ prices since their purchase last year, and no changes are planned. We will remain focused on our mission to develop an integrated system that improves patient care and reduces health care costs.”

According to the FTC complaint, Carilion’s $20 million acquisition of CAI and CSE reduced the number of outpatient imaging and surgical services providers in the Roanoke area from three to two, and eliminated competition that benefited patients, employers, and health plans. Because of the acquisition, Carilion now only faces competition for outpatient imaging and surgical services from only one other provider, HCA-Lewis Gale, the other major hospital system in the Roanoke area.

The FTC complaint alleges that, “Carilion’s acquisition of lower-cost providers CAI and CSE will result in higher health care costs for these services, with out-of-pocket costs for many patients likely increasing nearly 900 percent for some treatments. Also, higher prices for outpatient imaging and surgical services will lead to higher premiums and the risk of reduced coverage for needed services.”

The Citizens Coalition for Responsible Healthcare was formed last year by Roanoke Valley residents to focus on the issue of affordable health care. Their attention has been aimed almost exclusively towards Carilion practices. Attorney Ken King (Chairman, President) talked then about a mission “to assure accessible, affordable, high quality healthcare for all citizens.”

At the time, King noted that the group had received media attention elsewhere – from newspapers in London and New York, as part of an examination of Carilion’s role in the region. The Wall Street Journal ran a front page article in August of last year accusing the Healthcare giant of using its leverage to monopolize a previously competitive marketplace and then charging inordinate rates for medical procedures. The article charged that Carilion’s business practices were “why insurance rates in Roanoke have gone from being the cheapest in the state, to the most expensive.”

Carilion spokesperson Eric Earnhart said Tuesday, “the FTC issue will not affect our ability to move forward with the Clinic. The imaging center and surgery center in question represent about 1/2 of 1% of our business.”

The issue is likely to quiet down and then return again in force next March when the FTC hearings are set to begin.

By Gene Marrano
[email protected]

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