McLaren St. Luke’s sued ProMedica on Tuesday over its alleged plans to cut off access to McLaren St. Luke’s services to protect its market share.
The day after competing health system McLaren Health Care Corp. acquired St. Luke’s Hospital in Maumee, Ohio, ProMedica’s Paramount Health Care allegedly terminated its commercial insurance and Medicare Advantage contracts with St. Luke’s and its physicians, effective Jan. 21. Toledo, Ohio-based ProMedica also ended the contracts between its Michigan hospitals and the McLaren Health Plan the same day, as executives conceded that the moves were in response to the prospect of greater competition from McLaren, according to the complaint filed in an Ohio federal court.
The hospital and WellCare want to prevent ProMedica from blocking McLaren St. Luke’s and its physicians from the health plans offered by ProMedica’s insurance subsidiaries. They claim their damages could exceed $10 million if the terminations went through.
The contract terminations will prevent thousands of individuals and families from seeing their preferred doctor or receiving non-emergency care at any McLaren St. Luke’s or WellCare Physicians Group location.
“This challenge comes as McLaren St. Luke’s prepares to make significant investments that will allow our hospital to better serve the community with a broader range of services, which ultimately creates increased competition for ProMedica,” Jennifer Montgomery, CEO of McLaren St. Luke’s, said in prepared remarks. “By terminating McLaren St. Luke’s in-network provider status, ProMedica is penalizing their own members by limiting choice and causing significant damage to our hospital.”
ProMedica said in a statement that it does not comment on the details of pending litigation, but it looks forward to demonstrating that this “frivolous lawsuit from an out-of-state health system lacks any merit and was filed solely to tarnish ProMedica’s reputation.”
St. Luke’s is Grand Blanc, Mich.-based McLaren’s only hospital outside of the state. McLaren pledged up to $120 million in capital investments in the hospital over the next five years, including a new orthopedic, neuro and spine center and a revamped intensive care center.
St. Luke’s has operated in the red in recent years in part because of the agreement the Federal Trade Commission made with ProMedica, which was forced to unwind its acquisition of St. Luke’s in 2016 on the grounds that it would give the hospital group too much market power to raise prices.
As the McLaren acquisition came closer to fruition, ProMedica ended or refused to renew eight “profitable” contracts with St. Luke’s on June 1 on behalf of its subsidiaries, according to the suit. One of these contracts involving cardiothoracic surgeons that work at St. Luke’s, has caused “substantial and continuing damage.”
While St. Luke’s has replaced the ProMedica surgeons that worked at the hospital, the primary new doctor didn’t have a relationship with referring physicians, causing St. Luke’s heart surgeries to decline by more than 70%, the plaintiffs allege.
“The ProMedica cardiothoracic surgeon, Dr. Riordan, desired to continue practicing at St. Luke’s, and opposed the action by ProMedica. Moreover, that was the preference of the cardiac service line group at ProMedica. But leadership at ProMedica ordered that the agreement be terminated,” the complaint reads, adding that the mandate was a direct result of the McLaren transaction.
The plaintiffs claim the contract siphoning is one in a series of anticompetitive actions. One instance involves University of Toledo Medical Center, which entered a 50-year academic affiliation with ProMedica in 2015.
While ProMedica contends the partnership with fortify the medical center, some Ohio lawmakers argue that it will gut the medical center as ProMedica siphons off its physicians and the most profitable services.
With 91,000 members in its Paramount health plans, the suit alleges that ProMedica has the leverage to stifle competition and raise prices with around half of the acute-care market share in the area and as much as 70% in certain service lines.
“Our hospital has long been known as a high-quality, low-cost provider in the market,” McLaren St. Luke’s Board Chairman Bill Carroll said in prepared remarks. “Restricting patients’ access to receiving care locally and preventing the introduction of important new services harms everyone—including Paramount’s own members. With more than $100 million in planned investments to McLaren St. Luke’s facilities and services at stake, the community will pay a significant price if ProMedica’s strong-arm tactics are allowed to stand.”
McLaren St. Luke’s stands to lose a substantial portion, “if not the majority,” of its $25 million in annual payments related to the care of Paramount’s commercially insured and MA members, according to the lawsuit, noting that Paramount represents more than a fifth of St. Luke’s commercially insured and MA business. The commercially insured helps offset care for the uninsured, underinsured and Medicare and Medicaid beneficiaries, according to the complaint.
Some patients may have an opportunity to switch health plans and still receive care at St. Luke’s, but most employers do not offer a range of health plans and many have already chosen their network.
Paramount has not told its members why it ended its relationship with St. Luke’s. which makes it even less likely they would seek care there, the plaintiffs alleged. Many independent physicians will likely conclude that if they have significant numbers of patients who are out of network with Paramount, they are better off treating all their patients at a hospital other than St. Luke’s.
All of this adds up to “incalculable” harm, noted in the complaint.