Trillium Argues Oregon Hospitals Conspired to Prevent Insurer’s Entry into State-Regulated Medicaid Markets

Three major hospital systems are accused of taking advantage of state regulation of healthcare to snuff out competition in a novel antitrust case filed in the United States District Court for the District of Oregon.

Trillium Community Health Plan, a subsidiary of the Centene Corporation, alleges numerous entities and individuals, including three prominent hospital systems—Legacy Health, Providence Health & Services Oregon, and Oregon Health & Science University—collectively refused to contract with Trillium in order to eliminate the insurer from offering Medicaid coverage in three Oregon counties.

The controversy traces its roots to Oregon’s establishment in 2011 of Coordinated Care Organizations (“CCOs”) as a framework for delivering improved care to the state’s Medicaid recipients.  Operating as a network of various healthcare providers, the CCOs service the Medicaid population on a county-by-county basis.  To form a CCO, an applicant, usually an insurer, must provide various assurances to the Oregon Health Authority (the “OHA”), including guarantees that the insurer has established a sufficient network of providers across the spectrum of healthcare services offered to beneficiaries.  The OHA has approved 15 CCOs across the state, including granting Trillium a CCO in Lane County and portions of Douglas County.

In 2019, the OHA began its “CCO 2.0 contract awards,” in order to increase CCO coverage and allow additional competitive entry.  During that contracting process, Trillium sought to expand its reach into the greater-Portland area.  At the time, the sole CCO in those three counties was operated by Health Share, a non-profit membership corporation controlled by numerous healthcare entities, including Legacy, Providence, and Oregon Health & Science University.

In its complaint, Trillium alleges that its efforts to form a new CCO in Portland were thwarted by the three hospital systems.  Specifically, throughout 2019, contract negotiations between Trillium and each hospital system failed, and as a result, Trillium was unable to meet OHA’s network adequacy requirements.  Trillium’s claim of a per se illegal boycott is supported by allegations that tie the alleged anticompetitive conduct to each hospital system’s desire to ensure that Health Share was the only available CCO within the three counties.  Trillium claims that although each provider originally submitted letters of intent to OHA to bid and compete for the CCO through their own provider-sponsored health plan (“PSHP”), eventually those providers collectively agreed to withdraw those proposals in favor of supporting their co-owned CCO, Health Share.

The Trillium case raises interesting questions about competition in the highly regulated healthcare space.  In particular, the case touches on vertical integration of healthcare providers.  PSHPs—such as those offered by the three hospital systems in Oregon and the co-owned Health Share—an ever-growing part of the American healthcare ecosystem.  As of 2017, 18 million Americans received their insurance through a PSHP.  Those enrollment numbers are expected to grow as more employers and individuals switch from standard insurance products to those controlled by their preferred provider system.  The PSHP model certainly has the potential to creates efficiencies and may improve the quality of care at a lower overall cost.  But, plaintiffs, including competing providers, have argued that a dominant health system’s ownership of an insurance product can assert undue influence over regional markets, leading to anticompetitive effects.

Moreover, the Trillium case puts the spotlight on state regulation of healthcare competition.  The OHA’s control of CCO participation is not that dissimilar from a state’s control of market participants through certificate of need (“CON”) laws.  The CON laws of 36 states and Washington, D.C. allow state agencies to limit capacity of healthcare services in an effort to deter price inflation.  The Federal Trade Commission continues to question the usefulness of CON laws, particularly in light of the nature of the laws limiting competitive entry.  Nonetheless, if the state makes the determination that a healthcare market should have limited entry, the federal antitrust laws, under the state action doctrine, are precluded from remedying any anticompetitive effects.

Defendants’ motions to dismiss in the Trillium case are slated to be filed before the end of the year.  Given the issues of healthcare vertical integration and state regulation, healthcare practitioners and providers are likely to follow this case with great interest.

Edited by Gary J. Malone

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