State AG, CHI Franciscan tussle over settlement

CHI Franciscan cites the press release was misconstrued with many omissions

In a May 13 press release, Attorney General Bob Ferguson said that CHI Franciscan will pay up to $2.5 million to resolve a federal antitrust lawsuit, filed by Ferguson against the Tacoma-based nonprofit health care system in 2017.

In an email to Kitsap News Group, CHI Franciscan media spokesman Zach Knowling disputed much of the contents of Ferguson’s press release, stating it was “misconstrued with many omissions.”

As part of the settlement, CHI Franciscan is also required to divest its controlling interest in an outpatient surgery center it acquired in Silverdale, restoring competition for services on the Kitsap Peninsula, the press release states. The money will be distributed to health clinics and organizations to increase access to health care services on Kitsap Peninsula.

CHI Franciscan disputed these claims, stating that “There was never a judgment or admission about anti-competitiveness on the Kitsap Peninsula” and that “The AG’s lawsuit did not claim there was a lack of competition in ambulatory surgery centers on the Kitsap Peninsula.”

In addition, CHI Franciscan is required to notify the Attorney General’s Office of future deals that could decrease competition. The agreement also includes other contract changes and notice requirements. Ferguson filed the lawsuit after Franciscan acquired the assets of WestSound Orthopaedics in Silverdale, and then announced an affiliation with The Doctor’s Clinic, a multi-specialty practice with more than 50 physicians and seven locations throughout Kitsap County.

The deals combined the three largest providers of orthopedic physician services in the Kitsap region, greatly reducing choices for Kitsap consumers seeking orthopedic services close to home, the release from the attorney general’s office asserted.

“CHI Franciscan’s actions unlawfully decreased competition and increased prices at the expense of patients,” Ferguson said. “Today’s agreement holds CHI Franciscan accountable for putting its bottom line ahead of the people on the Kitsap Peninsula.”

CHI Franciscan claims this statement is also false, citing that “the judge dismissed half of the AG’s case outright, leading the AG to seek a settlement for the remaining portion of his allegations.”

As part of the TDC agreement, Franciscan acquired the group’s ambulatory surgery center and then began referring many surgeries to Franciscan-owned Harrison Medical Center. After the two deals, thousands of Kitsap Peninsula patients faced higher prices, increased wait times, difficulty in scheduling procedures and a reduction in their choice of services and locations, Ferguson’s release states.

CHI Franciscan also disputed that statement, claiming “the addition of The Doctor’s Clinic and WestSound Orthopaedics did not enable CHI Franciscan to negotiate higher reimbursement rates for Peninsula services, nor did we seek to do so. CHI Franciscan negotiates all of our payor contracts on a system-wide basis, which reflects competition across a broad geographic area and range of services.”

The release also asserted that, privately, in documents obtained during the AGO’s investigation, officials at CHI Franciscan and TDC discussed the deals as a boon to their bottom line and harmful to patient care. CHI Franciscan’s Chief Financial Officer Mike Fitzgerald wrote in an email: “I am all for taking advantage of hospital-based pricing. … It would be great to drop a couple of million more to our bottom line if we think we can do it.”

TDC’s former physician president summarized these comments to its current medical director: “I can’t wait to hear how CHI messages the addition of TDC to (Franciscan Medical Group). You can now get your outpatient care in a complex, relatively unsafe, and vastly more expensive location. You are welcome, Kitsap County…”

In 2016, the AGO received complaints on behalf of consumers and began investigating CHI Franciscan’s agreements in Kitsap County. The office found the true motive for both deals was to gain negotiating clout over health care insurers and win the ability to charge higher rates for physician services, according to the release.

Both transactions also enabled CHI Franciscan to capture more patient referrals and shift services to its wholly owned hospital, Harrison Medical Center, the only civilian acute-care hospital in Kitsap County, the AGO said. The deals hobbled CHI Franciscan’s competitors while allowing it to reap the benefit of more expensive, hospital-based rates, the release stated.

Overnight, rate increases hit the vast majority of procedures covered by commercial insurance contracts with the organizations, resulting in higher out-of-pocket costs for patients.

The $2.5 million that CHI Franciscan will pay as part of the settlement will be distributed to direct patient services, including West Sound Free Clinic, Peninsula Community Health Services, Bremerton Health Center and Kitsap Mental Health Services.

Knowling also provided a written statement from Cary Evans, CHI Franciscan’s vice president for communications and government affairs.

“The AG lost this lawsuit and is now twisting the facts to match his baseless allegations,” Evans wrote. “The Court dismissed most of his case before even going to trial — which led the AG to settle, leaving our agreements with both WestSound Orthopaedics and The Doctor’s Clinic in place.

“This settlement will cost our patients far less than proceeding to trial, and we stipulated the funds must be invested in the peninsula as part of our mission to build healthy communities and provide the highest quality care close to home.”

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