Community Health Systems and Anti-Trust Law: Some monopolies are more legal than others

Martha K. Huggins, Ph.D……

I grew up hearing my grandfather and his son, my maternal uncle, rail against  the Sherman Anti-Trust Act.[i]  I had no idea what they were talking about, but I knew I should believe that ‘Anti-Trust” actions by government were bad.  My grandfather, an independent prospector for metal ores, between 1886 and the early 1900s—broken only by his Spanish-American War (1898) service—increasingly sold his paltry take of gold, silver, or copper ingots to mining syndicate representatives, among them the Anaconda Copper Company. My grandfather’s simple tools—his hands, a digging spade, and crude sieve—were made obsolete by the powerful mining syndicates’ modern machinery and highly-trained engineers who turned mining into a predictable science. Mining’s monopoly took away my grandfather’s joy and the psychological rush of prospecting. Monopolization of mining reduced my uncle to a poorly paid mine worker.

But my grandfather and uncle never blamed the monopolistic power of mining syndicates for their own loss of income.  Instead, they  placed the blame on the US government’s “over-regulation” that allowed “thuggish” government officials to “to kill mining” through enforcement of the  Sherman Anti-Trust act, also known as “Competition Law.”  Aimed at protecting honest and healthy competition, US Congress passed Sherman in 1890,  prohibiting “certain business activities that the federal government consider[ed] anti-competitive.”

My favorite board game growing up was “Monopoly,” which was played to take over the other  players’ properties, making the successful player “rich.”  “Monopoly,” the board game, let the winning player build a fictive fortune by “buying up whole neighborhoods, charging rent, [and] watching [their]… empire grow,” [ii] if the winner had been able to avoid or get out of  jail.

Health and Hospital Care in the Lower Keys

“Monopoly” is a game.  In real life the US government supposedly acts to break up monopolies by enforcement of the Sherman Anti-Trust Act—most often resulting in civil rather than criminal penalties for corporate violators. “Jail” is for “real” criminals; fines and other civil penalties are for rich corporations and their officers! A monopoly[iii] exists when a “specific person or enterprise,” such as the two Key West hospitals operating as one entity, provides a service in the absence of any other real competing emergency room and hospital care facility.  When the 1999 contract was consummated between the Lower Keys Hospital District and the Health Management Associates (HMA), the entity created –two real for-profit hospitals melded into one—under management initially of HMA and now by Community Health Systems (CHS), was not a “monopoly” at all. Sherman Anti-Trust law had been tweaked by 1999  to allow  the kind of hospital monopoly that we today have in the Lower Florida Keys– a “government-granted” monopoly.  This special dispensation from the U.S. government recognizes that when a local hospital is the sole provider of critical hospital care to an underserved rural population, it is not the same as a real monopoly.

However,  US government regulators still recognize that a critical-care hospital, such  the Lower Keys Medical Center (LKMC),  “has significant market power…[even] to charge overly high prices.” Due in part to for-profit hospitals’ ‘special status,’ they have the privilege of not publishing their prices for medical procedures and other services.  Thus patients are unable to assess hospital charges in relation to Medicare or Medicaid reimbursements.   Simply put, “market forces fail to constrain hospital charges” and patients do not get to know in advance how charges are derived and whether insurance will cover them. Knowing that recent research by economists and other social scientists has revealed that “The real cost of reduced competition among hospitals[–where] hospitals have a monopoly, [ shifts]…massive price hikes [to patients].”  In fact, according to one study, “hospital prices in monopoly markets are 15.3 percent higher than in markets with four or more hospitals. Hospitals in duopoly markets [where just two separate hospitals dominate the market]… prices…are 6.4 percent higher…. [Hospital] treatments in markets that have a hospital triopoly [are]  4.8 percent more expensive” than where competition is more abundant.[iv]

Former Federal Trade Commission (FTC) Chair Jon Leibowitz “told the Wall Street Journal in 2012, “If you want to do something about controlling costs in health care, you have to challenge anticompetitive hospital mergers.”[v]  But easier said than done:  Hammer and Sage have documented that “attempts to prevent hospital mergers are simultaneously the most visible and the least successful aspect of public antitrust enforcement.”[vi] In 1989, the Department of Justice tried and failed to block a merger of two of the three major hospitals in Virginia’s Roanoke Valley. Between 1994 and 2000, the FTC and the Justice Department made seven failed attempts to block hospital mergers. A study by Gerard F. Anderson (Johns Hopkins Bloomberg School of Public Health) and  Ge Bai (Washington and Lee University),[vii] that included 4,483 U.S. hospitals, in a study of Medicare payments for emergency room and hospital care within a ratio of  Medicare allowable costs.  This 2012 study found that fifty hospitals among the total of hospitals studied, “had charge ratios, on average, 10.1 times [greater than the cost] of billed procedures.”  In contrast, “Most hospitals in the set of 4,483 U.S. hospitals, had charge-to-Medicare ratios only in the 1.5–4.0 range.  Forty-percent of the highest-cost-ratio hospitals were in Florida.  (Our LKMC hospital was not in the 2012 study)However, the 50 hospitals in the sub-sample were “charging markups of more than 1,000 percent.”  For-profit hospitals were disproportionately represented among the high-charge hospitals, and “just one for-profit multiple hospital system (Community Health Systems) operated half of the fifty hospitals with the highest” Medicare-to-cost markups.  Anderson and Bai concluded that, “Hospitals with substantial market power [e.g., those with a monopoly’] can use high markups as leverage with private insurers in price negotiations.  High profit markups and the possibility for obtaining high revenues from out-of-network patients, make the option of joining a network less attractive to…hospitals, These hospitals with a government-granted monopoly are less willing to negotiate with private insurers.”

Designated in Anti-Trust circles as a “refusal to deal,” such an unwillingness to negotiate can itself be an anti-trust violation, even among hospitals with a ‘government-granted’ monopoly. “Privately insured in-network [insurance] patients may also pay higher premiums as a result of high hospital markups.”  In the end, we all pay for “predatory pricing” by hospitals, which is yet another anti-trust violation–even if carried out by ‘government-granted monopoly’ hospitals.  Those keeping an eye on “predatory billing” might be interested that the Blue Paper learned this week that, indigent patients, whether at one or the other of the Lower Keys Hospital District’s combined hospitals, are reportedly levied the full price for services receivedThis pattern, found as well by researchers Anderson and Bai, among the U.S. hospitals in their 50 hospital sub-sample,  confirm that nationally, “Uninsured patients, who lack bargaining power, are commonly subject to the full hospital charges.  We could add that the un-paid debts created by the Lower Keys uninsured can then be handled by CHS tax attorney’s as a corporate tax write off. In the modern, real life, game of “Monopoly,” monopolist hospitals never seem to lose.  In contrast,  as the Blue Paper learned on Tuesday from the LKMC executive Board,  those who pre-pay for their medical procedure at the LKMC Hospital can receive a  67%  percent reduction in the cost of their hospital procedure and care.  

Getting Caught Getting Rich Through the Sleeze:  Fines Not Jail.  

The lawsuits and U.S. government investigations into HMA and CHS business practices are much more public than these entities’ revenues and losses.  In its 2013 quarterly report to the U.S. Securities and Exchange Commission (SEC), Community Health Systems fessed up its misstatements:

“From time to time, [CHS] receive[s] various inquiries or subpoenas from state regulators, fiscal intermediaries, the Centers for Medicare and Medicaid Services and the Department of Justice regarding various Medicare and Medicaid issues….We are currently responding to subpoenas and administrative demands concerning certain cardiology procedures, medical records and policies…. Settlements of suits involving Medicare and Medicaid issues routinely require [emphasis added] both monetary payments as well as corporate integrity agreements.  Additionally, qui tam or “whistleblower” actions initiated under the civil False Claims Act may be pending but placed under seal by the court to comply with the False Claims Act’s requirements for filing such suits. Also, from time to time, we detect issues of non-compliance with Federal healthcare laws pertaining to claims submission and reimbursement practices and/or financial relationships with physicians.”[viii]

In addition, HMA/CHS, during their respective tenures in managing our Lower Keys hospitals have been implicated in “Medicare and Medicaid problems routinely require[ing] [emphasis added] both monetary payments …[and]  corporate integrity agreements.”

  • 2015: A Suit was filed by Key West tourist, Gertrude Millien against the Lower Keys Medical Center alleging “financial fraud” in her federal lawsuit. “Key West’s only hospital knowingly tried to collect more than twice what it was legally owed by a patient who in 2015 racked up more than $17,700 in medical bills after a car crash.”[ix]
  • 2013: CHS “created a $98 million reserve [account] to cover a settlement with the Department of Justice,” while it was “in negotiations with the U.S. Justice Department (DOJ) to resolve claims in connection with DOJ’s investigation into the company’s short-stay hospital admissions for the years 2005-2010, as well as its investigation at a hospital in Laredo, Texas.” [x]
  • 2011: US Government v.Health Management Associates, Inc., a publicly-traded corporation that operates 59 general acute-care hospitals in non-urban communities throughout the United States (0-11-cv-01713-JFA) and  Emergency Medical Services Corporation and its wholly-owned subsidiary, EmCare, Inc., one of the nation’s largest providers of hospital emergency room physician services, for violating the False Claims Acts (“FCAs”) of the United States and the States of Florida, Georgia, North Carolina, Oklahoma, Tennessee and Texas.  [NOTE:  EmCare once ran the ER at the Lower Florida Keys Medical Center].  See the Blue Paper (9/30/2016)[xi]  for other alleged HMA irregularities, besides, allegedly “setting target ER inpatient admission rates — including a corporate-wide target ER inpatient admission rate of 50% for Medicare-eligible patients — designed solely to boost admissions; requiring medical staff to order a computer-generated series of diagnostic tests (testing protocols) on each ER patient, even when some or all of the tests are medically unnecessary.” [xii]
  • 2011:  The Securities and Exchange Commission subpoenaed documents from CHS related to its investigation of CHS emergency room admissions and observation practices, and subpoenaed documents related to CHS’ litigation with Tenet Healthcare, in which Tenet accused “CHS of overbilling Medicare by admitting patients into hospitals that competitors would typically place into outpatient observation.”[xiii]
  • 2011; 2013: The “Justice Department, multiple U.S. Attorneys’ offices, and the Department of Health and Human Services [were] working together to investigate …[CHS]  billing practices.  CHS disclosed that the U.S. Department of Justice had served [it]…with another subpoena and asked to interview two current employees, suggesting a broadening in the scope of the investigation.
  • “The S. Department of Justice, the U.S. Department of Health and Human Services, and the U.S. Securities and Exchange Commission, among others, [were] conducting multiple investigations of Community Health Systems and its hospitals nationwide. CHS [was] also facing lawsuits filed by its own shareholders. Many of these investigations involve alleged improper admitting practices, improper use of certain medical procedures, and improper billing practices. CHS has publicly acknowledged that “pending or threatened proceedings against us may involve potentially substantial amounts as well as the possibility of civil, criminal, or administrative fines, penalties, or other sanctions, which could be material.”
  • 2009: Federal authorities investigate allegations that CHS “bilked the government and private insurance companies out of millions of dollars,” settlement may cost nearly $100 million.
  • 2009: The US Office of Inspector General of the U.S. Department of Health and Human Services (HHS) opened an investigation into the extended length of stay of patients in a CHS hospital in Laredo, Texas. In May 2011, CHS disclosed a new subpoena for patient records from the HHS related to the Laredo investigation,[7] and settlement talks between CHS and the U.S. Department of Justice disclosed in October 2013 are said to include the Laredo investigation.
  • 2009: Nancy Reuille, a Zanesville, Ind., woman who was employed by CHS-owned Lutheran Hospital from 1985 to 2008, filed a whistle-blower lawsuit under the Fair Claims Act, alleging that Lutheran billed the Medicare program for “false 23-hour observation after outpatient surgeries and procedures, and intentional assignment of inpatient status to one-day stays for cases that do not meet Medicare criteria for inpatient intensity of service or severity of illness.”[xiv]



[i] Sherman Anti-trust Act:

[ii]  Monopoly the board game, on-line (

[iii]  Monopoly, as politico-economic sysem (

[iv] Research by Zack Cooper of Yale University, Stuart Craig of the University of Pennsylvania, Martin Gaynor of Carnegie Mellon, and John Van Reenen of the London School of Economics.

[v] ProMarket, 3/14/2016 (the-true-price-of-reduced-competition-in-health-care-hospital-monopolies-drastically-drive-up-prices)

[vi] Health Affairs. 2017.  “Are Market Forces Strong Enough To Deliver Efficient Health Care Systems? Confidence Is Waning,”  January.  By Len M. Nichols, Paul B. Ginsburg, Robert A. Berenson, Jon Christianson and, Robert E. Hurley. (

[vii]  Anderson, J and Ge Bai, 2015. “Extreme Markup: The Fifty US Hospitals With The Highest

Charge-To-Cost Ratio.”  Health Affairs 34, No. 6 (2015): 922–928. (

[viii] SEC filing by CHS:

[ix] Gwen Filosa Key West Citizen, 8/17/16 (

[x] Hospital CFO (


[xii] Corporate Crime Reporter,

[xiii]   CHS Watch, (n.d.).  (

[xiv]      Local hospital named in lawsuit, 4/28/2011.   (

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6 thoughts on “Community Health Systems and Anti-Trust Law: Some monopolies are more legal than others

  1. Another thorough and revealing investigation by Martha Huggins!

    As for fees, I talked to a surgeon from Sarasota who worked a spell at LKMC. He told me he doubted he could successfully operate at LKMC. He said, “For a procedure that is charged at $3,000 in Sarasota, this hospital charges $17,000. Who would not just go to the mainland for scheduled operations?”

    I went to LKMC ER with a broken bone some years ago. I had top notch private insurance. I asked for a breakdown of the hospital bill and received a list of billing codes with no description. So I bought a CPT code book and discovered the hospital had billed for a heart valve replacement among other things. I also supposedly received 4 tetanus shots. I remember one tetanus shot and since I was conscious the whole time, I am sure I would have remembered open heart surgery! My bill (and co-pay) included a radiologist’s review of my x-rays a few days after i was released. It was totally pointless then, as well as being just plain incorrect.. An xray at LKMC was billed at over $400, yet a better image cost $35 from what was then Key West Diagnostics. They did not take insurance, but the out of pocket was less than my co-pay at LKMC. For-profit corporations are never benevolent. They make big money or heads roll.

  2. The laws in America have little interest in protecting the average person. What hospitals are getting away with reminds me of the banking disasters of a few years ago and the little slap on the hands to the big banks who had only their interest and big returns in mind. Screw the little guy.
    Rick you are correct the angels weep – but there is a special place in hell for many of these self-centered, greedy business people who think only about how much they can make from some scheme and the hell with others – even when it comes to a citizens health or financial future. Too many people have been screwed by CHS in the name of money. But one must remember a corporations responsibility is to its shareholders and providing the biggest profits possible – so CHS primary concern is MONEY – not the local citizens well-being. I have read too many accounts by the insured as well as the uninsured about the ridiculous billing tactics of CHS.

    So now we hear that the uninsured get an “automatic” 62% discount at LKMC. First of all – I don’t believe it! Talk is cheap, especially when your under fire. And 62% of what? – some unpublished rate that they change on a whim? And lastly, 62% of ridiculous, is still affordable and ridiculous.

    Health care consumers, remember you still do have control over your financial situation and costs. Are procedures too expensive at a CHS hospital facility? Then live in a better, more affordable community. Yes, health care cost may generally be out of control in the US compared to most of the rest of the world, but as JW above relates – go to another city and hospital for that $17,000 LKMC procedure and pay only $3000. And don’t pay $400 for a test that can be done for less than 10% of that cost elsewhere You shop for cars and houses and other consumer goods and services – isn’t your health and financial well-being more important than a car or house purchase? Lastly, consider a vacation for a medical procedure and pay a fraction of the US cost. Americans are seeking health and dental care around the world – and getting better care at affordable, out of pocket costs having no insurance coverage in these other countries. I can only speak personally about Panama where I have had wonderful experience at the Cleveland Clinic affiliated hospital, and personally toured the John Hopkins hospital. My health care experience was far superior in Panama compared to the same surgery in the US. My doctor in Panama called me personally several times to see how I was doing, charged me nothing for a follow-up visit, and whose fees were only $200 for out-patient surgery including biopsies and pathology tests, Of course every doctor and situation is different, and one must research the hospitals and doctors you are considering. But never forget that as a consumer….YOU ALWAYS HAVE CHOICES! HEALTH CARE COSTS ARE ONLY GETTING SIGNIFICANTLY MORE EXPENSIVE EVERY YEAR IN THE US, WITH NO END IN SIGHT TO THESE RISING COSTS. How long can you afford this?

    Martha, thank you once again for your story and for keeping the CHS – LKMC story in the forefront. The laws don’t seem to be helping any of us (except a few at the top).

  3. What they want is for everyone to be on insurance so they can milk insurance for the maximum amount. The uninsured simply can not afford so end up with the state paying.
    Many simply end up on disability and then covered. Nothing will change so best you can do is try to beat the system. The homeless go to the hospital for everything that likely could be treated at a doctors office far cheaper. Bills are often several times higher than needed because the hospital knows it will at best collect 50%

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