CHI Franciscan, Washington state settle suit over alleged antitrust violations in physician group acquisition, partnership agreement

By | March 21, 2019

A lawsuit originally filed by the Washington state attorney general against CHI Franciscan, the parent company of Harrison Medical Center, that alleged improper relationships with two local physician groups, has been settled, the system confirmed in a statement.


The settlement came shortly before the case was set to go to trial in the U.S. District Court for Western Washington in Tacoma. CHI Franciscan and the state have until April 29 to settle the details, including any monetary amounts if applicable, according to a local report.


In 2016, in separate transactions, CHI Franciscan acquired WestSound Orthopaedics, a practice that included seven physicians, and struck a professional services agreement with The Doctors Clinic, a group that operated several clinics across the Kitsap, Washington area. That agreement kept the Doctors Clinic as an independent organization but stipulated that the group offer services only to CHI Franciscan’s medical group. It also included the acquisition of the group’s surgery, imaging and lab centers, the report said.

The state sued saying the deals limited consumer choice and would spark price hikes for care, alleged that the WestSound acquisition was illegal, and that both transactions violated state and federal antitrust laws.

“Both transactions 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 transactions have hobbled CHI Franciscan’s competitors while allowing it to reap the benefit of more expensive, hospital-based rates. Overnight, commercial insurers saw double-digit percentage price increases. Rate increases hit the vast majority of procedures covered by contracts with the defendants. These increases were passed on to patients in the form of higher out-of-pocket costs,”  Attorney General Bob Ferguson said.

In early March, a judge struck down the complaint related to the WestSound deal, but the case against the agreement with the Doctors Clinic would have proceeded to trial.


“Along with the court’s recent judgment to remove WestSound Orthopaedics from the lawsuit, the settlement ensures CHI Franciscan’s joint affiliations with WestSound and The Doctors Clinic remain in place. This is good for patients and doctors on the Peninsula, keeps our highly skilled doctors in our community, and ensures everyone has access to great care close to home,” said Cary Evans, vice president of communications & government affairs for CHI Franciscan.

“Thousands of Kitsap Peninsula patients have faced higher prices, increased wait times, difficulty in scheduling procedures, and a reduction in their choice of services and locations. As a result, CHI Franciscan has netted well over $ 1 million in ill-gotten gains so far….These transactions were intentionally made to decrease competition, increase prices, and pad CHI Franciscan’s bottom line at the expense of its patients,” Ferguson said in a statement when the suit was filed.

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