Is Anti-Steering Anticompetitive? Examining DOJ's Expanding Enforcement Against Hospital Contracting

The business relationship between hospitals and commercial payers is both highly complex and symbiotic: Payers need hospitals in their networks to sell a commercially viable product, and hospitals need a sufficient volume of commercially insured patients to offset payment sources that typically do not cover the cost of delivering care. Ideally, the parties reach a mutually acceptable agreement on price and non-price terms, the contract performs as intended, and the needs of all parties—including, ultimately, the member-patient—are satisfied.

In the face of sharply rising health care costs, payers in recent years have developed budget-friendly products and plan features as an alternative to pricier, broad-network offerings. These mechanisms have taken various forms, including:

• Narrow networks: Products that include a limited panel of in-network providers.
• Tiered networks: Products that lower a customer’s out-of-pocket expenses when the customer uses providers in more cost-effective “tiers.”
• Centers of Excellence: Plan features that incentivize patients to seek care at designated “Centers of Excellence,” with designations based on a combination of a provider’s high quality and cost effectiveness.
• Site-of-Service Incentives: Plan features that steer patients to cost-effective sites of care, such as freestanding imaging or surgery centers.
• Reference Based Pricing: Payment methodologies that set a fixed reimbursement rate for a given procedure, with the member bearing any cost above the reference price.
• Active Transparency: Actively informing a member of lower-priced providers for a given procedure while permitting the member to select the provider of choice.

Some of these strategies can benefit hospitals, payers, and members alike. For example, a hospital might willingly extend a deeper discount to a payer in exchange for being featured in a narrow network, given the increased patient volume likely to result. Other activity—such as actively steering members to lower cost sites for traditionally high-margin services—tends to be more payer-friendly and can erode a hospital’s bottom line.

Some hospitals have sought to counteract these initiatives by negotiating provisions that restrict a payer’s ability to steer patients to competitors, relegate the hospital to a less preferred tier, require the payer to include all of the hospital’s components in its network, and the like. These provisions are typically the product of hard-nosed negotiations in which each side agrees to various tradeoffs to strike a deal. But when might a hospital’s contracting practices violate federal antitrust law? This is a question the Department of Justice Antitrust Division (“DOJ”) has shown a continued willingness to test.

In 2016, DOJ and the North Carolina Attorney General sued the Charlotte-Mecklenburg Hospital Authority (“CMHA”) in the Western District of North Carolina for including anti-steering provisions in its contracts with multiple, major commercial payers. DOJ alleged that CMHA was unlawfully using its market power to impose such provisions on payers, stifling the development of cost-effective commercial plans and products and thereby contributing to the high cost of health care in and around Charlotte, NC. That case settled in 2019, with CMHA essentially agreeing not to enforce existing anti-steering provisions or to negotiate for new ones for the next decade.

As it turns out, the CMHA case was not a one-off: Earlier this year, DOJ brought two new enforcement actions under theories strikingly similar to those pursued in North Carolina. As explained below, any hospital with a sizeable market presence, high prices, and undifferentiated quality should think twice before negotiating for these types of provisions or else risk federal enforcement, class action litigation, or both.

The Complaints

Within five weeks of each other, DOJ filed civil antitrust complaints against two hospital systems—OhioHealth Corporation (“OhioHealth”), and The New York and Presbyterian Hospital (“NYP”)—alleging that each used contractual restrictions in its payer agreements to suppress competition in violation of Section 1 of the Sherman Act. The State of Ohio joined as co-plaintiff in the OhioHealth action and asserted a parallel claim under Ohio’s Valentine Act; no comparable state-law claim appears in the NYP complaint.

The two complaints follow a common template. Both allege that the defendant system holds significant market power in its respective geography, charges prices materially higher than local competitors of comparable quality, and leverages that power to impose contract terms on commercial payers that impede the development of budget-conscious insurance products. The government’s theory is that these contractual restrictions—which include prohibitions on narrow networks that exclude the defendant, tiered benefit designs that steer patients toward lower-cost rivals, centers-of-excellence designations, and site-of-service incentives—insulate the defendant from price competition that would otherwise benefit employers and commercially insured patients. The table below highlights key similarities and distinctions between the two cases.

Despite the cases’ obvious similarities, several differences warrant emphasis. The OhioHealth complaint’s inclusion of gag-clause allegations—restrictions that prevent payers from even informing patients about lower-cost alternatives—adds a transparency dimension absent from the NYP case. The alleged market shares also differ: OhioHealth’s share exceeds 35% in both of its alleged markets, while NYP’s share sits above 30% in Manhattan and above 25% in the broader Four-Borough Market. Whether shares in the 25-35% range suffice to establish market power under a rule-of-reason analysis will be a central question in both cases, particularly in the NYP litigation, where the Four-Borough share dips into the mid-twenties. Finally, NYP’s internal documents, as alleged, provide unusually direct evidence of the expected impact of steering restrictions on profitability—evidence the government will likely use to argue competitive effects.

Analysis

The Declining Market Share Threshold

The most consequential signal these complaints send concerns where the enforcement floor now sits. The CMHA complaint alleged a market share of approximately 50%—a figure that fell within the range courts have historically treated as probative of market power. The OhioHealth and NYP complaints push to meaningfully lower share thresholds: above 35% for OhioHealth, above 30% for NYP in Manhattan, and above 25% for NYP in the broader Four-Borough Market. These shares are not trivial, but they fall below levels that courts have traditionally found sufficient, standing alone, to infer market power. The complaints therefore lean on a broader foundation: moderate share data combined with direct evidence of supracompetitive pricing, internal admissions, and the practical reality that payers cannot viably sell commercial insurance without including the defendant in at least some networks. The “must have” hospital concept is prominent in both pleadings, and it will likely feature in how courts evaluate payer alternatives and network viability.

The Legal Framework

Both complaints proceed under Section 1 of the Sherman Act, which prohibits agreements in restraint of trade, rather than Section 2, which addresses monopolization. That choice undoubtedly reflects the share profiles and the bilateral nature of the challenged contract provisions. Section 1 requires proof of an agreement and an unreasonable restraint of trade. Because anti-steering provisions are bilateral contractual terms, the agreement element is straightforward. The primary litigation battleground will be the rule-of-reason burden-shifting framework: the government must demonstrate substantial anticompetitive effects; the defendants may then offer procompetitive justifications; and the government must show that those benefits could be achieved through less restrictive means.

Both complaints also allege that the defendants require payers to include all of the system’s facilities in their networks as a condition of including any of them—a contractual restraint analytically distinct from the anti-steering provisions. The OhioHealth complaint is especially pointed on this front, alleging that OhioHealth derives additional leverage from rural hospitals that are the sole hospitals in their counties. All-or-nothing contracting prevents payers from selectively contracting with lower-cost facilities within the same system and is analytically separate from provisions that restrict plan design after the network is established.

The Supreme Court’s opinion in Ohio v. American Express Co. (Amex) confirms the rule-of-reason approach for vertical restraints and, in its two-sided platform analysis, cautions against assessing competitive effects on only one side of a platform. The government has long argued that hospital–payer contracting is not a two-sided transaction platform of the Amex variety, and both complaints are structured accordingly, defining a single-sided product market and emphasizing direct evidence of harm. Even if Amex’s formal two-sided framework does not apply, hospitals do compete for patients downstream of payer negotiation. Defendants may contend that observed price differences reflect quality differences, and that any evaluation of steering restrictions must account for quality competition at the patient level. The OhioHealth complaint anticipates that argument by citing public quality metrics; the NYP complaint alleges that major competitors offer similarly high-quality care at lower prices. Whether those allegations survive discovery and expert challenge will bear significantly on the merits.

Procompetitive Justifications: Volume Discounts and the Value of Integration

Among the procompetitive justifications for the provisions at issue, defendants will likely advance a volume-discount rationale: providers extend discounted rates in exchange for expected patient volume, and anti-steering provisions protect the provider’s ability to realize that volume and thereby sustain lower prices. Said differently, anti-steering provisions make patient volume more predictable; without some modicum of predictability, hospitals would be reluctant to extend procompetitive discounts. That rationale has intuitive appeal but faces factual headwinds where, as here, the complaints allege that defendants’ prices exceed those of comparable competitors. If the record shows higher, not lower, prices, it becomes harder to argue the restrictions preserve a discount rather than the hospital’s margin or market position.

A second justification involves the avoidance of fragmented care. Payer steerage can result in patients being directed in and out of an integrated delivery system for discrete services or procedures, leading to unnecessarily duplicative testing and diminished accountability for quality. Conversely, steering restrictions can keep more care within a single integrated delivery system, promoting quality and reducing utilization —both of which lower cost. The credibility of this defense will depend on evidence of actual clinical integration—shared protocols, coordinated treatment planning, and measurable outcomes—rather than mere corporate affiliation. Courts and enforcers increasingly scrutinize integration claims to ensure they reflect genuine clinical coordination tied to demonstrable consumer benefit.

Follow-On Litigation

Government enforcement in this space has reliably generated private follow-on litigation. Two private class actions were already pending against NYP before DOJ filed its complaint, and CMHA faced two separate private class actions that were essentially copycats of DOJ’s lawsuit. The risk of treble-damages class actions by purchasers should be treated as a material exposure if government allegations gain traction. Systems should assume that any government complaint alleging supracompetitive pricing and contractual restraints will likely prompt parallel private suits seeking monetary relief.

The Enforcement Landscape

The Ohio Attorney General’s joinder in the OhioHealth case underscores sustained state interest in hospital contracting practices, including on a bipartisan basis. The NYP complaint was filed without state participation, though state involvement can occur on a separate track. The OhioHealth and NYP actions also confirm that steering restrictions remain a durable federal enforcement priority across electoral cycles. Earlier investigations and litigations in this area have spanned multiple administrations, suggesting continued focus on contractual restraints that stifle the development of budget-conscious products.

Practical Takeaways

These complaints warrant a concrete response from any health system with significant market presence. If a system’s payer contracts contain provisions that restrict the payer’s ability to offer narrow networks, tiered benefit designs, centers of excellence, site-of-service steering, or reference-based pricing, the business rationale for each provision should be contemporaneously documented and defensible under a less-restrictive-means analysis. Contracts that include gag clauses restricting the payer’s ability to share pricing information with plan members deserve particular attention; the OhioHealth complaint treats these as a separate category of harm within the broader price transparency movement. Systems should also take a clear-eyed look at their market profile. A system with a 25-35% share that charges materially higher prices than local competitors of comparable quality falls within the enforcement profile reflected in these complaints. Internal strategy materials matter as well; both complaints rely on planning documents and executive communications that acknowledge the financial threat posed by payer steering. Finally, the financial calculus extends beyond injunctive relief. If reimbursement rates were negotiated with an implicit assumption of volume stability—because the payer could not steer patients elsewhere—invalidation of steering protections may lead payers to introduce narrow or tiered products and seek rate concessions in future negotiations.

Conclusion

The OhioHealth and NYP complaints reflect a consistent theory of harm focused on plan-design restrictions that impede budget-conscious insurance products and insulate high-priced systems from competitive pressure. They also signal a willingness to bring Section 1 cases against systems with shares in the 25-35% range when accompanied by allegations of supracompetitive pricing, network indispensability, and internal admissions. Defenses grounded in volume discounts and integration of care will turn on a fact-intensive showing that the restraints are necessary to achieve demonstrable consumer benefits that cannot be realized through less restrictive alternatives. Given the likelihood of private follow-on litigation and rate renegotiation pressures if steering protections fall away, health systems should reassess their contracting practices, documentation, and internal communications with an eye toward both litigation risk and future payer dynamics.

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