Antitrust Enforcement in Healthcare? What's That?
There's a disconnect between the Justice Department's current probe of "most-favored-nation" pricing in hospital contracts with insurers and its failure to enforce antitrust laws against healthcare providers and insurance companies. If the government had prevented these organizations from getting too big in the first place, it wouldn't have to police their contract negotiations.
DOJ is currently issuing subpoenas to Blue Cross Blue Shield companies in several states. Blues plans in Missouri, Ohio, Kansas, West Virginia, North Carolina, South Carolina and the District of Columbia are said to be among the subjects of the investigation. The Blues plans were apparently targeted because they tend to be more dominant in local markets than national plans like United and Aetna are.
The feds are apparently looking into allegations that some Blue Cross Blue Shield firms have pressured hospitals into agreements under which they won't accept lower rates from rival insurers. Such "most favored nation" agreements would prevent competitors from gaining a price advantage in the insurance market, but they'd also drive up healthcare costs.
Last fall, the feds sued Blue Cross Blue Shield of Michigan, alleging that it had demanded most-favored-nation clauses in contracts many of the state's hospitals. In some cases, the government maintained, these provisions required the hospitals to demand rates from other insurance companies that were 40 percent higher than those they were getting from the Blues. That way, the hospitals could get higher payments from the Blues, but their competitors would pay more.
The Michigan Blues defends its contracts and is fighting the charges in court.
Meanwhile, the Justice Department is also looking into situations where dominant healthcare systems are using their clout to force local insurers not to deal with competitors. When the government sued United Regional Healthcare System of Wichita Falls, Tex., alleging such an arrangement, the provider settled without admitting wrongdoing.
It should come as no surprise that the big dogs in healthcare use the same brutal tactics as big dogs elsewhere to sew up their markets. But the most-favored-nation clauses in insurance contracts seem relatively benign compared to the idea of the biggest hospital system in town trying to shut down its competitors. If the Justice Dept. can find any more of those situations, it ought to act fast.
At a more basic level, however, the real problem is that healthcare systems and insurance companies have been allowed to get so big in local markets. The government didn't intervene in any of the big insurance mergers of the past decade, partly because the Bush Administration was averse to antitrust enforcement. The Federal Trade Commission did get try to reverse the acquisition of a nearby hospital by Evanston Northwestern Healthcare Corp., a healthcare system in the Chicago area. But, after several years of expensive litigation, the best the FTC could do was get the merged providers to negotiate separate contracts with insurers .
Ironically, the government's only antitrust successes in healthcare have involved physician networks that have less financial ability than hospitals do to fight back in the courts. By invoking antitrust regulations, the FTC stopped independent practice associations (IPAs) such as Genesis Physicians Group of Dallas and Brown & Toland Medical Group of San Francisco from negotiating collectively with payers. But in the long run, after these and other physician organizations integrated their member practices clinically, they were allowed to bargain with health plans, anyway.
Perhaps the antitrust laws just weren't written with health care in mind. Or maybe the tendency of healthcare and insurance entities to get bigger is just inevitable, like water running downhill. But the bigger they get, the more we pay.
Image supplied courtesy of geograph.org.uk.
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