Hospital lobby targets Senate proposals on contract reforms
BATTLE LINES ARE already being drawn over some of the most substantive of the changes contained in the Senate Health, Education, Labor & Pensions Committee’s proposed reforms to hospital and insurer contracting practices.
In formal comments on the draft legislation from committee Chairman Lamar Alexander (R-Tenn.) and his Democratic counterpart, Sen. Patty Murray of Washington, hospital groups made it clear they don’t want Congress to interfere in contracting practices— even those that have drawn major litigation from the U.S. Justice Department and the state of California, which contend they have driven up the price of employer insurance.
The discussion draft included a ban on “all-or-nothing” clauses, which force insurers to contract with all of a health system’s facilities or none of them. American Hospital Association Executive Vice President Tom Nickels said in the group’s initial statement that this “could lead to even more narrow networks with fewer provider choices for patients, while adversely affecting access to care at rural and community hospitals.”
The AHA in its comment letter also came out against a provision that would prohibit health plans from contracting with providers unless the provider notified enrollees of their estimated costs within 48 hours of a request. Care is too specialized to be able to come up with a reasonable estimate in advance, the AHA said.
In another comment letter, Federation of American Hospitals CEO Chip Kahn demanded that the committee remove all the contract provisions. “The concerns that (the provisions) are trying to address— predatory business practices and ensuring competition—are already more than adequately covered by existing law— namely antitrust laws,” Kahn wrote.
For their part, insurers offered conditional support for the reforms, essentially suggesting that more public disclosure is good, so long as it doesn’t interfere with their ability to leverage their power in contract talks.
“We are supportive of disclosure of out-of-pocket costs to our members but broad public disclosure of negotiated rates will lead to healthcare cost increases and distortions of market competition,” the Blue Cross and Blue Shield Association of America wrote.
Industry groups say the proposals— such as the balance-billing ban policies that aren’t provider friendly and bans on “all or nothing” clauses—pose a threat to rural healthcare. On that point, an AHA representative pointed to the March Government Accountability Office report about insurance market consolidation—since states like Alabama, Alaska, Mississippi and Montana are dominated by a single company holding at least 80% of the market.
But this rural healthcare argument draws strong skepticism from others. “They do it because it’s effective,” Dr. Farzad Mostashari, co-founder and CEO of the primary-care company Aledade, said of the approach. “The Senate being what it is, and rurals and rural healthcare being a real concern, it really has political potency to talk about this. But in reality (fixing) the rural hospital closure problem would take a fraction of what they’re proposing, which is to hold all hospitals harmless from any reform.”
The panel’s draft legislation coincided with the fallout from a recent RAND Corp. study, which sampled 25 states and found that on average hospitals get 241% of Medicare rates from employer insurance. Some hospitals and hospital groups have questioned the study’s accuracy, but the RAND researchers specifically highlighted hospital contractual clauses that inflate and obfuscate pricing—including “all-or-nothing” clauses.
The Trump administration has not commented specifically on the Senate health committee’s proposal, but an official said that legislation addressing high healthcare costs “is exactly what the American people want Congress to do.”
And for many on the employers’ side, the case to back the Senate proposals has been building in the courts. North Carolina’s Atrium Health only recently settled with the U.S. Justice Department over its anticompetitive steering clauses. Alexander’s draft legislation would prohibit hospitals and insurers from entering into anti-steering agreements to keep patients from cheaper hospitals or clinics.
And California Attorney General Xavier Becerra’s antitrust lawsuit against Sutter Health almost presents the Senate-proposed reforms point by point.
Becerra’s case, filed in March 2018 and headed for oral arguments in August, described contracting strategies that allegedly caused regional healthcare costs to skyrocket in Northern California. One report from the University of California at Berkeley detailed that average hospital inpatient procedures cost $90,000 per patient more in Northern California than Southern California.
The contracting tactics outlined in the Sutter Health lawsuit would get axed in the legislation from Alexander and Murray.