Modern Healthcare

Bill aims to end secrecy of provider-insurer contracts

- —Harris Meyer

TO THE DISMAY of hospital leaders, the Alexander-Pallone-Walden legislatio­n includes bans on secret contract terms between providers and health plans that critics say are anti-competitiv­e and drive up prices.

Section 201 would prohibit so-called gag clauses in contracts that prevent plan sponsors, enrollees or referring providers from seeing cost and quality data. Self-insured employers say they often can’t find out the rates they are paying providers from their third-party administra­tors due to these clauses.

Section 202 would bar contract language that makes it difficult for employers and plans to steer enrollees to lower-cost or high-quality providers, including anti-tiering, all-or-nothing and most-favored nation clauses.

That section, however, includes a newly crafted exception for vertically integrated systems like Kaiser Permanente, as well as an opportunit­y for states to waive the prohibitio­ns for up to 10 years for arrangemen­ts they determine will not lessen competitio­n.

The Congressio­nal Budget Office estimated these transparen­cy provisions would reduce average premiums for private health insurance about 0.05%.

Employers “are trying to do all kinds of innovative things, but in the current market environmen­t there’s only so far they can go,” said James Gelfand, senior vice president for health policy at the ERISA Industry Council. “This bill says a lot of these shady contractin­g tactics will come to an end.”

Hospital lobbying groups strongly oppose the provisions, warning they will lead to the growth of narrow network plans that consumers won’t like.

“These are issues that ought to be settled in contract negotiatio­ns, not by dropping the government hammer through regulation­s,” said Chip Kahn, CEO of the Federation of American Hospitals, who had hoped the provisions would be left out of the new

House-Senate legislatio­n.

While there’s no reliable data on how widely these techniques are used, insiders say they are quite common.

In October, Sutter Health agreed to settle a class-action lawsuit filed by employers, labor unions and California Attorney General Xavier Becerra alleging that the California health system engaged in anti-competitiv­e practices including all-or-nothing contractin­g.

Last month, Atrium Health reached a settlement with the U.S. Justice Department prohibitin­g the hospital system from using anti-competitiv­e steering restrictio­ns in its contracts.

Employers say they frequently face these contract obstacles, such as all-ornothing clauses, when they approach insurers and hospital systems to develop value-based networks.

“A few of their hospitals may be high quality and reasonably priced, while others are poor quality and high priced,” said Gloria Sachdev, CEO of the Employers’ Forum of Indiana. “Such clauses are antithetic­al to aligning payment with value.”

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