Physicians, including orthopedic surgeons, have complained for years that the Department of Justice (DOJ) and Federal Trade Commission (FTC) have targeted them for antitrust violations while hospitals and insurance companies have escaped scrutiny and prosecution as they become dominant health care players in their communities.
“More than 30 groups of physicians have been prosecuted over the past 14 years for alleged antitrust violations when dealing with insurers, ” Michael Connair, M.D. told OTW on November 28.
Highly Concentrated Insurance Markets
At the same time, according to an American Medical Association (AMA) study of U.S. insurance markets, 83% of the 368 metropolitan areas studied were highly concentrated. In 95% of the metropolitan areas, one or more insurers had a combined HMO+PPO market share of 30% or greater. And in 47% of the areas, at least one insurer had an HMO+PPO market share of at least 50%.
Department of Justice Seeks Input
Now the DOJ is signaling that it wants help from physicians to identify anticompetitive practices by insurers and hospitals.
In a 2010 speech, then Assistant Attorney General Christine Varney told the American Bar Association/American Health Lawyers Association that it is essential that the government continue to refine and expand its understanding of market forces, structures, and dynamics in the health care industry.
She told the health care lawyers that the biggest obstacle to an insurer’s entry or expansion in the small- or mid-sized-employer market is scale. New insurers cannot compete with incumbents for enrollees without provider discounts, but they cannot negotiate for discounts without a large number of enrollees. This circularity problem makes entry risky and difficult, helping to secure the position of existing incumbents.
Preventing Domination
“It is, therefore, imperative that the Division prevent mergers or acquisitions that will create, or even increase the size of, dominant health insurance plans, particularly in the small-group and individual markets, ” said Varney.
The new prosecution attitude was displayed in an October 2010 meeting between representatives of the American Medical Association, the American Academy of Orthopaedic Surgeons (AAOS) and Democratic Rep. John Conyers, Ranking Member of the U.S. House of Representatives Judiciary Committee. Conyers held a congressional hearing after the meeting with the physicians and developed a framework for physicians to use to provide information to the DOJ and FTC regarding potential antitrust activities by dominant hospitals and insurers in their areas.
Henry Allen, JDIn a just published article in AAOS NOW, Henry Allen, JD, senior attorney for marketplace advocacy for the AMA provides a list of behaviors that may be anticompetitive when conducted by market dominant health insurers and hospitals. “Accordingly, information concerning such conduct may be of interest to DOJ, ” said Allen.
Allen told OTW that there is now an appreciation by the government of the frustrations experienced by physicians on antitrust matters. Allen participated on a speaker panel at the October 2010 meeting that included a DOJ official. That official expressed a willingness to review cases forwarded by the AMA where physicians conclude they are the victims of anticompetitive conduct.
Contact the AMA
Allen made it clear that he is neither offering legal assistance nor agreeing to act as an agent or representative for any individual physician. With that understanding, he is interested in receiving information on health insurer or hospital anticompetitive conduct for possible referral to DOJ, assuming that the AMA believes the agency would consider the information important.
Hospital and health insurance markets have undergone significant consolidation during the past 20 years, says Allen. “In many areas throughout the country, physicians now face a dominant hospital with the power to cripple physician-owned facilities. Physicians are also confronted with health insurers that possess ‘monopsony’ or ‘buyer’ power—the ability to reimburse physicians at rates that are so far below a truly competitive level that physicians may be driven from the market and patients may receive diminished service and quality of care.”
Health insurer monopsony power, says Allen, enables dominant insurers to insist on anticompetitive contractual provisions. “One such provision is the so-called ‘most favored nation’ clause, in which the dominant health insurer demands that a physician accept from it the lowest reimbursement rate that the physician accepts from any other health insurer. Another tactic of health insurer monopsonies is to offer reimbursement rates that prevent would-be competitors from entering the market. Therefore, appropriate enforcement of antitrust laws is critical to prevent anticompetitive health insurer mergers and to prohibit actions that inhibit the entry of new health insurers into a market.”
Allen continued that the consolidation of hospital markets has made it difficult, and sometimes impossible, for physicians to open and operate freestanding surgery centers. “Dominant hospitals have shown a willingness to use their market position to hurt physician-owned surgery centers and the physicians who work at or invest in those centers.”
According to Allen, identifying anticompetitive practices by hospitals and health insurers is a critical first step in protecting orthopedic practices and physician autonomy. He summarizes the types of conduct that could indicate an anticompetitive practice. He says if your area includes a dominant hospital or health insurer, and you believe that any of these activities are occurring, you may want to share that information with him at the AMA.
Allen can be reached at Henry.Allen@ama-assn.org.
Below is Allen’s summary of potential anticompetitive behaviors from the AAOS NOW article.
Anticompetitive Behaviors
The following behaviors indicate that a hospital and a health insurer may be working together to limit competition:
A hospital and a health insurer in the same area refuse to deal with competing insurance plans and competing physician-owned facilities.
A health insurer refuses to contract with a physician-owned specialty hospital or outpatient center, while permitting a dominant hospital to add new facilities to its already existing network.
A health insurer offers reimbursement rates that discriminate against a dominant hospital’s rivals.
A dominant hospital offers bundled price discounts to insurers in exchange for an exclusive arrangement with the hospital; as a result, smaller competing hospitals or physician-owned facilities are unable to obtain a contract with the insurer.
A hospital and insurance company merge, or one acquires the other.
Dominant Hospital
The following behaviors indicate that a dominant hospital may be abusing its market position:
The dominant hospital conditions the granting or continuation of privileges on an agreement by physicians that they not seek privileges from other hospitals in the area.
The dominant hospital pressures its employed physicians to not refer patients to freestanding outpatient facilities or to specialists not employed by the hospital.
The dominant hospital gives employed physicians financial benefits if they only refer patients to other employed physicians.
The dominant hospital initiates “sham proceedings” against another hospital, physician-owned hospital, or physician-owned outpatient center. For example, the dominant hospital knowingly submits materially false statements about the small hospital in a certificate of need application or files frivolous lawsuits against the other hospital or facility.
The dominant hospital institutes “conflict of interest” policies that exclude physician owners of a competing specialty hospital or outpatient center from the hospital’s medical staff.
The dominant hospital refuses to enter into transfer agreements with physician-owned facilities.
The dominant hospital requires that physicians perform a certain percentage of procedures at the hospital.
The dominant hospital creates an alliance with staff physicians to collectively negotiate with health insurers.
The dominant hospital negotiates an exclusive managed care contract with a critical health insurer or with several different health insurers.
The dominant hospital merges with or acquires another hospital.
The dominant hospital refuses to contract with a health insurer for certain services unless the health insurer agrees to use it for nonrelated services as well. For example, a dominant hospital that is the only provider of Level III neonatal care in the area refuses to allow health insurers to contract for perinatal services unless they also agree to use it for nonperinatal services.
Dominant Health Insurer
The following behaviors indicate that a dominant health insurer may be abusing its market position to hurt smaller health insurers; such conduct would ultimately hurt physicians by giving the dominant health insurer “buyer power.”
The dominant health insurer demands that a physician accept from it the lowest reimbursement rate that the physician accepts from any other health insurer (“Most Favored Nation” clause).
The dominant health insurer threatens to terminate a physician’s provider status if the physician agrees to contract with another health insurer.
The dominant health insurer pays discriminatory reimbursement rates to physicians who work with a rival health insurer.
The dominant health insurer insists that physicians agree to an “all-products clause, ” which requires them to accept all present and future insurance products and payment methods offered by the company as a condition of participating in any of the insurer’s products. This can include requiring the physician to participate in an insurer’s health maintenance organization.
A dominant health insurer merges with or acquires another health insurer.
Make a Difference
The health care reform legislation, if it survives the Supreme Court challenge, will have potential anticompetitive implications for physicians as it relates to Accountable Care Organizations and insurance exchanges. The opportunity provided by AAOS and the AMA to offer direct evidence of anticompetitive insurance company and hospital market activity is one that orthopedic surgeons should take seriously.
Tell Henry Allen what you see in your community. Again, his email is Henry.Allen@ama-assn.org.
