Insurers face new pressure over limited doctor choice
By Anna Wilde Mathews and Christopher Weaver
Wall Street Journal, February 6, 2014
Insurers are facing pressure from regulators and lawmakers about plans that offer limited choices of doctors and hospitals, a tactic the industry said is vital to keep down coverage prices in the new health law’s marketplaces.
This week, federal regulators proposed a tougher review process for the doctors and hospitals in plans to be sold next year through HealthCare.gov, a shift that could force insurers to expand those networks.
Meantime, regulators in states including Washington and New Hampshire are ramping up their own scrutiny, and lawmakers in Mississippi and Pennsylvania, among others, are weighing bills that could force plans to add more hospitals and doctors.
The moves come amid complaints by some consumers that they don’t have access to a broad enough range of care—such as specialists at top academic medical centers…
Health law goals face antitrust hurdles
By Eduardo Porter
The New York Times, February 4, 2014
[I]n a remote courthouse in Idaho … less than two weeks ago a district judge sided with the Federal Trade Commission and ordered the unwinding of the merger between one of the state’s biggest hospital systems and its biggest independent network of doctors.
The ruling against St. Luke’s Health System’s 2012 purchase of the Saltzer Medical Group underlined a potentially important conflict between the nation’s antimonopoly laws and the Affordable Care Act. The new law has encouraged the creation of big, broad accountable care organizations, which are paid to keep patients healthy rather than for individual services.
“We want to be providing a more coordinated product that delivers health care at a lower overall cost to the community we serve,” Christine Neuhoff, general counsel at St. Luke’s, told me. ….
Paradoxically, Judge B. Lynn Winmill seemed to agree. In his decision, he noted that the merger, had he let it stand, would probably have improved patient outcomes: “St. Luke’s is to be applauded,” he wrote, “for its efforts to improve the delivery of health care in the Treasure Valley,” which stretches west from Boise.
Still, he slapped it down because the merged group, he reasoned, would be able to demand higher reimbursement rates from health insurers and raise rates for services like X-rays, pushing up health care costs for consumers. “There are other ways” to obtain the desired efficiencies that “do not run such a risk of increased costs,” he concluded.
FTC wins challenge against Idaho hospital deal
By Brent Kendall
Wall Street Journal, January 24, 2014
Lawyer David A. Ettinger, who represented a competing Idaho hospital that opposed the St. Luke’s transaction, said the judge’s ruling effectively rebuts “the notion that all these transactions are appropriate because of the Affordable Care Act.”
By Kip Sullivan
The Affordable Care Act has set off another wave of mergers among hospitals, and it has induced insurance companies to kick doctors out of their “networks.” Both hospitals and insurers are justifying their behavior by claiming it is exactly what the authors of the Affordable Care Act wanted them to do. Hospitals claim they are merely trying to create “accountable care organizations” (a new synonym for HMO endorsed by the ACA) that will better “coordinate care” and thereby reduce costs. The insurance industry is claiming they are narrowing their networks in order to lower costs and winnow out doctors who don’t care about “quality.”
The emperor here is stark naked. The hospital and insurance industries are building up market power as fast as they can in order to maintain countervailing power against each other. By reducing the size of their networks, insurers create more power over the remaining providers and use it to negotiate lower reimbursements. By merging with other hospitals and buying up clinics, hospitals make it harder for insurers refuse to include them in their networks and to squash their fees. Neither the insurers nor the hospitals can afford to disarm unilaterally.
Proponents of the ACO provisions within the ACA should have predicted that their handiwork would set off the equivalent of an arms race. The least they can do now is admit that’s what happened and that the consequences – smaller networks and bigger hospital-clinic chains – need to be unraveled. But ACA proponents either ignore the issue or suggest solutions that make no sense. In the New York Times article quoted above, Jonathan Skinner, a leading ACO proponent, argues that empire building by hospitals won’t lead to higher prices because insurance companies are also building up countervailing power by creating narrower networks. The Times quotes Skinner as follows: “It’s certainly true that the consolidation of physician groups and hospitals can lead to greater market power and higher charges to insurance companies. But the insurance companies are creating narrower networks of providers. So providers who try to charge more risk getting dropped entirely from the now narrower network.” What Skinner is saying is that we needn’t worry about giant hospital chains because giant insurance companies will react by reducing consumer choice and all will be well. In this battle between Godzilla and King Kong, patients will lose choice of provider, but that’s not anything we should worry our little minds about. What’s important is that the ACO experiment should play out across the country.
The Times also quotes Obama ally David Cutler saying that if hospital-clinic monopolies do evolve, that’s fine because they are probably the “only way to obtain good care,” and if that turns out to be the case, then we’ll have to “regulate [their] prices or total spending.” Like Skinner, Cutler is assuming that enormous hospital-clinic chains confer such obvious benefits that society must give up choice of provider and learn to tolerate enormous hospital-centered monopolies. The only difference between Cutler’s “solution” and Skinner’s is that the government will play Godzilla to the hospital’s King Kong, not the insurance industry.
But the claim that enormous health “systems,” dressed up as ACOs or anything else, can improve care and lower costs remains unproven. Until it is proven, the FTC, the Justice Department, and state attorneys general should not stand idly by and watch the empire builders. And judges should not treat the claims made by ACO proponents as true as the judge in the St. Luke’s case apparently did. When the FTC or Justice brings the empire builders into court and the empire builders claim they are merely trying to “integrate care” per the ACA, judges should demand evidence that ACOs or “integrated systems” work as advertised. That evidence does not exist today and probably never will exist.
In ruling against St. Luke’s, the Idaho judge made a valuable observation. He said “there are other ways” to achieve the goals ACO advocates claim they want to achieve. Imagine that. May I suggest one way: Why don’t ACO proponents state concretely and specifically what they want ACOs to do, and if evidence indicates what they’re proposing is good for patients, then let’s pay clinics and hospitals (not ACOs) to provide those services. When I say ACO proponents should speak “concretely and specifically,” I mean in everyday language, not “coordinated” this and “integrated” that and other fatuous labels invented by the illuminati at 80,000 feet.
For example, if ACO proponents were to say that what they really want is nurses to visit heart failure patients at home after discharge and to monitor them remotely thereafter, I believe all of us – ACO proponents and skeptics alike – would agree the evidence indicates that is good for patients http://www.innovations.ahrq.gov/content.aspx?id=275. In that event, we could write a code for those services and order public and private insurers to pay for them. Why funnel un-earmarked “capitation” payments through the headquarters of enormous hospital-clinic chains and hope they’ll use the money to pay nurses to take better care of heart failure patients rather, than, say, more advertising or more mergers?
Paying clinics and hospitals directly would remove much of the incentive to build empires and it would give society a much better record of where our money went.
Of course, the ultimate antidote to empire-building is a single-payer system.