America's Health Insurance Plans Issues Public Comment on FTC Notice

WASHINGTON, Oct. 11 -- America's Health Insurance Plans has issued a public comment on the Federal Trade Commission notice entitled "Solicitation for Public Comment". The comment was written on Sept. 30, 2021, and posted on Oct. 4, 2021:

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AHIP appreciates the Federal Trade Commission's (FTC) invitation to submit comments on contract terms that may be harmful to fair competition. As the national trade association representing health insurance providers, AHIP advocates for public policies that expand access to affordable health care coverage for all Americans through a competitive marketplace that fosters choice, equity, quality, and innovation. As a result, AHIP has unique insight into the ways that hospitals and others have utilized anticompetitive contract terms to create, enhance, and preserve their market power. Such contract terms have real--and harmful--impacts on consumers, small businesses, and others.

Below we address three ways that hospitals use contract terms to anti-competitively benefit themselves at the expense of individual consumers and small businesses: (1) All or Nothing Contracting; (2) Anti-Tiering Provisions/Anti-Steering Provisions; and (3) Contractual Provisions that Lead to Post-Merger Price Increases by Hospitals. Each merits strong FTC consideration as it examines ways to prevent, or mitigate, the anticompetitive exercise of market power by hospital systems.

In addition, we also suggest that the FTC consider the exercise of market power by "deemed monopolists" to whom the government cedes certain authorities, policymaking, or actions. Such deemed monopolists can arise from well-intentioned government policies that have the unintended effect of saddling consumers with the costs of government created monopolies.

All or Nothing Contracting

The use of all or nothing contracting by dominant hospital systems and the harm from such contracting has been well-documented. In all or nothing contracting, a health insurance provider, on behalf of its members, is unable to contract with only some of the hospitals (or other entities) within a hospital system. Such behavior allows a system to utilize its "must have" hospitals to require health insurance providers to contract with other hospitals in the system-- whether or not the health insurance provider would otherwise contract with those hospitals on the terms provided.

Most recently, a court approved a settlement of challenges to Sutter's contracting practices brought by the California Attorney General and others./1

That settlement required Sutter to cease its all-or-nothing contracting practices. It also required Sutter to cease anticompetitive bundling of products and services. This is an important addition because "all or nothing," while the most egregious of such anticompetitive bundling practices, is not the only type. Depending on the specific market dynamics, sometimes the anticompetitive bundle is less than "all" of a system's entities, products, and services. The same principle applies, however. While the freedom to select will not restore consolidated hospital markets to a competitive state, the absence of such freedom amplifies the market power of hospital systems to the significant detriment of consumers./2

AHIP respectfully requests that the FTC continue the outstanding work done in addressing the harm that the use of "all or nothing" (or anti-competitively bundled) contracting by hospitals has on consumers, small businesses, and other customers of health insurance providers. While such contract practices remain in the toolkits of dominant hospital systems, the already-significant harm created by such systems will be exacerbated to the detriment of consumers.

Anti-Tiering Provisions/Anti-Steering Provisions

Hospital system use of anti-tiering and anti-steering provisions has been recognized as another means by which such systems disadvantage consumers. These provisions may take many forms, also including provisions that inhibit value-based contracting or selective networks. The language of such terms continues to evolve, but all such terms prevent health insurance providers from structuring products to empower consumers to obtain high quality, efficient care.

For example, in 2018, the Antitrust Division of the U.S. Department of Justice settled a case with Atrium Health, the dominant hospital system in the Charlotte, North Carolina area. The Division's lawsuit, filed in 2016, challenged the use by Atrium of anti-steering provisions in its contracts with health insurance providers. As recognized by the Division, the anti-steering provisions prevented health insurance providers from offering consumers options to reduce their health care expenses. Specifically, such anti-steering provisions prevented health insurance providers from offering consumers financial incentives to utilize providers that have proven to offer better overall value./3

More recently, the settlement of the Sutter matter referenced above prevents Sutter from vetoing or interfering with narrow, tiered, or steering products offered by commercial health insurance providers, as well as value-based designs of any kind for such products. As health insurance providers develop new ways to use information and exercise choice in concentrated hospital markets, dominant hospital systems will develop new terms to stifle such choice. So, whether the contract terms prohibit, inhibit, or limit tiering, steering, selective networks, value-based care, or other consumer-benefitting offerings, the net impact of such terms is the same: When such terms are used, consumers lose.

AHIP respectfully requests that the FTC continue the excellent work done in addressing the harm to consumers that anti-tiering/anti-steering contract terms (as well as other, related terms inhibiting selective networks, value-based care, or other consumer-benefitting offerings) by hospitals has on consumers, small businesses, and other customers of health insurance providers. While such contract practices remain in the toolkits of dominant hospital systems, the already-significant harm created by such systems will be exacerbated to the detriment of consumers.

Contractual Provisions that Lead to Post-Merger Price Increases by Hospitals

We greatly appreciate the FTC's efforts to prevent anti-competitive hospital consolidation, and we support its continued work in this area. Such consolidation leads to a variety of harms, including increases in prices for the services offered by hospitals. Those increases result from a variety of mechanisms, but one mechanism of relevance to this request for comments is the use by hospitals of contractual provisions (sometimes referred to as Acquisition Clauses) that automatically escalate a lower-priced hospital's prices to that of its higher-priced merger partner. These clauses are facially problematic, reflecting an immediate escalation of the prices paid by consumers before any hypothetical improvements in quality or care could have even taken effect./4

Thus, Acquisition Clauses are detrimental to competition, harmful to consumers, and an important area for continued FTC activity.

AHIP respectfully requests that the FTC continue and expand its focus on the harm created by Acquisition Clauses. While the harms caused by anticompetitive hospital mergers are as varied as they are documented, the use of Acquisition Clauses effectively creates an immediate harm for consumers. We would appreciate further FTC activity in this area, as the harm to consumers from anticompetitive hospital consolidations continues to harm consumers, small businesses, and other customers.

Abuse of (Government Created) Deemed Monopolies

Contract terms utilized by government-created "deemed monopolists" are another area in which FTC action would benefit consumers. "Deemed monopolists" are non-governmental entities ceded certain authorities, policymaking, or activities that otherwise would have been conducted by the government, providing them control over other non-governmental entities. While the government's actions in creating such deemed monopolies are undoubtedly well-intentioned, possession of this ceded authority allows the monopolist to insist upon unreasonable pricing or other contractual terms. The other entities have no leverage to refuse such terms as compliance with governmental requirements are at stake, thus raising the costs ultimately borne by consumers.

An example of a deemed monopoly would be the effective monopoly granted by the government to the American Medical Association (AMA) with respect to certain codes for billing office and outpatient medical procedures. The effective monopoly power that the government's actions has created for the AMA's CPT(R) codes creates the power to impose contractual terms without any competitive constraint. It would be beneficial for the FTC to examine this nexus of government activity and private market power to determine if consumers are bearing unnecessarily costs because of the actions of a deemed monopolist.

AHIP respectfully requests that the FTC examine the potential of consumer harm from contractual terms resulting from the deemed monopoly possessed by the AMA on coding for office and outpatient services. Given the relationship of this deemed monopoly with the decision of the U.S. Department of Health and Human Services (HHS) to exclusively utilize (and therefore effectively mandate the use by non-governmental entities of) the AMA's CPT(R) codes, we respectfully suggest that the FTC discuss with HHS whether it could take steps to eliminate or mitigate this deemed harm exercised through contractual terms.

We appreciate the FTC's consideration of these comments as well as, more generally, its efforts to combat anticompetitive hospital consolidation and to address other problematic areas in health care competition, such as acquisitions of physician practices by hospital systems and various monopoly-extending practices of pharmaceutical manufacturers.

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Footnotes:

1/ https://oag.ca.gov/news/press-releases/attorney-general-bonta-announces-final-approval-575-millionsettlement-sutter.

2/ See also the FTC and Department of Justice's Statements of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program. 76 Fed. Reg. 67026, 67030 (Oct. 28, 2011) (noting that "an ACO should not require a purchaser to contract with all of the hospitals under common ownership with a hospital that participates in the ACO.")

3/ The FTC and the Department of Justice's Statements of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program also pointed to "anti-steering" and "anti-tiering" provisions as ones that may "prevent private payers from obtaining lower rates and better quality service for their enrollees."

4/ We appreciate the FTC's ongoing attention to the harm caused by Acquisition Clauses. See, e.g., https://www.ftc.gov/enforcement/cases-proceedings/2010044/hackensack-meridian-health-inc-englewoodhealthcare-0.

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The notice can be viewed at: https://www.regulations.gov/document/FTC-2021-0036-0022

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