Anticompetitive conduct by health insurers and hospitals
What is anticompetitive conduct?
A health insurer or hospital may engage in anticompetitive conduct to unlawfully acquire, maintain or enhance market dominance, and to hinder the efforts of existing or potential competitors. Health insurer anticompetitive conduct is reflected in clauses which insurers include in their physician contracts, including for example: “Most-favored nation” (MFN), “all-products” and anti-discrimination clauses. In addition to these anticompetitive conduct clauses in health insurer contracts with physicians, dominant health systems enter into exclusive agreements with health insurers that are designed to thwart competition from physician-owned facilities or service lines.
Most-favored nation, all-products and anti-discrimination clauses as examples of anticompetitive conduct contract clauses
Generally, an MFN contract clause requires the physician to guarantee that the physician will not agree to a lower payment rate from any other health insurer than the physician has agreed to accept from the health insurer using the MFN contract clause. In so doing, the MFN contract clause protects the health insurer from potential competition. For example, suppose Health Insurer A includes MFN clauses in its physician contracts. Another health insurer (Health Insurer B) wants to enter A’s market and compete with A. Health Insurer B may believe that it needs to get a lower rate than that physicians have agreed to with Health Insurer A, in order to obtain a toehold in the market, and physicians may be willing to accept a lower rate because of Health Insurer B’s reputation for fairness and transparency. However, the MFN clauses in A’s contracts ensure that physicians cannot offer B better rates than those it has accepted from A, thus making it impossible for B to enter the market and offer physicians and consumers the advantage of its more collaborative policies.
“All-products” contract clauses require a physician to participate in all of the health insurer’s product lines. For example, suppose a health insurer offers preferred provider (PPO), health maintenance, workers compensation, and Medicare and Medicaid managed care products to employers in its respective market. If the physician’s contract with the insurer contains an all-products clause, the physician could not participate in the health insurer’s PPO business, which the physician might want to do because of favorable reimbursement rates, without also participating in the health maintenance, workers compensation, and Medicare and Medicaid managed care business. All-products clauses can extend the reach of dominant insurers, and be used to prop up health insurance products that would not be competitive if offered separately.
Health insurers also sometimes use anti-discrimination clauses to achieve anticompetitive effects. Physician contracts usually contain clauses prohibiting discrimination based on race, national origin, etc. However, insurers sometimes include in such provisions language stating that the physician may not discriminate based the entity reimbursing the physician for care provided to the patient. Such language can prevent a physician from contracting with another insurer offering favorable reimbursement rates, because the physician would only have the capacity to see these new patients if the physician could limit the number of patients the physician would take from the initial insurer, a practice that is arguably “discriminatory” against the original insurer and thus barred by the anti-discrimination clause.
Anti-competitive conduct by health systems or hospitals
Dominant health systems or hospitals can also engage in anticompetitive conduct that directly harms physicians. For example, a dominant health system or hospital can offer deep price discounts on all of its services to a health insurer, on the condition that the insurer not do business with any of the system’s or hospital’s competitors. Such agreements can hinder, or even foreclose, competition from physician-owned facilities—such as specialty hospitals or ambulatory surgery centers, or physician-owned service lines, such as diagnostic imaging services performed in free-standing physician practices—because the insurer is contractually prohibited from purchasing services from such facilities or service lines.
What is the American Medical Association doing?
The American Medical Association (AMA) actively advocates against anticompetitive conduct undertaken by dominant health insurers or health systems/hospitals in all appropriate venues. For example, the AMA, working with state medical associations, has convinced state legislators and regulators to prohibit health insurer mergers unless the merged entity agreed not to utilize MFN and/or all products clauses. For more information on these efforts see the following documents:
- AMNews article “Blues merger faces opposition in Pennsylvania Legislature,” January 2009.
- Final settlement between Attorney General of the State of Nevada and UnitedHealth Group, Inc. & Sierra Health Services, Inc. (2008)
The AMA also routinely communicates its opposition to anticompetitive conduct to the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ). In April 2011, the AMA sent a letter to the DOJ voicing strong concern regarding a powerful hospital system’s use of MFN clauses. For more information, refer to the AMA Letter to Joshua Soven, U.S. Department of Justice, concerning the proposed judgment in US v. United Regional Health Care System.
National Managed Care Contract
The AMA’s National Managed Care Contract (NMCC) and the NMCC Database are vital tools in the AMA’s efforts to combat anticompetitive behavior by health insurers. The NMCC was developed by the AMA in consultation with state medical association attorneys with expertise in managed care contracting issues and regulations. The NMCC is based on the most physician-favorable managed care laws and regulations from all 50 states and the District of Columbia. This empowering advocacy resource addresses all of the anticompetitive contract clauses that can reasonably be expected to appear in physician contracts.
The NMCC Database, accessible to AMA members, also contains an All Products Clause Issue Brief specifically designed to help physicians analyze and negotiate all products clauses. Using the NMCC and other resources, the AMA has helped a number of state medical associations enact legislation prohibiting or restricting a wide array of anticompetitive physician contract clauses.