Feds turn spotlight on Anthem over "most-favored-nation" clause

Observers say use of the controversial contracting strategy has increased with health plans' market power.

By Robert Kazel, AMNews staff. June 7, 2004.

Anthem is facing a federal inquiry into a contracting tactic it -- and other big plans -- use to guarantee that doctors and hospitals always give it the biggest discounts.

That tactic is commonly referred to as a "most-favored-nation" clause. Doctors who sign a contract containing such a clause agree to a certain fee schedule. If discounts to other plans ever rise above these levels for any procedure, the payer with most-favored-nation status can adjust its payment schedule to regain a price advantage, said Mark Rust, a Chicago health care attorney. The repricing goes on constantly, and doctors are seldom aware of it, he said.

The inquiry by the Justice Dept. is not expected to interfere with completion of the Anthem-WellPoint Health Networks merger, which, with 26 million members, would become the nation's largest private health plan.

But the Justice Dept.'s apparent heightened interest in most-favored-nation clauses could portend more aggressive reviews of such provisions throughout managed care, because other large payers with a dominant presence in local markets also have written such provisions into at least some of their contracts with physicians and hospitals, legal experts say.

The Justice Dept. last fall asked Indianapolis-based Anthem to provide it with documents relating to the clauses, said Deborah New, Anthem spokeswoman. Anthem complied. Gina Talamona, spokeswoman for the Justice Dept., acknowledged that the department had begun a "current, active, ongoing investigation" into most-favored-nation clauses in the insurance field, though she would not identify any specific company.