CEA Report, OhioHealth Settlement Continue White House and DOJ Focus on Payor-Provider Contracts

Two recent antitrust developments in healthcare portend potential changes to contracting practices: first, the White House Council of Economic Advisors published a report in support of a nationwide ban on anti-steering, anti-tiering, and all-or-nothing contracts, concluding that a nationwide ban would substantially reduce healthcare prices and premiums. Second, the US Department of Justice Antitrust Division and State of Ohio proposed a settlement with OhioHealth that would bar a range of anti-tiering provisions the government alleges deter steering and other plan design features that allegedly promote lower-cost care.

Specifically, the parties’ proposed final judgment voids contract terms that “prohibit, deter, prevent, or penalize” steering, steered plans, or transparency about price, cost, quality, or patient experience between payors and patients.

In parallel, both developments evidence the administration’s continued interest in investigating and challenging certain payor-provider contract provisions.

CEA REPORT ON THE EFFECTS OF BANNING HOSPITALS’ ANTI-STEERING, ANTI-TIERING, AND ALL-OR-NOTHING CONTRACTS

On June 18, the White House Committee of Economic Advisors released a study on the effects of banning hospitals’ anti-steering, anti-tiering and all-or-nothing contracts. The study estimates that banning such clauses could reduce hospital and affiliated-physician prices by 18% and employer-sponsored insurance premiums by 6.5%—saving workers and employers approximately $1,755 per family and $606 per individual per year.

National aggregate premium savings are further estimated to be approximately $45 billion per year. The study attributes savings to restored insurer bargaining leverage, patient sorting to lower-cost providers via tiering/steering and transparency, rival growth as volume shifts to competitors, and reduced cross-market leverage from bundled contracting.

While no specific legislation has been proposed, it is possible that the report could support further legislative efforts and/or administration priorities at the DOJ and Federal Trade Commission.

OHIOHEALTH SETTLES ANTITRUST LAWSUIT BY DOJ

In February of this year, the DOJ and the Ohio Attorney General filed a civil lawsuit against OhioHealth Corporation in the US District Court for the Southern District of Ohio, alleging violations of Section 1 of the Sherman Act and the Valentine Act, Ohio’s antitrust law.

The government alleged that OhioHealth used its market power (with an alleged market share of approximately 35%) in the Columbus area to force payors to accept contractual restrictions that made it difficult or impossible for the payors to develop “budget-conscious” health plans for their insureds.

Soon thereafter, the DOJ filed a similar suit against NewYork-Presbyterian (NYP), alleging that NYP had unlawfully restrained competition by contracting with payors on an “all-or-nothing basis” and requiring that NYP be featured at the most favored level of benefits in each plan, despite NYP having a relatively modest market share (25%–35%).

On June 16, and with briefing of OhioHealth’s motion to dismiss still incomplete, the parties filed a proposed final judgment settling the government’s case against OhioHealth. The settlement barred OhioHealth from seeking or enforcing provisions that prohibit, deter, prevent, or penalize steering, steered plans, or payors transparently sharing of information about price, cost, quality, and patient experience with their member patients.

Prohibited conduct would also include:

• Requirements of prior approval for the introduction of new benefit plans
• Requirements that OhioHealth be included in the most-preferred tier of benefit plans
• Actions that would penalize, or threaten to penalize, payors from communicating price, quality, or patient experience information directly or indirectly to its members (or others that contract with payors for access to plans)
• Actions that would penalize, or threaten to penalize, payors engaging in steering
• Actions that would penalize, or threaten to penalize, payors designing, offering, expanding, or marketing steered plans (e.g., narrow network benefit plans, tiered network benefit plans, or any benefit plans with reference-based pricing, site-of-service steering, or a center of excellence as a component)

Under the proposed settlement, OhioHealth still may restrict steerage within a narrow network in which it is the most-prominently featured provider, communicate with members about provider selection considerations, and review or challenge inaccurate transparency information without materially delaying dissemination. OhioHealth may also enforce certain confidentiality protections around price/cost disclosures consistent with applicable law.

There is flexibility for tiering, and while OhioHealth cannot require most-preferred tier placement, the settlement allows it the right to participate in the most-preferred tier on the same terms and conditions as other providers (or, if OhioHealth declines, participate on substantially similar terms to an existing broad network plan).

COMPLIANCE CONSIDERATIONS

The OhioHealth settlement terms, if entered, will serve as a roadmap for what the DOJ views as compliant contracting, particularly with respect to contractual language that prohibits or penalizes steering and payor-patient transparency.

Coupled with the CEA report, the NYP filing, and the administration’s broader healthcare antitrust focus, the DOJ’s posture suggests sustained attention on health systems’ contracting practices that, according to the DOJ, constrain “budget-conscious” plan design regardless of traditional market-share thresholds for enforcement.

These developments have implications for health systems across the nation:

• Hospital systems should be aware of the government’s continued scrutiny of provisions that arguably penalize or deter steering, tiering, narrow networks, reference-based pricing, site-of-service incentives, centers of excellence, and transparent communications between payors and patients. Moreover, while the settlement suggests that the DOJ will scrutinize requirements that a health system be included in a payor’s “most-preferred tier,” it also suggests that the DOJ may be less willing to challenge neutral “right to participate” terms on the same conditions as other providers and fallback participation on substantially similar broad-network terms if declined.
• Hospital systems should approach negotiations with care to prevent proposals from being misconstrued as seeking to improperly exploit a market position. For example, hospital systems should discuss the benefits of contracting on a systemwide basis and not make statements that could misconstrue a negotiation position as an attempt to engage in “all-or-nothing” contracting.