Getty Images/iStockphoto

More States Passing Laws to Preserve Provider Competition

An updated report shows that more states are implementing price transparency and other laws to protect provider competition in the face of rapid consolidation.

All states have anti-trust statutes in place to preserve provider competition in the face of rapid consolidation, but more state governments are relying on price transparency, health plan contracting rules, and other laws to ensure provider market power does not lead to higher costs, according to a new report.

Catalyst for Payment Reform (CPR) published this week an update to its 2014 report on state policies on provider market power published in conjunction with the National Academy of Social Insurance.

Using the Database of State Laws Impacting Healthcare Cost and Quality, jointly developed by CPR and the Source on Healthcare Price and Competition at the UC Hastings College of the Law, the new report showed how state laws have evolved in the past four years to address market power imbalances that enable anti-competitive practices and rising healthcare costs.

Since 2014, the healthcare industry has seen a large amount of provider consolidation. 2017 alone proved to be a record year for hospital merger and acquisition activity, with a total of 115 transactions announced that year.

Provider consolidation has continued to trend, with reports showing merger and acquisition activity remaining strong in 2018 and 2019. Research has also shown that nearly three-quarters (72 percent) of metropolitan areas have highly concentrated hospital markets.

Legislation has been a key way states have responded to provider consolidation as evident from CPR’s 2014 report. But as studies continued to come out blasting the effects this consolidation has had on care quality and costs, states have increasingly leaned on the legislative approach to preserve provider competition, the updated report uncovered.

CPR researchers found that, on top of anti-trust remedies, more states are implementing laws that target provider behavior.

For example, 20 states have passed laws implementing mandatory all-payer claims databases, which aggregate claims data from Medicare, state Medicaid agencies, state employee and retiree agencies, and private payers, the report stated. These databases are designed to preservice provider competition and reduce costs by “exposing high priced providers for public policy purposes,” and in some states, inform consumer-facing websites that allow consumers to shop for providers and healthcare services.

The report also showed that 20 states – up from 18 in 2014 – have attempted to encourage competitive behavior in health plan contracting by banning “most favored nation” clauses. According to CPR, the clause “prevents a provider from charging a health plan a rate higher than the lowest reimbursement rate the provider agrees to with any other insurer.” This practice can impede other health plans from entering local markets, which can result in higher healthcare costs.

Notably, Massachusetts also passed legislation to prevent anti-steering clauses, another anti-competitive practice that can lead to higher costs to the system and to consumers.

In the report, CPR researchers also identified other state laws aiming to preserve provider competition, including:

  • Establishment of state commissions dedicated to promoting provider competition and controlling healthcare costs, which has been done in seven states, including Massachusetts and Delaware where the commissions implement all-payer, statewide cost growth benchmarks
  • Laws in three states governing accountable care organizations, including the use of certificates of authority
  • Expanded authority of the Department of Insurance, which is most notably occurring in Rhode Island where the department can establish affordability standards
  • Laws in 36 states that require a certificate of need (CON), including 26 states requiring CONs for acute care

The laws are critical tools states rely on to prevent negative consequences from provider consolidation, and they will continue to be a staple of the toolbox. However, some states are increasingly using non-legislative actions to further promote provider competition, CPR researchers found.

A select group of states – California, Massachusetts, Montana, New Hampshire, North Carolina, Oregon, and Rhode Island – are using strategies like blocking potential mergers, enacting conditional settlements for mergers, and implementing rate limits for state employee and retiree plans.

Other approaches being used by these states included devoting resources to maintaining and/or establishing a competitive healthcare market (e.g., creating an antitrust bureau) and publicizing the issue of provider market power (e.g., giving agencies the authority to collect and analyze provider pricing data).

CPR researchers anticipate more stats to use non-legislative approaches to combat anti-competitive behavior, especially as some local markets become so consolidated that “unscrambling” them will be impossible.

To view a catalog of state laws addressing provider competition, please view the report here.

Next Steps

Dig Deeper on Healthcare payment policy and regulation

xtelligent Health IT and EHR
xtelligent Patient Engagement
xtelligent Virtual Healthcare
Close