HCW-00064-93773 America's Health Insurance Plans (AHIP

Health Care Workshop, Project No. P131207

Submission of America's Health Insurance Plans to the Federal Trade Commission and the

United States Department of Justice on Health Care Competition

April 30, 2015

America's Health Insurance Plans (AHIP) would like to thank the Federal Trade Commission

(FTC) and the Antitrust Division of the United States Department of Justice (DOJ) (collectively,

"the Antitrust Agencies" or "the Agencies") for hosting the workshop, Examining Health Care

Competition, and for the opportunity to provide comments on the important issues covered in the

workshop.

We appreciate, and support, the Antitrust Agencies' longstanding efforts to promote competition

in health care markets. We commend the Agencies for an outstanding Workshop and for

promoting an impressive, thoughtful discussion. We agree with the Agencies that the workshop

and comments submitted in conjunction with this effort will support enforcement, competition

advocacy, and consumer education efforts related to health care competition.

AHIP members have taken leadership roles in both finding innovative ways to work with

providers and health care organizations to deliver high quality, lower cost, and more accessible

care to consumers. AHIP and its members also have called attention to the harm posed by

anticompetitive provider consolidation and the disharmony between this type of consolidation

and durable transformations that will benefit consumers.

We would like to highlight our perspective, and the common themes through our comments, that:

(1) consumers benefit from more, not less, competition in health care markets, and (2) the

Antitrust Agencies are vital to ensuring that consumers receive such benefits. The Agencies have

made important advancements in promoting competition through enforcement activities related

to horizontal provider consolidation. AHIP encourages the Agencies to continue these efforts

and, when appropriate, challenge other forms of anticompetitive provider consolidation. In

particular, greater focus on vertical provider consolidation (e.g., hospital acquisitions of

physician practices) and on the growth of multi-hospital systems in metropolitan can help

prevent harm to consumers when such transactions are anticompetitive.

The Agencies' enforcement activities have been complemented, and their benefits to consumers

amplified, by their efforts in the legislative and regulatory arenas. Such competition advocacy is

of great importance given the competitive implications of legislation and regulation at both the

state and federal levels. Provider collective bargaining, any willing provider requirements, and

overbroad network adequacy requirements can have a similar impact to, or can add to the harm

created by, provider consolidation. We encourage the Agencies to continue these competition

advocacy and education efforts.

More generally, both competition advocacy and enforcement by the Agencies continue to be of

critical importance as health care markets and the regulatory framework that governs these

markets go through a period of tremendous change. We support Agency efforts in these areas,

appreciate the opportunity to offer comments, and stand ready to assist them in future efforts to

more fully deliver the benefits of competition to health care consumers.

I. Efforts to Transform Healthcare to the Benefit of Consumers Involve Health Plans

as Leaders and Partners and Depend on Competitive Provider Markets

One justification often offered for anticompetitive provider consolidation is that it is necessitated

by the Affordable Care Act (ACA), or the transformation of the healthcare system more

generally. The health care system is indeed changing rapidly, both as a result, and independently,

of the ACA. Yet, those pursuing anticompetitive consolidations argue that the consolidations are

necessary to deliver higher quality care, better use of information technology, and manage the

transformation in payment from volume to value. This is far from reality, as both theory and an

examination of health care markets demonstrate.

Vigorous competition among providers not only increases incentives to lower costs and improve

quality, but also to innovate both independently and in collaboration with health plans. In

contrast, in spite of the rhetoric, the reality is that anticompetitive provider consolidation creates

a roadblock for those in pursuit of lower costs and higher quality.

In provider markets that are hospitable to such activities, health plans are reducing the cost of

care and improving value by transforming their relationships with healthcare providers.

Health

plans and providers have pursued transformation through: (1) clinical integration of providers;

(2) investment in and deployment of technology; and (3) payment reform. The approaches are

varied, but the effort is national and has created promising results.

Karen Ignagni, Health Plan Innovations in Delivery System Reforms, AJMC, April 16, 2013.

Health plans have enabled and pursued clinical integration in a variety of forms, including

accountable care organizations, patient-centered medical homes, and bundled payments. Across

these approaches, however, several important similarities can be found. Such efforts include the

use of care or case managers to coordinate care for patients; the use of data and information

sharing to help providers manage their patients; and the use of infrastructure development

assistance to support physician practices with capital constraints. These efforts have led to

positive early results.

Health plans also have made data and decision-support tools available to providers in a variety of

settings. The data and tools provided include: detailed claims data; hospital and emergency

department census reports; analytic reports detailing potential medication interactions, gaps in

care, and site of service opportunities; and predictive modeling reports on risk, out-of-network

use, comparisons to benchmarks, and progress toward quality and resource use targets. For

example, in one state health plans are working together to make patient medical records available

to any treating physician or nurse.

Finally, health plans are working w ith providers to replace fee-for-service payments with a

system of paying f or value. The goal of such changes is uniform better health outcomes and

increased affordability. The approaches to such changes are varied but generally involve

prospective models that focus on accountability, shared risk, and population-based care.

Ruth S. Raskas et al., Early Results Show WellPoint's Patient-Centered Medical Home Pilots Have Met

Some Goals for Costs, Utilization, and Quality, 31 Health Affairs (2012).

Tim Logan & Stuart Pfeifer, Insurance Giants Creating Massive Database of Patient Records, LA

Times, August 4, 2014.

II. The Harmful Impact of Anticompetitive Consolidation Among Hospitals and Other

Health Care Providers

Provider-related costs are a significant portion of total medical costs, and the growth in such

costs has had a significant, harmful effect on consumers. Anticompetitive provider consolidation

has been a significant driver of this growth. This consolidation replaces a situation in which

providers compete to offer lower costs, higher quality services, and better approaches to

delivering c are, to one in which a provider uses its market power to charge higher prices and

faces reduced incentives to innovate or improve quality.

According to Irving L evin Associates, a health care research firm, the number of hospital

mergers and acquisitions in the United States more than doubled from 50 in 2009 to 105 in

2012.

Moreover, an analysis of provider concentration by Bates White Economic Consulting

found that hospital ownership in 2009 was "highly concentrated" in more than 80 percent of the

335 areas studied.

Numerous research findings demonstrate that consolidation among providers

is resulting in higher healthcare costs for consumers and employers:

• A June 2012 study by the Robert Wood Johnson Foundation (RWJF)

found that

"increases in hospital market concentration lead to increases in the price of hospital care,"

and that "when hospitals merge in already concentrated markets, the price increase can be

New Laws and Rising Costs Create a Surge of Supersizing Hospitals, New York Times, August 12,

2013.

Market concentration of hospitals, Bates White Economic Consulting, Cory Capps, PhD, David

Dranove, PhD, June 2011.

The impact of hospital consolidation-Update, Martin Gaynor, PhD and Robert Town, PhD, Robert

Wood Johnson Foundation, June 2012.

dramatic, often exceeding 20 percent." This study further cautions that "physician-

hospital consolidation has not led to either improved quality or reduced costs" and,

additionally, notes that consolidation "is often motivated by a desire to enhance

bargaining power by reducing c ompetition." An earlier RWJF research project

, focusing

on the hospital consolidation that occurred in the 1990s, indicates: "Studies that examine

consolidation among hospitals that are geographically close to one another consistently

find that consolidation leads to price increases of 40 percent or more."

• An article published in June 2011 by the American Journal of Managed Care found that

"hospitals in concentrated markets were able to charge higher prices to commercial

insurers than otherwise-similar hospitals in competitive markets."

• An issue brief published in July 2011 by the National Institute for Health Care

Management Foundation found that one of the factors contributing to higher prices is

"ongoing provider consolidation and enhanced negotiating strength vis-a-vis insurers,

resulting in an ability to extract higher payment rates from insurers."

• Paul Ginsburg and Robert Berenson, in an article published in the February 2010 edition

of Health Affairs

, wrote that "providers' g rowing m arket power to negotiate higher

payment rates from private insurers is the 'elephant in the room' that is rarely mentioned."

• A September 2013 research brief by the Center for Studying Health System Change

reported that "it is clear that provider market power is key in price negotiations and that

How has hospital consolidation affected the price and quality of health care?, William B. Vogt, PhD and

Robert Town, PhD, Robert Wood Johnson Foundation, February 2006.

Unchecked Provider Clout in California Foreshadows Challenges to Health Reform, Health Affairs,

February 2010.

High and Varying Prices for Privately Insured Patients Underscore Hospital Market Power, Center for

Studying Health System Change, September 2013.

certain hospitals and physician groups, known as 'must haves' c an extract prices much

higher than nearby competitors." This study also concludes that "increases in provider

prices explain most if not all of the increase in premiums" in recent years.

• A May 2014 article by Laurence Baker, M. Kate Bundorf, and Daniel Kessler in Health

Affairs, found that when a hospital-owner of a physician group increases its market share,

it concomitantly increases its prices.

The problems caused by anticompetitive provider consolidation pre-date health care reform, but

their import continues and has perhaps been amplified in its wake. For example, the

establishment of exchanges has been a central aspect of health care reform, and the ability of

individual consumers to obtain plans from such exchanges has been seen as an important means

of expanding coverage. Unfortunately, research has demonstrated that concentrated provider

markets are associated with higher priced exchange plans, threatening the ability of consumers to

access coverage through the exchanges. Research by Scott Thompson, published in the Antitrust

Healthcare Chronicle

, found that more competitive hospital markets in California were

associated with a more than 8 percent reduction in exchange premiums. Richard Scheffler

presented similar findings from his own work at the workshop, finding both hospital and medical

group concentration associated with higher premiums on the California exchange.

Vertical Integration: Hospital Ownership of Physician Practices is Associated with Higher Prices and

Spending, Health Affairs, May 2014.

ACA Exchange Premiums and Hospital Concentration in California. Antitrust Health Care Chronicle,

January 2015.

Covered California: Competition in the Health Insurance Market?, February 2015, available at

https://www.ftc.gov/news-events/events-calendar/2015/02/examining-health-care-competition.

While the record of the cost to consumers from hospital consolidation is well developed, more

can and should be done, both empirically and analytically. We were pleased to hear from the

impressive array of panelists at the workshop on their work on advancing research and the

analytic framework. A better understanding of the impact of vertical consolidation, the creation

of hospital systems, and the role of regulatory changes in enhancing and reducing provider

market power would help both the Agencies in their missions and other stakeholders in

understanding, responding to, and removing impediments to the interests of consumers in

receiving high quality, affordable health care.

III. Innovation and Quality are Possible Without Harmful Consolidation

Hospitals seeking to pursue the goals of health reform - higher quality, more efficient care - can

achieve these goals without anticompetitive consolidation. Through the appropriate use of

technology and care coordination strategies with partners, hospitals can address health care

quality without the harmful effects of consolidation that limits competition.

As discussed above, health plans and providers have engaged in a wide range of collaborative

efforts to improve the quality and efficiency of health care delivery and these efforts have

succeeded without anticompetitive hospital consolidation. In fact, such consolidation has the

opposite impact on quality improvement efforts. Just as anticompetitive consolidation has been

recognized to have a chilling impact on innovation in many other markets, such consolidation

among hospitals is likely to reduce innovative collaborations between health plans and providers.

This would be an unfortunate outcome for consumers who might otherwise benefit from the

improvements in quality and efficiency generated by these innovations.

Indeed, the health plan initiatives noted above involve health plans partnering with providers to

improve quality and lower costs in a manner that does not depend upon anticompetitive provider

consolidation. For example, health plans have been leaders in the adoption of patient-centered

medical homes, which attempt to replace episodic care with a sustained relationship between

patient and physician.

Similarly, health plans have been strong partners in many accountable

care organizations, with promising results in reducing preventable readmissions and total

inpatient hospital days.

The range of such efforts is vast, beginning with the point of contact

with the patient and extending all the way to the "back office" interactions between plans and

providers. For example, in Ohio, health plans sponsored an information technology initiative to

improve efficiency of transactions between plans and physicians by providing a one-stop service

in electronic transactions for physicians.

Such initiatives not only are consistent with provider competition, but explicitly or implicitly rely

upon it. The false choice--that consumers can have competition among health care providers or

innovation by those providers, but never both--should be rejected. Instead, protecting and

promoting competition in provider markets will make it possible for providers, plans and others

AHIP Press Release, AHIP Board of Directors Releases Principles on Patient-Centered Medical Home,

June 25, 2008.

Early Lessons from Accountable Care Models in the Private Sector: Partnerships Between Health Plans

and Providers, Aparna Higgins et al., Health Affairs, September 2011.

AHIP Press Release, Health Plans Collaborate on Landmark

Initiative to Reduce Time, Expense for

Physician Office Practice "Paperwork," October 5, 2009.

to utilize a wide variety of innovative approaches to improving quality and efficiency. While

such a variety of approaches will lead to a variety of results, consumers will benefit as the best

approaches are emulated, expanded, and improved upon. Just as surely, consumers will be

harmed if such innovation is replaced by anticompetitive consolidation, leading to reduced

competition, higher prices, and diminished innovation.

IV. The Importance of Antitrust Agency Enforcement and Competition Advocacy

In a time of rapid change, including consolidation, the role of the Antitrust Agencies in analyzing

and, when appropriate, challenging provider transactions is more important than ever. We

commend the Agencies for their work in this area and specifically have supported, with amicus

briefs, the FTC's ProMedica and St. Luke's cases.

It is important for consumers that the

Agencies continue their work in challenging anticompetitive provider transactions. As

appropriate, this may include challenges to anticompetitive vertical consolidation (hospital

acquisitions of physician practices or other entities) and to hospital systems.

Also important with respect to the Agency's enforcement efforts is their continued work to dispel

misperceptions about and mischaracterizations of these efforts. Their enforcement with respect to

provider consolidation is not an impediment to pro-competitive developments. Only a very small

number of transactions are, in fact, challenged. In addition, there are good reasons to believe that

the purported justifications of anticompetitive transactions (e.g., higher quality care) will not be

See http://www.ahip.org/AHIPAmicusBrief112112/ (AHIP amicus brief in ProMedica) and

http://www.ahip.org/AmicusBrief/St-Lukes82014/ (AHIP amicus brief in St. Luke's).

achieved through such transactions. Further, there are growing a nd varied approaches to

achieving the same goals that do not come with the cost of higher prices for consumers.

The Agency's competition advocacy efforts are also of vital importance as the regulatory

landscape continues to evolve. A number of regulations remain "on the books" that are to the

detriment of consumers. Others are being proposed currently or will in the future. Two areas in

which the Agencies have provided much needed guidance are provider collective bargaining a nd

any willing provider statutes. Both are bad for consumers and create harms similar to those

created by anticompetitive provider consolidation. Those considering such proposals benefit

tremendously from the information that the Agencies can provide on such harms and, armed with

such information, can make better informed decisions.

Contemplated changes to network adequacy rules pose an emerging, similar set of concerns.

Some would push such rules beyond their intended purpose to foreclose consumer-desired high

value networks, mandate the inclusion of certain types of providers, or create a "lite" version of

any willing provider requirements. All would create harm for the consumers in the form of

higher prices and less innovation. We encourage the Agencies to provide their valuable counsel

on these issues, as well as on other legislative and regulatory issues that emerge.

V. Conclusion

We appreciate the opportunity to provide the Antitrust Agencies these comments. Sound health

care policy and strong competition policy are harmonious, in spite of the suggestion of discord

by a few. Quality can be improved, access increased, and the cost curve bent, not by allowing

anti-competitive provider transactions (or increasing provider market power through regulation)

but instead by protecting a nd enhancing c ompetition. That was true prior to health care reform

and remains as true, and perhaps even more important, after it.

AHIP and its members stand in favor of, and are actively pursuing, changes to the healthcare

system that will lower cost, improve quality, and spur innovation. Such changes depend upon

competition. Anticompetitive provider consolidation, whatever the rhetoric surrounding its

benefits, in reality promises to prevent this change. Similarly, regulation that cuts off the avenues

for plans, purchasers, and consumers to circumvent provider market power leaves only the well-

trod avenue of consumer harm. We fully support the efforts of the Antitrust Agencies both to

prevent anticompetitive provider consolidation and to advocate for legislation and regulation that

is cognizant of competitive consequences for consumers. These efforts will lead health care to

the road of beneficial changes for consumers. Unfortunately, consumers know all too well where

the other road leads.