All or Nothing Contracting - What's Your Number Two?

Thanks, shurx, for this review on iTunes entitled "Prepare to Learn." Shurx wrote:

"[RHV] provides key insight from experts that you won't find anywhere else. It paints the picture of how our healthcare is tangled, and who benefits because of it. Whether it's drug pricing, PBM shenanigans, hospital billing, or market trends that are challenging the status quo, this podcast is worth your time. I've shared many of the episodes with my pharmacy colleagues who have replied, 'I didn't know that's how it worked.' Now they do thanks to Stacey and her team."

I wanted to kick off this particular show with this review because today we are again digging into the business of hospital care in this country. That's actually how Sanat Dixit, MD, MBA, FACS, put it on LinkedIn recently. He said some of the hospitals these days aren't in the healthcare business; they're in the hospital care business. And when I say some hospitals, I mean some people in decision-making roles at some hospitals.

There was an opinion piece in the New York Times the other day by Eric Reinhart, and here's my highlight from his essay. He writes, "But the burnout rhetoric misses the larger issue in this case: What's burning out health care workers is less the grueling conditions we practice under, and more our dwindling faith in the systems for which we work."

Relentless Health Value is here so that our Relentless Tribe has the information that you need to influence what goes on in some of the boardrooms where some of these decisions are being made. With that, let's move on.

You know why my guest, Brennan Bilberry, got into his current line of work battling hospital chain anticompetitive practices? He got into it because this behavior, which is normalized in healthcare, would never be tolerated in any other sector of the economy. No one would get away with it because these anticompetitive practices are, hey, anticompetitive. They spell the death of functioning markets.

We kick off our conversation, Brennan and I, going through the typical hospital system consolidation playbook and how anticompetitive practices are kinda part of the typical gig here. It's quite clever, by the way, for hospital system executives to think this way. I mean, it's illicit and, some would say, unethical but clever if your main metric is revenue maximization. Anticompetitive contract terms are, after all, a flywheel. You consolidate to get enough market power to effectively force everyone to sign your anticompetitive contracts. And then step two: After that, you break out your anticompetitive contract terms spatula and you scrape out any remaining competition from your area. Which leads you to step three: Rub your hands together and raise prices and donate to politicians so legislation becomes even less likely. And then step four: Continue to raise your prices. Don't you love it when a plan comes together?

In this healthcare podcast with Brennan Bilberry, we talk about four contract terms that any self-respecting anticompetitive hospital contract should include and how each of them restricts competition unfairly and causes higher prices for communities, taxpayers, patients, employers … basically everybody, including people who work at the health system, who wind up needing medical care.

In a nutshell, here's the four anticompetitive contract terms that we dig into in this episode:

1. All-or-nothing contracting, wherein a hospital system says if you want us in your network, you must include every single facility that we have in your network and at the monopoly-level prices we demand, even in areas that might be competitive. There is a reason why a hospital system might be all hachi machi to buy a rando not super profitable hospital in a rural area. The payer must include that hospital in their network then because of network adequacy or whatever. And then from then on, all of their care settings are now in network—even the lower-quality ones—and all of them at the highest prices. And there's no price negotiation that's possible after that.
2. Anti-steering and anti-tiering clauses: This means that a payer/ASO (administrative services organization)/TPA (third-party administrator)/plan sponsor cannot steer members to lower-cost or higher-quality hospitals, nor can it offer benefit designs that have tiers (ie, lower co-pays if a member goes to specified high-value hospitals). So, any chance of using consumerism or navigation as a way to get members to better places is just eviscerated by this little move.
3. Pricing gag clauses: It's when contract terms prohibit an ASO/TPA from telling its plan sponsor customers or members what the price of services are before (or sometimes even after) the service is rendered, claiming it's important to not let employers or patients know these costs because revealing actual prices will [checks notes] cause hospital prices to go up. I'm speechlessly mystified by this logic, but OK … I only have a bachelor's in economics.
4. Contract terms that restrict other providers in the market: So, a dominant hospital uses admitting privileges or referrals or other leverage to effectively control other providers in the market, including providers who are ostensibly independent. So, while the market may look dynamic, it is really not.

Some links to interesting articles and posts and other episodes related to this topic:

Definitely listen to the shows with Mike Thompson (EP389) and also the one with Chris Skisak and Gloria Sachdev (EP390). We talk about market dynamics and hospital legislation in these two shows, which are, frankly, the best ways to get rid of hospital systems' ability to hold their communities and other local providers hostage with some of this strong arming.

Here's a link to an article I was thinking about while recording this show about Daran Gaus's hypothesis for how mergers will impact hospital prices.

And here's a link to an article about how commercial prices for outpatient visits were 26% higher for patients receiving care at a health system than those visiting non-system physicians and hospitals.

Another episode I mentioned when Brennan and I discussed the consequences of some of these anticompetitive contract terms is the one with Cora Opsahl (EP373). I also reference the episode with Dale Folwell, treasurer in North Carolina (EP249).

One last link is to the conversation I had with Dr. Scott Conard (EP391), where the local hospital bought a local ACO (accountable care organization) physician organization and the community paid an additional $100 million to the hospital the following year.

My guest in this healthcare podcast as aforementioned is Brennan Bilberry, who is a founding partner over at Fairmark Partners, which is a law firm litigating some of these antitrust lawsuits against some of these hospital chains.

You can learn more at fairmarklaw.com.

Brennan Bilberry is a founding partner of Fairmark Partners, LLP, a law firm focused on fair competition issues, especially in the healthcare industry. Fairmark has filed numerous antitrust cases against dominant hospital systems, seeking to tackle anticompetitive practices that lead to higher prices for businesses, consumers, and unions.

Prior to founding Fairmark, Brennan worked as a policy consultant and political operative whose work included overseeing environmental public policy campaigns in numerous countries, providing international political intelligence for US investors, advising political campaigns around the world, and designing consumer and legal advertising.

Brennan also worked on numerous US political campaigns, including serving as communications director for Terry McAuliffe's 2013 successful campaign for Virginia governor, serving as deputy executive director of the 2012 pro-Obama Super PAC Priorities USA, and developing research and policy communications for the House Democrats.

Brennan is a native of Montana and South Dakota and has lived in Washington, DC, for the past 15 years.

06:16 What happens after a hospital consolidates?

07:23 What does an anticompetitive system look like when a hospital consolidates?

10:13 Tricia Schildhouse on LinkedIn.

10:35 What are some anticompetitive "tricks" that hospitals employ?

12:37 The Sutter case in northern California.

14:50 What can you do if you're forced to engage in an all-or-nothing contract with a hospital system?

18:31 The Atrium case in North Carolina.

19:36 EP373 with Cora Opsahl.

21:33 What are price gag clauses?

23:08 How are legacy gag clauses designed to prevent scrutiny in litigation?

24:04 EP249 with Dale Folwell.

26:08 How do hospital restrictions on other providers create an anticompetitive environment?

27:23 EP391 with Scott Conard, MD.

29:48 EP389 with Mike Thompson or EP390 with Gloria Sachdev and Chris Skisak.

You can learn more at fairmarklaw.com.

@brbilberry discusses #hospital #anticompetitive practices on our #healthcarepodcast. #healthcare #podcast #hospitals #hospitalsystems #anticompetitivepractices

Recent past interviews:

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Dr Vikas Saini and Judith Garber, David Muhlestein, Nikhil Krishnan (Encore! EP355), Emily Kagan Trenchard, Dr Scott Conard, Gloria Sachdev and Chris Skisak, Mike Thompson, Dr Rishi Wadhera (Encore! EP326), Ge Bai (Encore! EP356), Dave Dierk and Stacey Richter (INBW37), Merrill Goozner, Betsy Seals (EP387), Stacey Richter (INBW36), Dr Eric Bricker (Encore! EP351), Al Lewis, Dan Mendelson, Wendell Potter, Nick Stefanizzi, Brian Klepper (Encore! EP335), Dr Aaron Mitchell (EP382), Karen Root, Mark Miller, AJ Loiacono, Josh LaRosa, Stacey Richter (INBW35), Rebecca Etz (Encore! EP295), Olivia Webb (Encore! EP337), Mike Baldzicki