Vertically Integrated Healthcare Providers / Insurers – Weak State Oversight but New Federal Authority
by James C. Sherlock
In the struggle between Virginia’s disorganized attempts to oversee vertically integrated health care and insurance companies, Sentara being the most prominent example, and the defenses of regional Virginia monopolies against regulation and legislation efficient, monopolies have won.
This article discusses the failures of Virginia’s legislative and regulatory oversight structures. I will recommend structural changes to both to deal with the issues that fall through the cracks.
There is some very recent good news, however.
A new federal antitrust law gives federal courts authority over integrated healthcare and health insurance business structures operated under the trade restriction. I will briefly describe the potential effects of this change.
Sentara is a combination of monopoly healthcare delivery systems in Hampton Roads, other hospitals outside of Hampton Roads, and the powerful health insurer, Optima Health, which is combining with its new Virginia Premier as the larger system Medicaid managed care facility in Virginia and the largest HMO in Hampton Roads.
When he hits the smallest obstacle – say the now-closed DePaul Hospital or the Chesapeake Independent Regional Medical Center – Sentara has several weapons at his disposal.
It is accused of using its huge network of providers to deny competitor referrals, its dominant HMO to deny them network status, and the same HMO to impose lower payments for identical procedures on competitors smaller than it. to its own suppliers.
Now Sentara Is Charged In Virginia Court By Chesapeake Regional Of Poaching Chesapeake Interventional Cardiologists while a court case regarding Chesapeake’s COPN request for open heart surgery was pending.
You got the idea. And Sentara has an ongoing acquisition from Cone Health in North Carolina to bring these blessings to the Greenville area – Guilford, Forsyth, Rockingham, Alamance, Randolph and surrounding counties.
There are three levels of oversight that are supposed to regulate the activities of vertically integrated health providers and insurers: legislative, regulatory and judicial.
Only the judiciary is properly organized to do so.
Legislative. The General Assembly is not organized to deal with vertically integrated health care delivery and health insurers. It adopts health care and insurance legislation through different committees in each house:
- Health care: Health, social protection and institutions at home and Education and health in the Senate
- Insurance: Work and Home Trade and Commerce and Labor of the Senate.
This system will not result in legislation dealing with Sentara as it is structured. By far the best thing for consumers would be to ban such integration in Virginia. It would be both:
- restore the precious tension between insurers and providers that directly benefits consumers; and
- prevent internal collaboration between insurers and integrated providers that puts competitors at a disadvantage in both markets while falling through the cracks of regulators.
Sentara, Centra and others would be forced to separate from their lines of insurance, restoring competition at least in the insurance market and preventing them from using their insurers as weapons against competing providers. However, it would also protect them from federal prosecution under the new law discussed later here.
Failing that, I recommend that each house reorganize itself to have a single committee in each that drafts the legislation for health care and health insurance. The epic struggle to pass balanced billing legislation serves as a lesson.
Even lobbying is compromised. Lawmakers depend on lobbyists for much of their information, but it’s not clear they’re getting an unfiltered view of the health insurance industry in Virginia.
Insurers not controlled by providers want more competition between providers and lower prices. Virginia’s regional monopoly providers want the opposite. So vertical integration is currently compromising the health insurance industry lobbyist, the Virginia Association of Health Plans (VAHP).
Optima Health from Sentara and Virginia Premier are members, as is the Piedmont Community Health Plan from Centra. Aetna, another member, has partnerships with Inova and Carilion. These are four of the ten members of the VAHP. Therefore. Who exactly controls the VAHP’s position on health and health insurance legislation?
VAHP is compromised enough to let Anthem bear the brunt for the interests of consumers.
Regulatory. Like the legislature, the regulatory system is bifurcated when it comes to dealing with vertically integrated health providers and insurers. The Virginia Department of Health (VDH) is the regulator of health care and the State Corporation Commission (SCC) is the regulator of health insurance.
Neither agency has the authority to review the relationship between the provider and the vertically integrated systems assurance services, and it does not.
This is both a clear gap in regulatory authority and a crucially important one as more regional supplier monopolies in Virginia create insurance weapons.
I have been reporting here for 16 months the capture of VDH by the regional health monopolies and their lobbyist, the Virginia Hospital and Healthcare Association (VHHA). I don’t think the capture is seriously denied by anyone.
On the COPN reform, for example, the governor asked hospitals what he could do, not VDH what he should do.
The question is what to do.
My recommendation is that SCC be entrusted with the task of regulating the health activity in addition to its current regulation of health insurance activity. This transfer of regulatory authority would include the COPN program, which is a law and business regulation, not a law governing the practice of medicine.
VDH would retain the regulation of the practice of medicine and would be freed from much more contentious business issues. At this point, he might find his skill level.
Judicial. Under the current legislative and regulatory systems in Virginia, the only hope for Virginians to monitor their health care system for their benefit is the courts. Yet tThe Virginia justice system in Virginia was crippled by Virginia law, especially the COPN, even before players like Sentara attempted to load the dice with friendly judges.
That leaves the federal courts.
The good news for consumers is that the last Congress was passed and President Trump signed a law that extended federal antitrust law to insurers, who were previously exempt. This brings into play for the first time all the structures of the vertically integrated health and insurance conglomerates in antitrust cases in federal court.
It will not be instantaneous, but I expect this change in law will result in the shattering of many current systems.
The three federal antitrust laws are the Sherman Act, the Federal Trade Commission Act and the Clayton Act. They prohibit mergers and illegal business practices in general terms, leaving the courts to decide which are illegal based on the facts of each case. All three have very serious consequences. The penalties, both civil and criminal, can be severe.
I will quote the FTC summary of these laws to the extent that they can now apply to vertically integrated health care and insurance companies. Under the new law, health care providers and health insurers can be tried in federal courts as competing businesses. If applicable:
âUnder the Sherman Act, certain acts are considered to be so harmful to competition that they are almost always illegal. These include simple arrangements between individuals or competing companies to fix prices, divide markets or rig bids. These acts are “per se” violations of the Sherman Act; in other words, no defense or justification is allowed. “
Additional information from the FTC provides:
The Clayton Act deals with specific practices that the Sherman Act does not clearly prohibit, such as mergers and interlocking directorships (i.e. the same person who makes business decisions for competing companies). â¦ As amended by the Robinson-Patman Act of 1936, the Clayton Act also prohibits certain discriminatory prices, services and allowances in relations between traders.
I have already demonstrated here that Sentara has overlapping directions between its holding company, its suppliers and its insurers.
It is widely alleged that Optima pays lower prices to Sentara’s competitors and exercises discriminatory selections on the network against Sentara’s healthcare competitors.
I’m not a lawyer, but it shouldn’t be seen as a new day at the Federal Court for vertically integrated health care and insurance companies.
And that Sentara, with its impending acquisition of Cone Health in North Carolina, is in the spotlight of the FTC.