The National Academy for State Health Policy’s (NASHP) Hospital Cost Tool uses information from annual Medicare cost reports that are completed by hospitals and submitted to the federal government to provide health care purchasers and regulators with critical information to better understand hospital costs – versus their charges.
- Added metrics to assist with hospital comparisons, including total compensation, overhead compensation, inpatient discharges, and home office and related party costs.
- Expanded capture of Medicare charges, payments, and costs for hospital-based or subcontractor inpatient rehabilitation facility, inpatient psychiatric facility, swing beds, and skilled nursing facility services in both inpatient and outpatient settings.
- Isolated revenue capture for Title V and Title XIX programs from Title XVIII revenues.
- Eliminated separate calculations for Medicare swing bed calculations, including them in general Medicare calculations.
- Simplified the tool’s calculation of a hospital’s “break-even levels” or the point at which hospitals are reimbursed by commercial plans at the rate that covers the hospitals’ cost of providing care without losing money, even when considering the hospital’s potential losses from public payers and the uninsured.
For assistance utilizing the hospital cost tool, please email email@example.com.
Drug overdose deaths nationwide have continued to rise during the COVID-19 pandemic, exceeding 88,000 between August 2019 and August 2020, signaling a critical need for substance use disorder (SUD) treatment services and the workforce to provide them. Non-fatal overdoses, which are a predictor of future fatal overdoses, also rose, leading to an increase in opioid-related emergency department (ED) visits even as overall ED visits declined during the pandemic.
While overdose-related ED incidents are traumatizing to individuals and costly to payers – especially state Medicaid programs – Rhode Island has found that hospital emergency rooms can be low-barrier and successful access points to SUD treatment with the right crisis response – including peer services – in place.
Rhode Island, and 38 other states, have integrated the use of peers as care team members who can provide Medicaid-reimbursable, non-clinical treatment and recovery support services. In 2014, the state developed an innovative model, AnchorED, that introduced peers into hospital EDs to link patients who experienced overdoses with treatment and recovery. This program is the result of cross-agency collaboration among Rhode Island’s Department of Health (RIDOH), Department of Behavioral Health, Developmental Disabilities and Hospitals (BHDDH), the Providence Center (a community behavioral health provider), and Anchor Recovery Community Centers.
Currently, post-overdose peer services are accessible at all hospitals in the state – with the exception of a Veterans’ Affairs hospital – and peers who provide services are available 24 hours a day, seven days a week. Early evaluation of AnchorED showed that in the program’s first year, peers had contact with 1,329 patients. Among those patients, 88.7 percent were trained to use naloxone and 86.8 percent agreed to engage with a peer after hospital discharge. Further evaluation showed that ED providers consulted with peers in over 85 percent of overdose cases, and referral to treatment upon discharge increased from 9 to nearly 21 percent.
Building Blocks for Rhode Island’s AnchorED Program
State leadership ensures that peer services are recognized as a valuable component of opioid/substance use disorder (OUD/SUD) systems in Rhode Island. The Rhode Island Governor’s Overdose Prevention and Intervention Task Force, established through an Executive Order in 2015, provides a forum for consistent communication related to all SUD-related initiatives and has been important in promoting the peer workforce. This group, composed of stakeholders as well as state policy leaders, is co-chaired by the directors of the RIDOH and BHDDH, the two agencies that were instrumental in implementing policy for peer services in hospital EDs. In 2017, the governor signed another Executive Order making additional policy actions in response to the needs of the state emerging from the task force, including several initiatives supporting peer services that align to the task force’s Action Plan. Outcomes, including data on the number of peer recovery specialists (PRS) in the state and the number of services they provide, are reported on regularly updated public dashboards.
Data for 2020 showed an increase in the number of newly trained PRS, which reached 958 by September, and new client enrollments in services, which has increased steadily from a low point in April, 2020, likely related to the COVID-19 pandemic. The task force, which continues to hold open monthly meetings, recently issued an updated strategic plan that includes goals to further expand and enhance the peer recovery workforce. Task force meeting notes and presentation archives are also publicly posted.
Rhode Island state leaders were also engaged in concurrent efforts on workforce development as a component of their State Innovation Model (SIM) project. The state’s Health System Transformation Program published a Healthcare Workforce Transformation report that advocated expanding the role of peers as members of integrated behavioral health teams. The report recommended providing a pathway for state certification for peers as a strategy to build behavioral health workforce capacity with non-clinical team members in supportive roles.
Rhode Island, through a number of policy actions, has created a regulatory framework that supports delivery of peer services in hospital EDs. In 2016, the state passed legislation that requires hospitals to submit comprehensive discharge plans to its health department director and outlines specific requirements for post-overdose patient care. Aligning with this statute, RIDOH and BHDDH developed standards for hospital EDs, requiring integration of peer services into ED overdose response across all state hospitals, as well as Freestanding Emergency Care Facilities (FECF) that provide emergency services outside of a hospital’s structure. The agencies delineated these standards in the Levels of Care for Rhode Island Emergency Departments and Hospitals for Treating Overdose and Opioid Use Disorder, creating three levels of certification for EDs across the state. In order to gain certification at any of these levels, hospitals and EDs are required to complete and submit a self-assessment that reviews where each facility falls on the continuum of services identified in the standards.
Rhode Island Hospital Levels of Care Standards
|Level 3: Minimum standards – indicating readiness and capacity to:||Level 2: These certified facilities must meet Level 3 criteria, and also show capacity to:||Level 1 In addition to meeting levels 1 and 2 criteria, these certified facilities must:|
|1. Offer peer recovery support services in their emergency departments.
2. Follow the discharge planning standards as stated in current law.
3. Administer standardized substance use disorder screening to all patients.
4. Educate all patients who are prescribed opioids on safe storage and disposal.
5. Dispense naloxone for patients who are at risk, according to a clear protocol.
6. Provide active referral to appropriate community provider(s).
7. Comply with requirements to report overdoses within 48 hours to RIDOH.
8. Perform laboratory drug screening that includes fentanyl on patients who overdose.
|1. Conduct comprehensive standardized substance use assessments.
2. Maintain capacity for evaluation and treatment of opioid use disorder using support from addiction specialty services.
|1. Maintain a Center of Excellence or comparable arrangement for initiating, stabilizing, and re-stabilizing patients on medication-assisted treatment:
· Evaluate and manage medication assisted treatment, and
· Ensure transitioning to/from community care to facilitate recovery.
These standards for EDs also inform licensing regulations for both hospitals and Freestanding Emergency Care Facilities (FECF) in Rhode Island. Those regulations require that overdose patients and/or patients who are evaluated and found to have SUD are informed of available treatment services and that those patients are offered an opportunity to speak with a PRS. RIDOH also encourages hospitals in Rhode Island to use the BHDDS model consent form language for peer services, facilitating patient consent to both peer and medical services simultaneously. This approach to incorporating peer services into hospital consent forms was mandated by the legislature in 2018.
At this time, the standards are currently under revision by a workgroup of state leaders and stakeholders to identify and address gaps in alignment between the standards and the provider experience. These revisions, however, are not expected to lead to changes in the regulations.
The state began laying the groundwork for peer certification in 2012 when BHDDH began trainings for mental health peer recovery specialists through certification planning developed as part of the Substance Abuse and Mental Health Services Administration’s (SAMHSA) Transformation Transfer Initiative (TTI). In 2014, the Rhode Island Certification Board (RICB) – not a state entity – began certifying SUD peer recovery specialists as well, this led to BHDDH ultimately integrating mental health and SUD peer recovery trainings after the state brought together stakeholders through SAMHSA’s Bringing Recovery Supports to Scale Technical Assistance Center Strategy (BRSS TACS) program.
Peer certification in Rhode Island begins with the state’s integrated peer recovery and mental health training provided through Anchor Recovery. Requirements include:
- 46 hours of didactic learning across four domains (advocacy, mentoring/education, recovery/wellness support, and ethical responsibility)
- 500 internship hours, including or in addition to 25 supervised hours.
- Evidence of passing the International Certification and Reciprocity Consortium (IC&RC) peer recovery certification exam. To prepare for the exam, IC&RC provides a Candidate Guide, and BHDDH contracted with JSI International to develop the Rhode Island Peer Recovery Specialist Certification Study Guide.
Peers delivering services in Rhode Island must receive ongoing supervision from either licensed health care practitioners or certified peers who provided peer services for at least two years. Supervisors must also complete BHDDH-approved core competency training provided through a contract with Anchor Recovery. Agencies providing peer services must maintain a ratio of 1 supervisor for every 10 peer full-time-equivalents, and document provision of supervision totaling at least two hours per month or 30 minutes per week. Agencies must also provide at least a monthly opportunity for group meetings for working peers. In order to deliver services, these agencies must also be certified by BHDDH as Peer Based Recovery Support Services (PBRSS) providers and can use the PBRSS Provider Billing Manual to bill for services.
State Investment and Resources
Initial grant funding. Peers initially began meeting with overdose patients in hospital EDs as a volunteer engagement opportunity supported by Providence Center’s Anchor Recovery, a community recovery organization established in 2010 and funded through the state’s Substance Abuse Prevention and Treatment (SAPT) block grant.
Direct patient crisis response in partnership with a community organization was a familiar approach for the first Rhode Island hospital site to provide SUD peer services. The hospital already had an agreement with a local intimate partner violence organization that allowed volunteers to connect with patients in the ED. The hospital also maintained an agreement with the Providence Center to provide a clinician to triage and assess patients who came into the ED indicating mental health and SUD-related needs. Initial grant funding and existing relationships helped to facilitate development of peer integration.
Medicaid reimbursement. In the long term, paying for peers meant developing a source of sustainable funding for the program, and Rhode Island’s health policy leaders saw an opportunity to reimburse for peer services in Medicaid. While states have a variety of authority options to cover recovery support services in Medicaid, including health home models and 1915(b) and 1915(c) waivers, Rhode Island is one of nine states to provide these services under an 1115 demonstration waiver, submitted to the Centers for Medicare & Medicaid Services (CMS) in 2016 and approved in 2018. The waiver specifies that reimbursable services under the authorized Recovery Navigation Program (RNP) and Peer Recovery Specialist (PRS) Program include “an array of interventions that promote socialization, long-term recovery, wellness, self-advocacy, and connections in the community,” delivered as part of a care team.
Rhode Island’s waiver requires the state to credential peers using the International Certification & Reciprocity Consortium (IC&RC) exam and to develop standards for peer supervisors, as outlined in the previous section. The Rhode Island waiver created a bundled payment, which incorporates services provided by peer recovery specialists as part of the Recovery Navigation Programs. Services outside of such programs, which include those provided in EDs, are billed by the Medicaid-enrolled provider organization employing the PRS and are paid as a flat fee – peer services are reimbursed by Medicaid at rates of $13.50/15 minute unit for one-on-one services and $4/15 minute unit for up to 10 participants for group services.
Reporting and Outcomes
State regulations require that hospitals must report all opioid overdoses to RIDOH within 48 hours through a case report form that captures information about the patient and the overdose event. Additionally, AnchorED captures and reports on each unique patient contact, including data describing whether peer or other counseling services were accepted by the patient. Patients may also be referred to outpatient MOUD treatment, admitted to detox, or refuse engagement altoghter. This data is reported to the state by each hospital as de-identified, aggregate demographic and incident data. This is used to inform state leaders about who is seeking services and what factors may be leading to overdose, and how services are being initiated by PRS.
- Average minutes between contact and team connection to a patient;
- Whether naloxone training was done;
- Whether an individual agreed to see a PRS;
- Whether an individual agrees to a treatment referral; and
- Whether an individual agrees to initiating MOUD that day.
State agencies use these data sets to track outcomes and understand how hospitals are engaging individuals after an overdose to ensure connections to treatment are made. Rhode Island’s overall SUD response strategy includes collection and analysis of treatment and recovery data, and the state uses its Prevent Overdose RI website as a platform to publicly report on measures. ED overdose visits are reported publicly on a monthly basis, along with location and naloxone provision data, and the AnchorED outcomes of patient engagement. Reports include quarterly numbers showing total ED visits, as well as post-overdose counseling, which was accepted by 26 percent of overdose patients in the most recent data reported for the fourth quarter of 2020. Data for that time period also shows that of a total 267 overdose patients, with 45 percent receiving naloxone before being discharged from the hospital.
Challenges and Considerations in Maximizing Peer Workforce
Engage stakeholders. Peer stakeholders have been engaged with policymakers since the inception of the AnchorED program. These relationships helped to develop the policies that support the program, particularly for peer certification requirements. Stakeholder and cross-agency communication continues to drive policy in Rhode Island; regular informal communication through weekly calls among PRS contractors/peer recovery organizations, ED providers, law enforcement, detox centers, and state agencies has been key to identifying emerging trends and resulting needs.
Build workforce diversity. Several state leaders and stakeholders noted that diversity is lacking in the existing peer workforce and suggested that targeted recruitment of peers who are people of color, are bilingual, and/or identify as LGBTQ may help better meet the state population’s needs. A February 2021 update to the Governor’s Task Force – which has recently created a Racial Equity Workgroup – prioritizes this as a goal for the state’s recovery work, listing recruitment and training of people of color and those who speak languages other than English as a short-term recommendation.
Delineate peer roles. While the goals of peer engagement include patient retention and continuity of care, ED providers and stakeholders repeatedly stressed that connecting overdose patients to medications to treat opioid use disorder (MOUD) was the most important intervention to reduce overdose death. Providers noted concern regarding peers advocating for patients to choose either MOUD or abstinence-based recovery, a clinical decision that may test role definition and boundaries. While they emphasized that most peer-to-patient interactions are not clinical in nature and do not include discussions of medical interventions, there have been occasions when providers felt that peers may be overstepping in their roles by dissuading overdose patients from initiating MOUD. Providers and peers alike are mindful of existing tension in the recovery community regarding the use of medications. Abstinence-based recovery programming sometimes discourages medications, though this perspective is far from universal. In the most recent Governor’s Task Force strategic plan update, Rhode Island included a goal to develop PRS who focus on supporting patients in MOUD treatment, and to integrate these specialty PRS into services across the SUD continuum of care.
Identify hiring barriers. When Rhode Island first shifted toward employing peers to work within the hospital, leaders within the recovery organization and the hospital system had to decide whether peers would need to go through hospital system human resources checks and procedures, which may have posed barriers to peers being able to work in the hospital environment due to felony backgrounds or other prior issues. Rhode Island determined that the best course of action was to have peer candidates evaluated as part of the the recovery organization’s human resources to avoid this. Within some health systems, internal hospital policies can prevent the hiring of individuals with felony records, a challenge for some people in recovery who had past convictions. To mitigate this, states can consider approaches in which peers are hired by the organizations that bill for peer services rather than directly by hospitals.
The importance of relationships across systems and among team members in developing and integrating peer services in EDs was a dominant theme in interviews with state leaders and stakeholders. Relationships between the recovery community and hospital clinicians were already in place before AnchorED became a Medicaid-reimbursable model, and leaning on those relationships was key to licensure and Medicaid policy creation. Further, the relationships that develop between team members when providing peer services in the ED help to reduce stigma. As one peer leader said, integrating “education along the way” by talking with providers about the realities of active use and the fears that emerge from it helped humanize recovery for ED providers. Rhode Island’s leaders routinely pointed to the small size of the state and the opportunity that affords them to develop such relationships across systems. While the state’s small size is a unique factor that cannot be replicated, it suggests that states can support regional relationships among community behavioral health, community recovery organizations, and hospital systems through formal regional networks and activities.
Acknowledgements: This brief was supported by the Health Resources and Services Administration (HRSA) of the US Department of Health and Human Services (HHS) as part of a financial assistance award under the National Organizations of State and Local Officials cooperative agreement. The contents are those of the authors and do not necessarily represent the official views of, nor an endorsement, by HRSA/HHS, or the US government. The authors would like to thank HRSA project officer Diba Rab for her support and guidance. Further, the authors would like to acknowledge the dedication, leadership, and input of Rhode Island state agency leaders and staff, as well as providers, stakeholders, and peers who contributed to this brief.
Rampant consolidation in nearly every state has created dominant health care systems that can use anticompetitive contracting practices to charge supracompetitive prices, especially to commercial insurance plans.
With COVID-19 expected to accelerate the consolidation of health care providers, state policymakers are searching for tools to curtail the abuse of market power by dominant health providers. To create a more level playing field for negotiations, the National Academy for State Health Policy has developed a new model law that bans anticompetitive contract terms using states’ consumer protection and antitrust laws. This report describes how the model act can give states essential tools to help them rein in rising health care costs.
Rising health care costs from provider consolidation represent a critical financial challenge for states. High health care costs present states with policy tradeoffs – leaving costs unchecked means fewer state resources to invest in other priorities, such as social determinants of health, health equity, and other, non-health areas such as education and infrastructure. Private-sector employers and individuals who purchase insurance reel under increased premiums driven in large part by rising hospital costs. Without effective tools to slow the growth of health care costs, health spending will continue to threaten public and private resources in every other area.
A primary driver of rising health care costs is the wave of health care consolidation that gives consolidated providers market leverage to raise prices unhampered by competitive forces. Nearly all major metropolitan hospital markets are highly concentrated. Nationwide, as of 2018, more than half of all physicians and 72 percent of hospitals were affiliated with a health system. Evidence suggests that provider consolidation leads to higher hospital and physician prices and higher total expenditures – all while having little to no impact on improving quality of care, reducing utilization, or improving efficiency.
Rampant consolidation has created dominant health systems that can use anticompetitive contracting practices to charge supracompetitive prices, especially to commercial insurance plans. As the COVID-19 pandemic will likely accelerate consolidation of health care providers with strained resources, policymakers are searching for ways to limit the impact of increased provider market power on health care costs. In many states, it is not enough to try to prevent consolidation from occurring through pre-merger review because most state and metropolitan markets are already highly concentrated. In these already consolidated markets, states need tools to curtail the abuse of market power by dominant health providers.
Although state attorneys general may be able to prosecute anticompetitive behavior — such as the use of anticompetitive contracting provisions by dominant systems — under current antitrust authority, legislation prohibiting these contract clauses is necessary to improve state enforcement authority and disrupt the distorted bargaining dynamic between health insurers and powerful providers. State officials have routinely heard that insurers lack proper leverage to negotiate contract terms to reduce hospital and physician costs. To address the harms from anticompetitive contract provisions and create a more level playing field for negotiations, the National Academy for State Health Policy (NASHP) has developed a model act, Prohibiting Anticompetitive Contract Terms in Health Care Contracts. The model act prohibits four common anticompetitive contract terms, making the use of these provisions presumptively unlawful under a state’s consumer protection and antitrust laws.
Anticompetitive Contracting Practices by Consolidated Entities
One of the primary ways that dominant providers raise prices is through anticompetitive health plan contracting, in which powerful provider groups and health systems exploit their market power to demand terms in their contracts with health insurance plans. When health care markets become consolidated, a dominant health system may control multiple hospitals, multi-specialty physician practices, clinics, and ancillary service providers. Due to network adequacy laws, some services or providers are considered “must-haves,” such as a hospital with a neonatal intensive care unit or trauma facility, for a health plan to offer a commercially viable provider network. Health plans must ensure their provider networks are robust enough for their members to have access to essential services.
Insurers typically have two options for containing costs in competitive contracting:
- Exclude high-cost, low-value providers from the network, or
- Give consumers an incentive to choose more cost-effective alternatives.
Consolidated health systems leverage their market power in negotiations with insurers because the insurer cannot afford to exclude must-have providers from its network. Dominant health systems can use all-or-nothing negotiations to raise prices for all of their affiliated providers by threatening to prevent any of their providers from participating in the insurer’s network unless the insurer accepts the prices and terms set by the health system. These types of distorted negotiations between providers and insurers directly contribute to higher costs for states, employers, and patients. The four contracting practices that have raised the most concern among antitrust enforcers and lawmakers, and those that are targeted in the NASHP model act, are: (1) all-or-nothing contracting; (2) anti-tiering or anti-steering clauses; (3) most-favored-nation clauses; and (4) gag clauses.
All-or-nothing contracting: Health systems may use all-or-nothing provisions to leverage the status of their must-have providers or facilities in highly concentrated markets to demand higher payment rates for the entire system, including those providers in more competitive locations and specialties. An all-or-nothing provision requires the health plan to contract with all providers in that system or none of them. The insurer then faces a difficult choice – include all of the health systems’ facilities and providers in the network (even those of lower value or where there are other competitive choices) or lose all of them, which means the plan will not have a commercially viable provider network anywhere the health system has a must-have provider. By bargaining on behalf of all its affiliates, a powerful health system can thus raise the prices for its less desirable providers by tying them to must-have providers.
Anti-tiering or anti-steering clauses: Tiered networks and steering incentives are cost-saving strategies used by insurers to encourage patients to seek higher value care. When using tiered networks, insurers place providers into tiers based on price and quality and then offer patients financial incentives, typically through lower cost-sharing, to choose providers from a higher-value tier. When health systems use anti-tiering, they require a health plan to place that system’s facilities or providers in the most preferred tier, even if the health system’s providers do not meet the insurers’ cost or quality standards for the highest-value tier. In the case of anti-steering provisions, the health system may forbid the insurer from using cost-sharing incentives to steer patients to other providers, even if they offer better value. Dominant health systems use anti-tiering or anti-steering provisions to stop health plans from implementing these cost-control measures and thereby avoid competition.
Gag clauses: Gag clauses may prevent either party in a contract from disclosing terms of that agreement, including prices, to a third party. While many states have laws requiring insurers to disclose out-of-pocket costs to enrollees, only a few states have laws allowing patients, plan sponsors (such as an employer), or even state regulators to obtain negotiated price or quality information. As a result, patients and employers may be unable to access necessary information to make informed choices between providers, both for individual health care services and network inclusion. The lack of transparency from gag clauses and the mistaken notion that prices are trade secrets:
- Undermine price transparency tools for consumers;
- Decrease plan sponsors’ ability to push back on rising prices; and
- Make it more difficult for policymakers to understand how health care markets are operating in their state.
Gag clauses may be especially insidious when used in conjunction with other anticompetitive contract terms. For example, they may be used to hide the magnitude of variation in provider rates and therefore obscure the effects of an anti-steering clause.
Most-favored-nation (MFN) clauses: Unlike the other contract clauses included in the NASHP model, most-favored-nation clauses are typically used by a dominant insurer, sometimes in concert with a dominant health system. MFN clauses, sometimes called “pricing parity” or “price protection” clauses, are contractual agreements in which a provider or health system agrees not to offer lower prices to any other insurer. Dominant insurers thus ensure that they are getting the best prices. At first glance, these terms may appear to be pro-competitive because the health system is agreeing to lower their contracted prices with the insurer if the health system accepts a lower price from one of its competitors. Effectively, however, MFNs ensure that no rival insurer can negotiate with the health system to offer a novel insurance product (e.g., a narrow network) at lower rates. In addition, MFNs may allow insurers and providers to collude to raise prices. Insurers can accept an anticompetitive price increase from a dominant provider without competitive disadvantage because the insurer can pass the increase through to consumers in the form of higher premiums, as long as they know all competitors must also pay the same or higher rates.
State Antitrust Enforcement: A Resource-Intensive, Insufficient Solution
Recent lawsuits by state and federal antitrust enforcers and private plaintiffs have exposed how dominant health systems use contracting practices to increase prices and limit the ability of payers to control costs. High-profile cases by then-California Attorney General Xavier Becerra against Sutter Health and North Carolina Attorney General Josh Stein against Atrium Health targeted those dominant health systems’ use of anticompetitive terms in their health plan contracts, including all-or-nothing bargaining, anti-tiering, and anti-steering clauses that prevented private health plans from using financial incentives to encourage patients to choose lower-cost providers, and gag clauses that barred health plans from sharing price and quality information with patients.
While state attorneys general can use existing antitrust enforcement authority to address the anticompetitive contracting, bringing a case is resource-intensive, lengthy, and can be difficult to prove. Even if a settlement imposes conduct remedies and monetary penalties against the dominant health system, settlements avoid trial and do not establish legal precedent for future enforcement actions. As Emilio Varanini, deputy attorney general in the antitrust section of the California Department of Justice, has argued, “while litigation can blaze the way for addressing such anticompetitive conduct, ultimately legislation may be a far more effective tool for carrying out competition as a policy goal.” Beyond easing enforcement, in states that have passed legislation curtailing one or more of these contracting practices, one of the key benefits is that it alters the bargaining dynamic between powerful providers and health insurers by strengthening the ability of insurers’ to resist providers’ anticompetitive terms (and less-powerful providers’ ability to resist dominant insurers’ most-favored nation terms). NASHP’s model act builds on lessons learned from these recent, high-profile legal cases and gives states a tool to prohibit anticompetitive contract clauses through legislation.
Prohibiting Anticompetitive Contracting through NASHP’s Model Act
The NASHP model act also prohibits health care providers, health insurers, and plan administrators from demanding, soliciting, or agreeing to any health care contract that contains anticompetitive contract terms. The model specifically prohibits all-or-nothing, anti-steering, or anti-tiering, MFNs, and gag clauses, however it gives a state’s insurance commissioner or attorney general the ability to add other clauses through regulation that may result in anticompetitive effects. This flexibility is important as dominant health care entities’ contracting strategies may evolve to protect their market share and raise prices in response to these prohibitions. The model renders these prohibited contract clauses null and void and presumptively unlawful.
Although there is growing evidence that these health care contract provisions are used anticompetitively and pose a serious threat to competition, there could be pro-competitive uses of these clauses and, in some specific cases in health care markets, they may be used to lower costs. To allow for potential pro-competitive uses of these contract provisions, the model act does include a waiver process where the attorney general or insurance commissioner could approve the use of these contract terms if the benefits outweigh the harms. The regulating state agency is authorized to promulgate rules on which arrangements may be eligible for waivers, such as accountable care organizations, value-based payment arrangements, or those involving rural or other safety-net providers.
The NASHP model is designed to give enforcement authority to both the attorney general and the insurance commissioner in order to ensure broad enforcement and oversight of health system behavior and health care contracts. The attorney general and the insurance commissioner would have the authority to investigate, audit, and review any documents to ensure compliance with the law and to impose penalties for violations under state Unfair and Deceptive Acts or Practices (UDAP) laws. Importantly, the model also includes a private right of action to allow parties injured by these contract clauses to recover damages.
In highly consolidated markets, dominant health systems use their market power to demand anticompetitive terms in their contracts with health insurers, thus increasing prices and thwarting health insurers’ cost-containment efforts. In the post-pandemic world, state policymakers face limited state resources and rising health care consolidation. The NASHP model act provides policymakers with a tool to prevent already consolidated entities from further exploiting their market power to raise prices and restrict competition. A legislative ban will ease antitrust enforcement and eliminate the resource-intensive, fact-specific determination of harm in litigation. Legislation prohibiting anticompetitive contract terms will level the playing field between health insurers and dominant health systems, giving insurers the bargaining leverage to resist price demands of dominant systems and to direct patients to higher-value options. The NASHP model is an important step in state efforts to mitigate the harms that result from the significant consolidation in provider and insurer markets over the past decades, while also preparing states for the expected rise in consolidation after the pandemic.
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- Robin Feldman and Charles Graves, Naked Price and Pharmaceutical Trade Secret Overreach, 22 Yale J. L. & Tech. 61 (2020); Katherine Gudiksen, Samuel L. Chang & Jaime S. King, The Secret of Health Care Prices: Why Transparency is in the Public Interest, Cal. Health Care Found. (July 16, 2019), https://www.chcf.org/publication/secret-health-care-prices/.
- Scott Allen & Marcella Bombardieri, A Handshake That Made Healthcare History, Boston Globe (December 28, 2008), https://www.bostonglobe.com/specials/2008/12/28/handshake-that-made-healthcare- history/QiWbywqb8olJsA3IZ11o1H/story.html.
- United States v. Charlotte-Mecklenburg Hosp. Auth., 248 F. Supp. 3d 720 (W.D.N.C. 2017), UFCW & Employers Benefit Trust, et al. v. Sutter Health, et al., No. CGC 14-538451 (Cal. Super. Ct. S.F. City and Cnty. 2019), People of the State of California ex rel Xaviar Becerra v. Sutter Health., CGC 18-565398 (Cal. Super. Ct. S.F. City and Cnty. 2019), and Sidibe v. Sutter Health, 4 F.Supp 3d 1160 (N.D. Cal. 2013) (No. C 12–04854 LB).
- Becerra Complaint, People of the State of California ex rel Xavier Becerra v. Sutter Health., CGC 18-565398 (Cal. Super. Ct. S.F. City and Cnty. 2019).
- United States v. Charlotte-Mecklenburg Hosp. Auth., 248 F. Supp. 3d 720 (W.D.N.C. 2017).
- Robert Berenson, Jaime S. King, Katherine L. Gudiksen, Roslyn Murray, Adele Shartzer, Urban Institute Research Report: Addressing Health Care Market Consolidation and High Prices 37-39 (Jan. 2020), https://www.urban.org/research/publication/addressing-health-care-market-consolidation-and-high-prices.
- Emilio Varanini, Competition as Policy Reform: The Use of Vigorous Antitrust Enforcement, Market Governance Rules, and Incentives in Health Care, 11 St. Louis U. J. Health L. & Pol’Y 69, 86 (2018).
- Proposed Final Judgment, United States v. Charlotte-Mecklenburg Hosp. Auth., 248 F. Supp. 3d 720, 724 (W.D.N.C. 2017).
Katherine L. Gudiksen, MS, PhD is a senior health policy researcher at The Source for Healthcare Price and Competition. Erin C. Fuse Brown, JD, MPH, is the Cathy C. Henson Associate Professor of Law and director of the Center for Law, Health & Society at Georgia State University College of Law. Both Gudiksen and Fuse Brown produced this policy brief as consultants to the National Academy for State Health Policy (NASHP). Johanna Butler, BA, is a policy associate at NASHP.
This policy brief and the accompanying model legislation were produced with support from Arnold Ventures.
Model Act Summary:
This model legislation targets health insurance contract terms that have been used by health systems to impede competition and increase prices. In particular, this model act prohibits the use of most-favored-nation clauses, anti-steering clauses, anti-tiering clauses, all-or-nothing clauses, and gag clauses in contracts between health insurers and health care providers. The prohibition on these anticompetitive contract terms would be enforceable via administrative penalties by the State Insurance Department, civil penalties and antitrust remedies by the State Attorney General, and a private cause of action under the state’s unfair and deceptive acts or practices statute.
Section 1. [Section 1] is inserted in [State Insurance Code] to read as follows:
(A) Definitions: As used in this section:
i. “Enrollee” means an individual who is entitled to receive health care services under the terms of a health benefit plan.
ii. “Health care contract” means a contract, agreement, or understanding, either orally or in writing, entered into, amended, restated, or renewed between a health care provider and a health insurance carrier, health plan administrator, plan sponsor, or its contractors or agents for the delivery of health care services to an enrollee of a health benefit plan.
iii. “Health care provider” means an entity, corporation, or organization, parent corporation, member, affiliate, subsidiary, or entity under common ownership, whether for-profit or nonprofit, that is or whose members are licensed or otherwise authorized by this state to furnish, bill, or receive payment for health care service delivery in the normal course of business, and includes, without limitation, health systems, hospitals, hospital-based facilities, freestanding emergency facilities, imaging centers, large physician groups with eight  or more physicians, physician staffing organizations, and urgent care clinics.
[Commentary: States may want to define “large physician groups” separately or examine their physician market to define the numeric cutoff for a large physician group. The idea is to exclude the small practices that do not tend to exert market power in their health plan contract negotiations.]
iv. “Health insurance carrier” means an entity subject to the insurance laws and regulations of this state or subject to the jurisdiction of the [Insurance Commissioner] that offers health insurance, health benefits, or contracts for health care services, including prescription drug coverage, to large groups, small groups, or individuals on or outside the [Marketplace].
v. “Health benefit plan” means a plan, policy, contract, certificate, or agreement entered into, offered, or issued by a health insurance carrier or health plan administrator acting on behalf of a plan sponsor to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services and includes nonfederal governmental plans as defined in 29 U.S.C. § 1002(32).
[Commentary: States may already have a definition of “health benefit plan” or “health insurance carrier” in their statutes that can be referenced instead of adopting a new definition here. NASHP recommends defining “health benefit plan” broadly to include third-party administrators working on behalf of a plan sponsor, including self-funded employers and labor unions. States may choose to exclude long-term care plans, disability plans, and dental or vision plans.]
vi. “Health plan administrator” means a third-party administrator who acts on behalf of a plan sponsor to administer a health benefit plan.
vii. “Network plan” means a health benefit plan that either requires enrollees to use, or creates incentives, including financial incentives, for enrollees to use certain health care providers managed, owned, affiliated, under contract with, or employed by a health insurance carrier, a health plan administrator, or plan sponsor. Network plans include health maintenance organization (HMO) plans, preferred provider organization (PPO) plans, and exclusive provider organization (EPO) plans.
viii. “Tiered network plan” means a health benefit plan that sorts some or all types of health care providers into specific groups to which different provider reimbursement, enrollee cost sharing, or provider access requirements, or any combination thereof, are applied for the same services.
ix. “Anti-steering clause” means a provision of a health care contract that restricts the ability of the health insurance carrier or health plan administrator from encouraging an enrollee to obtain a health care service from a competitor of the hospital or health system, including offering incentives to encourage enrollees to utilize specific health care providers.
x. An “anti-tiering clause” means a provision in a health care contract that:
a. Restricts the ability of the health insurance carrier or health plan administrator to introduce or modify a tiered network plan or assign health care providers into tiers; or
b. Requires the health insurance carrier or health plan administrator to place all members of a health care provider in the same tier of a tiered network plan.
xi. An “all-or-nothing clause” means a provision of a health care contract that:
a. Requires the health insurance carrier or health plan administrator to include all members of a health care provider in a network plan; or
b. Requires the health insurance carrier or health plan administrator to enter into any additional contract with an affiliate of the health care provider as a condition of entering into a contract with such health care provider.
xii. A “most-favored-nations clause” means a provision of a health care contract that:
a. Prohibits or grants a health insurance carrier or health plan administrator an option to prohibit a participating health care provider from contracting with another contracting entity to provide health care services at the same or lower price than the payment specified in the health care contract;
b. Requires or grants a health insurance carrier or health plan administrator an option to require a participating health care provider to accept a lower payment in the event the participating health care provider agrees to provide health care services to another contracting entity at a lower price;
c. Requires or grants a health insurance carrier or health plan administrator an option to require termination or renegotiation of an existing health care contract if a participating health care provider agrees to provide health care services to another contracting entity at the same or lower price; or
d. Restricts other health insurance carriers or health plan administrators, not party to the contract, from paying the same or lower rates for items or services than the contracting health insurance carrier or health plan administrator pays for such items or services.
xiii. A “gag clause” means a provision of a health care contract that:
a. Restricts the ability of either the health insurance carrier, health plan administrator, or the provider to disclose any price or quality information, including the allowed amount, negotiated rates or discounts, any fees for services, or any other claim-related financial obligations included in the provider contract, to a governmental entity as authorized by law or its contractors or agents, any enrollee, treating provider of an enrollee, plan sponsor, or potential eligible enrollees and plan sponsors; or
b. Restricts the ability of either the health insurance carrier, health plan administrator, or the provider to disclose out-of-pocket costs to an enrollee.
(B) Limits on Anticompetitive Contract Terms.
i. Except as provided in [subsection 1(B)(iii)], no health insurance carrier, health care provider, health plan administrator, or any agents or other entities that contract on behalf of a health care provider, a health insurance carrier, or a health plan administrator may offer, solicit, request, amend, renew, or enter into a health care contract that would directly or indirectly include any of the following provisions:
a. A most-favored-nations clause;
b. An anti-steering clause;
c. An anti-tiering clause;
d. An all-or-nothing clause;
e. A gag clause; or
f. Any other clause that results or intends to result in anticompetitive effects as specified by the [Insurance Commissioner or State Attorney General] through regulation.
ii. Except as provided in [subsection 1(B)(iii)], a violation of this section constitutes an unfair or deceptive act under [insert state code section] and be presumptively unlawful under [reference state or federal antitrust laws], subject to enforcement by the State Attorney General.[Commentary: Some states have a code section in their insurance or business codes defining unfair and deceptive acts or practices (UDAP) in the business of insurance, but NASHP recommends that states declare violations of this section as a violation of general UDAP laws so as not to limit enforcement actions to the Insurance Department and enable enforcement against health care providers and health systems for violations of this section by the State Attorney General.]
iii. Application for a waiver:
a. A party to a health care contract, which contains a provision specified in [subsection 1(B)(i)], may submit the health care contract to the [Attorney General or Insurance Commissioner] for a waiver. The health care contract must be accompanied by the following information:
I. The name and business address of each party to the health care contract;
II. An identification of each location at which any party to the agreement or policy provides health care services; and
III. Any information required to demonstrate that the proposed agreement or policy results in an increase in the welfare of consumers in this State that could not have been accomplished through alternative means that are less restrictive.
b. The [Attorney General or Insurance Commissioner] shall approve or deny any waiver application in writing within 60 days.
c. The [Attorney General or Insurance Commissioner] may approve a waiver to allow a contract to include a provision specified in [subsection 1(B)(i)] if the [Attorney General or Insurance Commissioner] determines:
I. The agreement or policy results in an increase in the welfare of consumers in this State such that the procompetitive benefits of including the provision outweigh the harms to competition;
II. Such increase in the welfare could not have been accomplished through alternative means that are less restrictive; and
III. The agreement or policy does not otherwise constitute a contract, combination or conspiracy in restraint of trade under [state or federal antitrust laws].
d. The [Attorney General or Insurance Commissioner] may promulgate rules under this section to identify allowable conduct, agreements, or arrangements for which waivers may be granted.
iv. Except for contracts granted a waiver under [Section 1(B)(iii)] by the [Attorney General or Insurance Commissioner], any provision of a health care contract described in [Section 1(B)] in violation of this section is null and void and unenforceable. The remaining provisions of the health care contract, excluding any provision in violation of this section, remain in effect and are enforceable.[Commentary: This section allows the State Attorney General or Insurance Commissioner to review and approve contracts with a provision specified in [subsection 1(B)(i)] if the contract increases the public welfare, e.g., if the procompetitive benefits outweigh the anticompetitive harms. It also allows the State Attorney General or Insurance Commissioner to promulgate rules to define specific conditions under which the agency finds health care contracts are procompetitive, e.g., in specific types of accountable care organizations or other advanced payment models.]
i. Enforcement by State Attorney General
a. The Attorney General may subpoena any records necessary to enforce any provisions of [this Act] or to investigate suspected violations of any provisions of [this Act].
b. The Attorney General may institute proceedings on behalf of [the state, its agencies or municipal corporations] or as parens patriae of the persons residing in the state for:
I. Injunctive relief to prevent and restrain a violation of any provision of this chapter including, without limitation, a temporary restraining order, preliminary injunction, or permanent injunction;
II. Civil penalties for violations of the provisions of [Section 1(B)];
III. Criminal penalties for violations of the provisions of [Section 1(B)]; or
IV. Other equitable relief for violations of the provisions of [this Act] including, without limitation, disgorgement or restitution.
ii. Enforcement by Insurance Commissioner
a. All records and papers of health insurance carriers pertaining to health benefit plans or negotiations between the health insurance carrier and any health care provider shall be subject to inspection by the [Insurance Commissioner] or by any agent he or she may designate for that purpose. The Insurance Commissioner may require any health insurance carrier to produce a list of all health care contracts, transactions, or pricing arrangements entered into within the preceding twelve (12) months.
b. Except for contracts granted a waiver under [Section 1(B)(iii)], the Insurance Commissioner may impose an administrative penalty of up to $5,000 upon a health insurance carrier per day for each day that a contract in violation of [Section 1(B)] is in effect.
c. The Insurance Commissioner may, under section [state rate review section] deny the sale of any health insurance plan where the contract between the health insurance carrier and any health care provider is in violation of [Section 1(B)].
d. The Insurance Commissioner may refer any health care contract subject to this section to the Attorney General to review the contract for compliance with this Act. The referral of any health care contract by the Insurance Commissioner to the Attorney General does not constitute a violation of any confidentiality agreement between the health insurance carrier and the Insurance Commissioner that may exist under [state rate filing laws]. The authority of the Attorney General to prosecute violations of antitrust or consumer protection requirements and shall not be narrowed, abrogated, or otherwise altered by this section.
iii. Private right of action.
a. Any party that suffers a loss as a result of the violation of [this Act] shall be entitled to initiate an action pursuant to [reference to state UDAP law] and seek all remedies, damages, costs, and fees available under [reference to state UDAP law].
i. Nothing in this section shall modify, reduce, or eliminate the existing privacy protections and standards provided by reason of State and Federal law, including the federal Health Insurance Portability and Accountability Act (HIPAA) (Pub. L.104-191), the federal Genetic Information Nondiscrimination Act of 2008 (GINA) (Pub. L. 110–233), and required confidentiality provisions of the Americans with Disabilities Act of 1990 (ADA) (P.L. 110-325).
ii. Nothing in this section shall be construed to limit network design or cost or quality initiatives by a group health plan, health insurance carrier, or administrators working on behalf of a plan sponsor, including accountable care organizations, exclusive provider organizations, networks that tier providers by cost or quality or steer enrollees to centers of excellence, or other pay-for-performance programs.
[Commentary: The data privacy provision is included to ensure that the ban on gag clauses does not allow data protected by HIPAA or other privacy laws to be disclosed to employers or plan sponsors. The network provision provides assurances that the anti-steering and anti-tiering provisions do not limit insurers or administrators working on behalf of a plan sponsor from using other methods to direct patients to higher-value care. The network provision also expresses the intent of the legislature to allow health systems to create accountable care organizations or use other risk-based payment models to control costs.]
(E) Regulatory Authorization. The [Insurance Commissioner] and the [State Attorney General] may promulgate regulations necessary to implement, impose penalties, and ensure compliance with this section.
(F) Effective Date. This section shall apply with to any contract entered into or amended after the date of enactment of [this Act].
Section 2. Severability and Savings-Construction Clauses
(A) Every provision in [this Act] and every application of the provisions in [this Act] are severable from each other as a matter of state law. If any application of any provision in [this Act] to any person or group of persons or circumstances is found by a court to be invalid, the remainder of [this Act] and the application of the Act’s provisions to all other persons and circumstances may not be affected. All constitutionally valid applications of [this Act] shall be severed from any applications that a court finds to be invalid, leaving the valid applications in force, because it is the legislature’s intent and priority that the valid applications be allowed to stand alone. Even if a reviewing court finds a provision of [this Act] invalid in a large or substantial fraction of relevant cases, the remaining valid applications shall be severed and allowed to remain in force.
(B) [This Act] shall be construed, as a matter of state law, to be enforceable up to but no further than the maximum possible extent consistent with federal law and constitutional requirements, even if that construction is not readily apparent, as such constructions are authorized only to the extent necessary to save the statute from judicial invalidation.
April 8, 2021
A new, independent analysis of the Montana state employee health plan’s transition to reference-based pricing – which limits hospital prices to a multiple of what Medicare pays – found significant savings for the state in the two years after its implementation. Further, there is no evidence that utilization artificially increased as a result of the new payment model, which could occur if hospitals needlessly push more services onto patients to offset lower reimbursement rates, and, to date, there have been no hospital closures in the state.
Federal efforts to increase hospital price transparency are falling short as hospitals fail to fully comply with requirements. However, states with transparency laws that give them access to comprehensive hospital financial data are using the pricing information to more fully analyze hospitals’ fiscal health and inform states’ cost containment efforts.
For state agencies seeking to better understand rising health care costs, the price of shoppable services is a relatively small piece of the hospital financial puzzle. The federal regulation falls short of requiring other key metrics and data points that states need for oversight and/or for informed policymaking, such as bad debt, net gains/losses, profit margins, charity care, and more.
Additionally, neither the federal executive order nor subsequent regulations outline any sort of standardization for reporting the required data. Having a consistent standard for accounting documents – such as balance sheets, income statements, and statements of cash reserves – would provide comparability and clarity that states would be able to utilize in a multitude of ways. So even if hospitals comply with the current federal requirements, state officials will still lack access to the information they need to fully understand hospital financials and effectively combat rapidly rising health system costs in their states.
Building on a number of state hospital transparency efforts to date, the National Academy for State Health Policy (NASHP) has developed a reporting template and model legislation states can use to require health systems to provide comprehensive, standardized financial data that can inform policymaking and help state agencies better understand what is driving rising hospital costs. Connecticut and Oregon have been collecting hospital financial data for several years –their experiences informed the development of NASHP’s model law and reporting template, and they may be useful to other states.
The Connecticut Office of Health Strategy collects data to evaluate increased hospital expenditures against their revenue to determine if such expenditures are necessary and warranted. Connecticut also uses this data to help answer key questions about hospitals’ ability to continue to meet their debt obligations, pay their employees and vendors, and continue to provide quality care to patients. The standardized data Connecticut collects also helps the state evaluate the changing health care market, which includes health system mergers and acquisitions, increased capital costs, and the differences between increased expenses and revenues.
Assessing hospital financials helps states develop a range of cost containment strategies, from payment and care delivery reforms to policies designed to restrict cost growth. For example, hospital financial reporting serves as a critical companion to Connecticut’s cost-growth benchmark program by helping to contextualize claims reporting data when evaluating system costs over time. When paired with quality measures, all-payer claims database information, facilities fee reporting, discharge data, and cost benchmark data, hospital financial transparency has given Connecticut a fuller, more accurate picture of the health market’s performance statewide. Financial data on its own may not necessarily reveal price variation over time, but when tied with other data, such as reporting on payer mix (public vs. private payers) differences, states can better evaluate their hospital market’s performance.
With hospital costs making up a significant portion of health care spending, states have been interested in tracking the impact of hospitals’ payer mixes and the proportion of hospital costs on overall premium dollar changes over time, especially when compared to federal data. The Oregon Health Authority has been collecting hospital financial data for years and in 2014 began publishing quarterly reports. Oregon documented a rise in state health spending at an average of 6.5 percent per person per year from 2013 to 2017, compared to a 4.5 percent annual increase at the national level. This discrepancy between federal and state-level health cost annual increases encouraged Oregon to develop cost-containment strategies. Additionally, while hospital profit margins were about 7.3 percent statewide in 2019, some Oregon hospitals reported losses that year, which were quickly identified in the state’s standardized financial reporting format.
Oregon has also been able to utilize its financial data to assess the impact of the COVID-19 pandemic on its statewide health systems. As have many states, Oregon observed a decrease in hospital utilization in the second quarter of 2020, caused by the suspension of elective procedures and stay-at-home orders. This resulted in a steep reduction of about 80 percent in net patient revenue during April. Combined with data collected on hospital financial reserves, Oregon was able to prepare for the potential of rapid consolidation – which frequently leads to increased prices impacting consumers and boosting premiums.
While it’s unlikely that hospital transparency efforts on their own will produce lower health care costs, states may want to consider the value of this approach in collecting comprehensive health system data – particularly as care utilization has changed over the past year and its effect on the system remains unknown. NASHP’s model law and reporting template, informed by state experiences, offer a more robust health system financial picture than the current federal price transparency effort.
The National Academy for State Health Policy (NASHP) and Community Benefit Insight are hosting a TwitterChat at 3 p.m. (ET) Wednesday, April 7, 2021, as a part of National Public Health Week. It will discuss community engagement, how hospital community benefit improvement activities can address health disparities, and how this has changed as a result of the COVID-19 pandemic. Make sure to follow @NASHPhealth on Twitter and use #CommunityBenefitChat.
How to participate:
- Follow @NASHPhealth on Twitter.
- Join us at 3 p.m. (ET) Wednesday, April 7, 2021, and follow the conversation using #CommunityBenefitChat
- Share your thoughts and ideas on policies and support resources.
- Use links to your website, programs, initiatives, and partners in your tweets to promote the good work you, your organization, and/or state are doing!
- Include #CommunityBenefitChat in all of your tweets so chat participants can easily follow you and others during this event.
How it works:
- Each question will be numbered Q1, Q2, Q3, etc.
- Start your responses with A1, A2, A3 etc. to correspond with the question.
- You only have 280 characters per tweet but you’re not limited to only one tweet per question. Use A1a, A1b, A1c, etc. to indicate either a multi-part answer or multiple responses to a given question.
Q1: How can nonprofit hospitals help address community needs during the COVID-19 pandemic and recovery?
Q2. How can community benefit programs address social determinants of health and reduce health disparities worsened by the COVID-19 pandemic?
Q3. How can community benefit programs make public health services more accessible to vulnerable populations?
Q4. What steps can non-profit hospitals take to effectively engage community members in their community health needs assessments?
Q5. How is your state or community working to ensure meaningful community benefit spending?
Q6. What steps can states take to ensure community benefit spending meets identified community needs?
This chat is an excellent opportunity to highlight some of your exciting initiatives, innovations, and resources!
For decades, nonprofit hospitals have received large tax exemptions for investments in their communities. Currently, federal requirements do not define minimum spending by hospitals on community benefit programs nor are hospitals required to link community benefit dollars to identified health needs. With limited federal guidance, states are leading the way and establishing impactful community benefit policies. This slide deck outlines the levers states are using to hold nonprofit hospitals accountable for their investments in community health improvement. For more information, read NASHP’s blog, Now Is the Time for States to Hold Hospitals Accountable for their Community Benefit Expenditures.