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HHS Unveils Plans to Increase Healthcare Competition, Choice

Repealing certificate of need laws, expanding site-neutral payments, and developing APMs with a free-market approach can boost healthcare competition, HHS says.

Healthcare competition and healthcare consolidation

Source: Thinkstock

By Jacqueline LaPointe

- Deregulation is at the top of HHS’ mind, according to a new blueprint on increasing healthcare competition and choice from several White House agencies.

HHS, along with the Departments of the Treasury and Labor, the Federal Trade Commission (FTC), and several offices within the White House, released the “Reforming America’s Healthcare System Through Choice and Competition” report on Dec. 3, 2018. The report details the White House’s plans to inject more competition in the industry as it faces rapid consolidation.

“One of the most important mechanisms available to enhance the value Americans receive for their healthcare spending is increased competition,” the report states. “Market competition should encourage healthcare providers to charge lower prices and provide higher-quality services. Although the traditional view among economists is that government should step in to correct so-called market failures, this report finds many cases where government regulation and rules prevent healthcare markets from working efficiently.”

For example, the White House agencies cited Certificate of Need (CON) requirements as a major regulatory barrier to robust healthcare competition.

CON laws require healthcare providers to receive permission from state agencies to construct new healthcare facilities, expand existing facilities, or provide certain healthcare services. States first adopted CON requirements to ensure healthcare cost control and access to care.

READ MORE: How Hospital Merger and Acquisition Activity is Changing Healthcare

However, HHS and other agencies are now calling for the repeal of CON statutes, or, at least, the scaling back of the scope of the laws.

The state regulations are “costly barriers to entry for healthcare providers,” resulting in reduced healthcare competition.

“CON laws can restrict investments that would benefit consumers and lower costs in the long term and are likely to increase, rather than constrain, healthcare costs,” the agencies contend. “This is because CON regimes impose the legal and regulatory costs of preparing an application, then seeing that application through an often-lengthy approval process and potential third-party challenges.”

“In addition, those regulatory costs can be a barrier to entry, discouraging some would-be providers from entering certain healthcare markets, and discouraging some incumbent providers from expanding or innovating in ways that would make business sense but for the costs of the CON system,” they added.

The White House agencies also called for additional deregulation to inject healthcare competition. Other policy recommendations from the agencies include:

  • Broadening scope of practice laws for clinicians like physician assistants
  • Reimbursing for telehealth services
  • Permitting interstate medical licenses
  • Decreasing restrictions on physician-owned hospitals
  • Implementing site-neutral payment policies

READ MORE: Boost Healthcare Competition to Drive Down Prices, Up Quality

HHS has already started to implement policy recommendations. For example, the department recently finalized an extension of site-neutral payments to hospital-owned provider-based departments and additional reimbursement for telehealth services.

The report also calls for improvements to the federal value-based care and reimbursement transition.

Provider consolidation and decreased healthcare competition are unintended consequences of value-based care and reimbursement, the agencies explain.

“While changes such as ACOs and other alternative payment models (APMs) may hold the promise of improved care coordination and better aligned financial incentives, they may also encourage provider consolidation that increases market concentration, drives up prices, and decreases competition between providers,” the report states. “This may occur as hospitals purchase physician practices (vertical integration), or through mergers between hospitals or between physician practices (horizontal integration).”

Therefore, the agencies suggest that HHS develop alternative payment models that “allow free markets and patients to define value, rather than rely on technical and burdensome definitions invented in Washington.”

READ MORE: Care Integration Driving Healthcare Mergers and Acquisitions

APMs in Medicare Advantage may be the appropriate route to achieve the goals, the agencies add. The program promotes value, competition, and choice, the report states.

HHS should also evaluate value-based metrics to eliminate the burden and counterproductive measures and ensure small practices are not harmed by delivery system reform.

HHS and its partners intend for the deregulation and policy recommendations suggested in the report to reduce healthcare costs and improve care quality.

The agencies fear that the rate of healthcare consolidation, and reduced competition, as a result, will lead to higher healthcare costs, reduced access to care, and worse care quality. Recent research from the Commonwealth Fund already shows that 90 percent of healthcare markets are consolidated particularly because of hospital merger and acquisitions.

Healthcare costs tend to be higher in consolidated markets. For example, a May 2018 paper from the National Bureau of Economic Research revealed that prices were 12.5 percent higher at hospitals without local competition compared to prices at hospitals with four or more competitors.

“Without enacting a bold set of reforms that increase choice and competition in healthcare, government-created inefficiencies will continue to dominate the US healthcare system, particularly publicly-financed care, frustrating Americans as the rising cost of healthcare squeezes family and government budgets,” the White House agencies state. “Reform will involve taking on entrenched special interests that maintain their advantage over consumers by lobbying government to restrain competitive forces.”

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