Imagine a government program where private contractors boost their bottom line by secretly mining participants’ personal information, such as credit reports, shopping habits and even website logins.
It’s called Medicare.
This is open enrollment season, when 64 million elderly and disabled Americans choose between traditional fee-for-service Medicare and private Medicare Advantage (MA) health plans. MA membership is soaring; within a few years it’s expected to encompass the majority of beneficiaries. That popularity is due in no small part to the extra benefits plans can provide to promote good health, ranging from gym membership and eyeglasses to meal delivery and transportation assistance.
There is, however, an unspoken price for these enhancements that’s being paid not in dollars but in privacy. To better target outreach, some plans are routinely accessing sophisticated analytics that draw upon what’s euphemistically labeled “consumer data.” One vendor boasts of having up to 5,000 “certified variables for every adult in America,” including “clinical, social, economic, behavioral and environmental data.”
Yet while companies like Facebook and Google have faced intense scrutiny, health care firms have remained largely under the radar. The ethical issue is obvious. Since none of this sensitive personal information is covered by the privacy and disclosure rules protecting actual medical data, it is being deliberately used without disclosure to, or explicit consent by, consumers. That’s simply wrong.
But a more fundamental concern involves the analyses themselves.
Today on Health in 2 Point 00, Jess and I are at 10th annual Health Datapalooza in Washington D.C.! Jess talks to me about Xealth’s $11 million round to develop out its company, and Change Healthcare is applying for a $100 million IPO. The big takeaways from Health Datapalooza are that many people and companies have integrated data into their systems, but they haven’t been able to gain many actionable insights from it. Also, if you haven’t heard of the complaint Andrea Downing, Fred Trotter, and David Harlow wrote to the FTC concerning the privacy and data that can be downloaded from Facebook’s groups, you better check it out. It details out the concern that Facebook is not protecting the data of patients as anyone can download sensitive data from the groups and use it — Matthew Holt
The role of the United States’ antitrust laws are to ensure competition, not to prescribe or favor any particular organizational structure. Yet recent Federal Trade Commission (“FTC”) enforcement actions in the health care provider merger arena have done just that – dictated that if provider groups want to integrate, they can only do so through contractual means, not by merging their businesses. Everyone accepts the proposition that health care integration is essential to improving health care and bending the cost curve. Yet often the FTC has been a roadblock to provider consolidation arguing that any efficiencies can be achieved through separate contracting. But this regulatory second guessing is inconsistent with sound health care and competition policy.
Health care provider consolidation poses some of the most challenging antitrust issues. Particularly challenging are efforts by hospitals to acquire or integrate with physician practices. There is clearly tremendous pressure from both the demand and supply side for greater integration between hospital and physicians. And arrangements between firms in a vertical relationship are treated solicitously by the antitrust laws, because they are typically procompetitive and efficient. Where competitive concerns arise from a merger or alliance, the FTC will ask if there are efficiencies from the relationship and, if so, whether there are less restrictive alternatives to achieve the efficiencies. If there is a less restrictive alternative, the FTC will claim the efficiencies should not be credited. So for example, if the FTC believes that contractual arrangements between doctors and hospitals can achieve comparable efficiencies, the FTC will reject the merging parties’ claimed efficiencies.
In August, I wrote about how hospital monopolies are the biggest driver of health costs that nobody talks about. These powerful hospital chains know that insurers have no choice but to accept their jacked-up rates, and the cost of health insurance goes up whenever it suits their needs. Now, according to remarks by Federal Trade Commissioner J. Thomas Rosch, it turns out that accountable care organizations—one of Obamacare’s most touted policy gizmos—could make this problem far worse. “The net result” of ACOs, says Rosch, “may therefore be higher costs and lower quality health care—precisely the opposite of its goal.”
Rosch spoke last Thursday before the American Bar Association’s Antitrust Fall Forum, where he lambasted the “unintended consequences” of Obamacare’s headlong rush into the buzzword-filled land of accountable care organizations. ACOs, you will recall, are meant to improve the degree to which various physicians treating the same patient cooperate with one another. In theory, this would lead to better, more integrated care and reduced waste. In reality, ACOs will also stimulate mergers between hospitals and physician groups, worsening the problem of provider consolidation.
ACO’s purported savings shift costs to private insurers
The Congressional Budget Office, much to the dismay of Obamacare’s advocates, didn’t put much stock in ACOs, projecting that the law’s new Medicare ACO initiative would save $5.3 billion over ten years: eight-hundredths of one percent of Medicare’s projected spending over that period. “In other words,” Rosch points out, “the savings to Medicare from the ACO program are no more than a rounding error. Yet even the CBO’s modest cost savings projections are likely overstated.”
As I have previously blogged, a centerpiece of the Affordable Care Act (ACA) is the promotion of Accountable Care Organizations (ACOs). The Center for Medicare and Medicaid Services is banking on the financial incentives of ACOs (through “shared savings”), combined with over 60 pay for performance quality metrics, to promote efficient, high quality medical care. Providers are certainly taking notice. Hospitals are acquiring physician practices in numbers not seen since the 1990s and many physicians are thinking of starting their own ACOs. For the federal government to so aggressively promote the reorganization of health care delivery is unprecedented. (I am willing to debate those of you who remember the HMO Act of 1973.)
It must have quite a shock to CMS when the Federal Trade Commission announced its antitrust guidelines for ACOs. (These can be found here, especially pp. 21896-21899). I won’t dwell on the details but suffice it to say that the proposed test is likely to have a high false positive rate (challenging many ACOs that are not anticompetitive). And while the FTC lacks the resources to investigate every new ACO, the new rules certainly pose an obstacle to integration. So why is the FTC standing in the way of CMS? The answer may be found in one the masterworks of the great film director Akira Kurosawa.
In the movie Rashomon, four men witness different moments of what might or might not have been a heinous crime. Testifying at trial just three days later, the men attempt to describe the entire terrible episode from their own limited perspectives. The healthcare event whose details are in dispute occurred not three days ago, or even three years ago. And it wasn’t just one event, it was the entire decade of the 1990s. I believe that support or opposition to ACOs depends critically on how one views that lost decade.
Those who adamantly support ACOs – that includes most of my health services research colleagues, especially those still working in Washington to implement the ACA – view the 1990s as a lost opportunity. During the 1990s, hospitals merged with each other and with their medical staffs to create integrated delivery systems. IDSs were the forerunners of ACOs. They were supposed to coordinate care, accept shared financial risk, and give us greater efficiency and quality. Leading health policy analysts at the time could not wax more enthusiastic about how IDSs would change the system. And health providers were eager to jump on the bandwagon; IDS were hailed as “a new wave becoming a tidal wave.” (There were a few naysayers, including this blogger and my friends on the faculty at the Wharton school.) Unfortunately, the IDS wave crashed. Few IDSs saved money or raised quality; many lost their shirts.Continue reading…
There’s a new PSA test in health care. Hopefully it will prove more reliable than that other one.
In conjunction with the unveiling of the long-awaited ACO regulation by HHS, the FTC and Department of Justice issued a Joint Policy Statement setting forth their standards for conducting an expedited (90-day) antitrust review of applicants for ACO certification. The agencies explained that they will evaluate applicants’ market power based on the ACO’s share of services in each participant’s Primary Service Area (PSA) defined as the “lowest number of contiguous postal zip codes” from which the hospital or physician draws at least 75 percent of its patients for its services. The Statement summarized the antitrust implications of ACOs formed by hospitals or physician groups with large market shares in their markets:
ACOs with high PSA shares may pose a higher risk of being anticompetitive and also may reduce quality, innovation, and choice for both Medicare and commercial patients. High PSA shares may reduce the ability of competing ACOs to form, and could allow an ACO to raise prices charged to commercial health plans above competitive levels.
The antitrust enforcers were properly concerned with the risk that ACOs could become a vehicle for increasing or entrenching provider market power. Studies by academics, health policy experts and state governments have documented the impact of provider concentration on insurance premiums. Moreover, a post-reform merger wave may have increased the number of hospital and specialty physician markets and many areas are already served by dominant local providers. Inasmuch as the success of the ACO concept depends on its ability to spur delivery system change, the predictable intransigence of monopolistic providers presents an important issue. In this regard, it is heartening that the extended (and apparently controversial) regulation drafting process produced a result that promises to constrain the growth and exercise of market power.Continue reading…
The Federal Trade Commission recently held a day-long workshop focusing on Accountable Care Organizations. ACOs will vertically integrate hospitals and doctors and, in the process, achieve what previous incarnations of vertical integration could not. Let’s forget about whether ACOs will actually fulfill the dream of efficient healthcare delivery and focus on the FTC angle – will the creation of ACOs require the creation of provider market power and should he FTC therefore look the other way?
Many health economists have documented the perils of provider market power. Some of my own research has been instrumental in turning the tide against providers, whose monopolizing tendencies used to get a free pass from the courts. But as policy makers move ACOs to the fore, providers are hoping to sweep antitrust under the rug.
The latest salvo comes from the AHA, which last week released a study challenging two recent studies of hospital market power and then strains to connect their findings to ACOs. The AHA report goes a bit overboard in its criticism of these studies. One study consists of little more than anecdotes and should not be criticized for being anything else. The other study is more complex and the criticism is equally complex, mostly along the lines of “if you had measured things slightly differently, your results would have been slightly different.” The AHA report would have readers believe that these two studies represent the entire body of knowledge about hospital mergers. Having summarily dismissed them, the argument against FTC enforcement would seem complete.