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HHS Goes All In on Competition as the Way to Fix Healthcare Woes

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Competition good. Regulation bad.

That’s my caveman summary of HHS’ manifesto released on Dec. 3 on how to improve the quality and safety of patient care while simultaneously lowering healthcare costs.

It’s also the economic point of view that ties together all 119 pages in the new report into a compelling argument that market-based reforms are the keys to unlocking a patient-centered, outcomes-focused and value-driven healthcare delivery system in the future.

As a person who believes that healthcare is an industry like any other industry and that it responds to the same market incentives as any other industry, the report, Reforming America’s Healthcare System Through Choice and Competition, was a real page-turner. I smiled and nodded as I poured through it, including all of the footnotes and the appendix.

The report is HHS’ response to an Oct. 12, 2017, executive order from President Trump to come up with a plan “to facilitate the development and operation of a health care system that provides high-quality care at affordable prices for the American people by promoting choice and competition.”

Essentially, this HHS under President Trump says competition helps patients and the lack of competition hurts patients. This HHS says state and federal regulations, often backed by special interests, prevent that competition from working. And this HHS had other federal agencies, including the Treasury Department, Labor Department and the Federal Trade Commission, help produce this report.

Let me walk you through the main HHS arguments and summarize the agency’s key recommendations, all using HHS’ exact words so nothing is lost in translation.

 

Here’s what HHS thinks about COMPETITION:

“Economists generally accept that free-market competition produces the most efficient production and distribution of goods and services,” and that competition can do the same in healthcare. Free-market competition should “encourage providers to charge lower prices and provide higher-quality services.”

 

Here’s what HHS thinks about REGULATION:

“Many government laws, regulations, guidance, requirements and policies, at both the federal and state level, have reduced incentives for price- and non-price competition, increased barriers to entry, promoted and allowed excessive consolidation, and resulted in healthcare markets that lack the benefits of vigorous competition.”

 

Here’s what HHS thinks is the CONSEQUENCE:

“When government policies and regulations suppress competition, producers may use their market power to raise prices, produce lower-quality goods and services, or become complacent in innovation. In other words, without competitive pressure the incentive to lower prices, improve quality, and innovate diminishes.”

 

Here are HHS’ examples of COMPETITION-KILLING REGS:

  • State licensing and scope-of-practice (SOP) laws and regulations that “may impose unnecessary restrictions on provider supply and, therefore, competition. SOP restrictions limit provider entry and ability to practice in ways that do not address demonstrable or substantial risks to consumer health and safety.”
  • State licensing and SOP laws and regulations that make it “more difficult for qualified healthcare professionals licensed in one state to work in another state, even though most healthcare providers complete nationally certified education and training programs and sit for national qualifying exams.”
  • State licensing and SOP laws and regulations that restrict “the provision of telehealth services across state lines.”
  • State licensing and SOP laws and regulations that block “an expedited pathway for highly qualified, foreign-trained doctors seeking licensure who have completed a residency program equivalent to an American GME (graduate medical education) program.”
  • State certificate-of-need (CON) laws that “restrict investments that would benefit consumers and lower costs in the long term and are likely to increase, rather than constrain, healthcare costs.” Further, there is “no compelling evidence suggesting that CON laws improve quality or access, inefficiently or otherwise.”
  • State certificate-of-public-advantage (COPA) agreements that “displace competition in favor of state regulatory oversight and may, under the state action doctrine, immunize provider activity for conduct that might otherwise violate federal antitrust laws.” Further, “These types of regulatory conditions are often difficult to implement and monitor and may not accomplish intended goals.”
  • State laws that enforce provider non-compete agreements that are “overly burdensome and restrictive on providers. Further scrutiny of these and other restrictive covenants is warranted, particularly where they impede patient access to care and limit the supply of providers. By suppressing competition, these clauses may inflate healthcare prices, elevating patient and federal spending on healthcare goods and services.”
  • State “any-willing-provider” laws that “make it more difficult for health insurers, health plans, or PBMs to negotiate discounts from providers” and “tend to result in higher costs.”
  • Federal regulations that restrict physician ownership of acute-care hospitals when “many studies suggest physician-owned hospitals provide higher-quality care and that patients benefit when traditional hospitals have greater competition.”

 

Here’s what HHS RECOMMENDS:

If competition is good for healthcare consumers, and regulation kills competition, then it’s obvious what this HHS under President Trump thinks should be done to make things right. Kill regulation and promote competition. Here are a few of the agency’s key recommendations:

  • More vigorous antitrust oversight of healthcare mergers and acquisitions
  • Extend the FTC’s jurisdiction to include not-for-profit healthcare entities
  • Revise SOP laws to allow all providers to practice at the top of their license
  • Repeal or scale back CON laws to remove unnecessary barriers to entry
  • Discontinue the use of COPAs to promote market-based competition
  • Rethink the use of non-compete clauses and state any-willing-provider laws
  • Repeal federal restrictions on physician ownership of hospitals

 

Here’s what it will take to GET THE JOB DONE:

“While American Consumers and many providers would significantly benefit from the reforms laid out in this report, there are entrenched and powerful special interest groups that reap large profits from the status quo. It will take bold leadership to confront these incumbents and implement reforms.”

HHS’ “bold leadership” comment is intended for President Trump. But I think it’s really for anyone who’s in a position to make change in healthcare. It will be hard to change things precisely because the current system protects the status quo.

The statutes, rules, regulations and policies trashed by HHS in the report? They all weren’t put there by well-meaning state and federal regulators. Most were put there by paid lobbyists working for healthcare trade associations. Trade associations exist to support the economic interests of their membership. End of story. It doesn’t matter what their mission statements say. That’s just for show.

I believe in healthcare competition and the benefits that it can create for patients. But I also happen to believe in strong consumer protections because self-policing doesn’t seem to work in most industries, especially healthcare. I believe we can have both: vigorous and fair competition and health and safety regulation. We need bold leadership from the private healthcare sector to make it happen.

Author

David Burda is a columnist for 4sight Health and news editor of 4sight Friday, our weekly newsletter. Follow Burda on Twitter @DavidRBurda and on LinkedIn. Read his bio here.

About The Authors
David W. Johnson
David Johnson CEO 4sightHealth

David Johnson is the CEO of 4sight Health, a boutique healthcare advisory and investment firm. Dave wakes up every morning trying to fix America’s broken healthcare system. He is a frequent writer and speaker on market-driven healthcare reform. His expertise encompasses health policy, academic medicine, economics, statistics, behavioral finance, disruptive innovation, organizational change and complexity theory. Dave’s book, Market vs. Medicine: America’s Epic Fight for Better, Affordable Healthcare, is available on www.4sighthealth.com