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Judiciary Members Probe Administration Officials on Health Insurance Markets

By Jane Norman, CQ HealthBeat Associate Editor

December 1, 2010 -- Members of the House Judiciary Committee grilled officials from the Federal Trade Commission and Department of Justice about why they haven't done more to break up health insurer market concentration.

Lawmakers also said they're worried about what seems to be more aggressive enforcement of possible anti-trust violations committed by doctors than by hospitals and insurers and about how the regulations will be written on the accountable care organizations (ACOs) authorized by the health care law.

The ACOs, designed to produce more teamwork among health care providers, will offer higher Medicare payments when the ACOs meet cost control and quality performance targets.

But lawmakers voiced concerns about whether they might hinder competition and give great power to the dominant players in the partnerships, whether they are hospitals or large physician practices.

Rep. Charlie Gonzalez, D-Texas, repeatedly asked Richard A. Feinstein, director of the bureau of competition at the FTC, and Sharis A. Pozen, chief of staff at the antitrust division at Justice, to give a "yes or no" answer as to whether the nation now has a competitive health insurance industry.

"I think it really varies, candidly, market by market," said Feinstein. Pozen said that there are some areas with vigorous competition and some without.

"The answer for all of us has to be 'no,'" countered Gonzalez, citing 2007 figures that show two insurers make up anywhere from 48 percent to 98 percent of the market share depending on the state.

In testimony prepared for the committee, Arthur Lerner, a former antitrust lawyer with the FTC who was representing America's Health Insurance Plans, a trade group, said that regulators—whether at the federal or state level—do not shy away from closely scrutinizing mergers in the health insurance market.

The Justice Department, Lerner said, has an "active merger enforcement program, focused on identifying those mergers that, on the evidence, it believes should be challenged. It seeks the remedies it believes will protect consumers."

A representative of the American Hospital Association, however, said in her testimony that health care providers have faced much closer scrutiny of their attempts to form close associations or merge than have insurers.

Hospitals have been subjected to "intense scrutiny by the federal antitrust agencies,'' Melinda Hatton, AHA's general counsel and senior vice president, said in her testimony. "Conversely, insurers, which wield enormous—largely unchecked—market power in most markets, have not faced nearly as much public antitrust scrutiny and oversight.''

Gonzalez told the regulators that when it comes to antitrust enforcement he believes "doctors are at a tremendous disadvantage. "My own observation is they are just not as organized as the insurance industry or the hospitals." Yet they're being asked to take part in the ACOs without the lobbyists or lawyers that larger organizations may have to represent them, he said.

Feinstein and Pozen said that the rules on ACOs are being formulated in conjunction with the Centers for Medicare and Medicaid Services, and there will be clear guidance issued. "From the standpoint of the individual physician, if what they are hoping to accomplish is something that is likely to lead to more efficient delivery of care and higher quality, something that is going to serve the interests of consumers, we are not going to get in their way," said Feinstein.

Pozen said the desire is to help ACOs go forward and feel comfortable with innovation.

But Committee Chairman John Conyers Jr., D-Mich., urged again that the officials answer the "yes or no" question. "They're all concentrated, aren't they?" he asked, referring to markets.

Pozen declined to say yes or no. "We're doing what we can to not allow more of it and make sure insurers that are dominant are not using that dominance in an anti-competitive way," said Pozen.

She pointed to a lawsuit filed in October against Blue Cross Blue Shield of Michigan alleging the insurance company has used its clout to push anti-competitive provisions in agreements with hospitals.

Rep. Howard Coble, R-N.C., said that "physicians clearly want and need clear guidance" as the ACO model is implemented and need faster responses from the government when questions about anti-competititve practices arise.
"The guiding principle of antitrust law is it's supposed to promote consumer welfare through competition," Coble said. "However I feel patients often get lost in these discussions about health care."

Conyers said doctors are "hassled" or threatened with prosecution if they unite, but insurers are treated differently. "Doctors, whenever they get together, are worried about the laws and whether they crossed the line or not," he said. As for insurers, they set rates and "you're either in or you're out," said Conyers.

But Feinstein and Pozen said their agencies are committed to a health care market that works for consumers. It is "simply wrong" that collaboration is discouraged, said Feinstein.

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