Evaluating Vertical Integration in Healthcare: Risks and Benefits

IS BIGGER ALWAYS BETTER?

Vertical Integration in Healthcare: Community

Risks and Benefits

Health Insurance Reform Commission

August 31, 2021

Paul Harkaway, M.D.

Bruce Solomon, M.B.A., M.P.H.

PURPOSE

PURPOSE

•

To advise on proposed legislation in the Commonwealth of

To advise on proposed legislation in the Commonwealth of

Virginia that would regulate vertically integrated entities

Virginia that would regulate vertically integrated entities

owning both a hospital and a health insurance company

owning both a hospital and a health insurance company

•

Our True North in evaluating the benefit to the community is

Our True North in evaluating the benefit to the community is

the Triple Aim:

the Triple Aim:

•

Improved Quality

Improved Quality

•

Enhanced Access

Enhanced Access

•

Decreased Cost

Decreased Cost

2

METHODOLOGY

METHODOLOGY

•

Analyzed 47 peer-reviewed publications and state and

Analyzed 47 peer-reviewed publications and state and

federal testimony

federal testimony

•

Reviewed publicly available data from Virginia Health

Reviewed publicly available data from Virginia Health

Information, CMS, and Leapfrog on quality and cost

Information, CMS, and Leapfrog on quality and cost

•

Reviewed relevant legal filings from multiple states

Reviewed relevant legal filings from multiple states

3

WHAT IS VERTICAL INTEGRATION?

WHAT IS VERTICAL INTEGRATION?

•

One entity provides goods or services at multiple levels in the

One entity provides goods or services at multiple levels in the

chain of distribution, such as Netflix producing content and

chain of distribution, such as Netflix producing content and

then providing streaming services

then providing streaming services

•

Vertical integration in healthcare often involves combining

Vertical integration in healthcare often involves combining

hospital, physician, and health insurance services in one entity

hospital, physician, and health insurance services in one entity

•

Proposed legislation addresses vertical integration between a

Proposed legislation addresses vertical integration between a

hospital and a health insurance carrier

hospital and a health insurance carrier

4

WHY IS VERTICAL INTEGRATION A CONCERN?

WHY IS VERTICAL INTEGRATION A CONCERN?

•

Vertically integrated entities can and do use control of their

Vertically integrated entities can and do use control of their

insurance networks to exclude or disadvantage provider

insurance networks to exclude or disadvantage provider

competitors

competitors

•

Gap in Any Willing Provider law permits exclusion of lower-

Gap in Any Willing Provider law permits exclusion of lower-

cost ambulatory facilities

cost ambulatory facilities

•

Any Willing Provider law does not address modern tiering

Any Willing Provider law does not address modern tiering

and steering of networks

and steering of networks

•

Impact on care access and consumer costs especially

Impact on care access and consumer costs especially

those with high-deductible health plans

those with high-deductible health plans

•

Lawsuits in Florida and Pennsylvania against vertically

Lawsuits in Florida and Pennsylvania against vertically

integrated entities show these risks are not theoretical

integrated entities show these risks are not theoretical

5

RESEARCH FINDINGS AND CONCLUSIONS

RESEARCH FINDINGS AND CONCLUSIONS

•

Nationwide research consistently shows that vertical

Nationwide research consistently shows that vertical

integration leads to higher costs without clear quality benefit

integration leads to higher costs without clear quality benefit

•

As an example, in Hampton Roads, vertically integrated

As an example, in Hampton Roads, vertically integrated

Sentara/Optima performs same or worse on

Sentara/Optima performs same or worse on

quality/access/cost as non-integrated competing hospitals

quality/access/cost as non-integrated competing hospitals

and insurers

and insurers

6

RECOMMENDATIONS

RECOMMENDATIONS

•

Risk of abuse, other states’ experiences, rapidly evolving

Risk of abuse, other states’ experiences, rapidly evolving

markets, and lack of clear community benefit leads to

markets, and lack of clear community benefit leads to

conclusion that vertically integrated entities should be

conclusion that vertically integrated entities should be

regulated to protect consumers

regulated to protect consumers

•

To expand current Any Willing Provider statute to ensure

To expand current Any Willing Provider statute to ensure

equal opportunity to participate in VICs networks, subject to

equal opportunity to participate in VICs networks, subject to

objective requirements of quality, cost, and access

objective requirements of quality, cost, and access

•

Prohibit an officer/director of a VIC from simultaneously

Prohibit an officer/director of a VIC from simultaneously

serving as an officer/director of an affiliated healthcare

serving as an officer/director of an affiliated healthcare

provider

provider

•

Separate Boards for hospital and insurance carrier entities

Separate Boards for hospital and insurance carrier entities

with additional suggestion of community representation

with additional suggestion of community representation

7

QUESTIONS

8