New bill aims to clamp down on hospital anti-competition tactics like 'all-or-nothing' contracts

Woman tears agreement documents in front of agent
A bipartisan bill aims to outlaw tactics such as all-or-nothing contracts that require a payer or employer who contracts with a health system to contract with every provider in that system. (Getty/BernardaSv)

New bipartisan legislation aims to outlaw several practices employed by hospitals critics say harm competition, including requirements for payers to contract with affiliated providers.

The legislation introduced Tuesday by Sens. Mike Braun, R-Indiana, and Tammy Baldwin, D-Wisconsin, aims to ensure more affordable contracts between payers and providers.

“When large health systems engage in anticompetitive practices that restrict transparency, reduce choices and drive up healthcare costs we should do something about it,” Baldwin said in a statement.

The Healthy Competition for Better Care Act would prohibit health systems from requiring a payer or employer to contract with an affiliated provider or hospital as a condition of entering into a contract with the system.

It would also allow insurers to “negotiate their own rates with other providers who are not party to the contract of the provider involved,” according to a release on the legislation.

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The bill would enable insurers to give discounts or incentives to plan enrollees that choose a high-quality and low-cost provider.

Another section of the legislation would outlaw requirements that insurers pay a higher amount for items or services “than other issuers have agreed to,” a release on the bill said.

There are exceptions for certain group model issuers such as health maintenance organizations or value-based network arrangements like an accountable care organization.

The legislation—which will be referred to the Senate Committee on Health, Education, Labor and Pensions (HELP) for consideration—comes amid increased scrutiny of hospital mergers and practices.

The Federal Trade Commission has intervened in several potential deals, and President Joe Biden instructed the federal government to investigate changing merger guidelines for health systems in an executive order earlier this year.

The legislation earned plaudits from advocates and several industry groups.

“Despite the fact that the United States spends more money per person on health care than any other country, two-thirds of Americans believe that, as a country, we do not get value from our health care system,” said Jen Taylor, director of federal relations at the advocacy group Families USA, in a statement.

Employer groups also lauded the legislation, which they say can fix an unfair system.

“Where markets have failed because of anti-competitive behavior, federal policymakers have a responsibility to prohibit these practices and restore healthy competition,” said Elizabeth Mitchell, president and CEO of the Purchaser Business Group on Health.

The group said many of the provisions in the legislation target tactics used by dominant health systems and pointed to Sutter Health as an example. The Northern California-based healthcare system reached a $575 million settlement over price-gouging allegations, including that it required insurers and payers to sign “all-or-nothing” contracts that required payers to include in its network all its affiliated providers or none of them.

The legislation was previously passed by the Senate HELP Committee in 2019 as part of a larger package but did not make it out of Congress.