Hospital Lobby Attacks Patient Choice & Competition To Increase Revenue (through Higher Consumer Costs) with SB 320

Donald J. Pfundstein
Published on : 2022-02-09
The Contract Fable–calling their bluff

The hospital lobby promotes New Hampshire’s SB 320 as necessary to prevent the unilateral breach of provider contracts by insurers.  The claim is that insurers’ use of provider manuals, policies and procedures as authorized in the contract is a breach of the provider contract.  There are no such breaches.  Provider contracts and manuals generally contain the necessary flexibility to provide patients high quality, safe, and cost-effective care in sync with the ongoing patient-centric transformation of the healthcare delivery system.  If SB 320 were really about insurer contractual breach, a mutually agreed upon version of the Bill could be available today!

SB 320 Prohibits Patient Choice and Competition 

The Bill’s terms[1] impede consumer choice and competition and increase prices by prohibiting care utilization management tools, efforts to increase patient access to lower cost sites of care, and efforts to provide patients with the right care in the right place.  SB 320 is REALLY about the hospitals LOCKING OUT competition and consumer choice and LOCKING IN higher revenues at the expense of NH citizens and businesses.  No other state in the country has this type of law.

Site of Care [2]

SB 320 would freeze patient care in time and place in higher-cost hospital-based settings.  Mechanisms to prohibit use of lower cost sites of care can also implicate antitrust issues.[3]  Hospitals seek to retain patients within their footprint (i.e., site of care) and collect the associated higher revenue, at the expense of NH patients and health insurance consumers who will face higher out-of-pocket costs and higher insurance premiums.  By prohibiting high quality, lower cost sites of care, SB 320 forces consumers, employers and taxpayers to pay inflated hospital prices for things like knee and hip surgeries, cancer infusions, physical and occupational therapy, rehabilitation, specialty drugs, and imaging, to name just a few.  Even the American Hospital Association lists “Consumers embrace lower-cost sites of care” as the top reason for potentially lower health care spending in 2022 (page 21).  SB 320 will undoubtedly increase health care spending for all Granite Staters!

SB 320 Increases Costs [4] 

“On average, the price of an inpatient knee or hip replacement was $30,000, compared with $19,000 and $22,000 respectively…”  (McKinsey page 2).

A  McKinsey tool created to analyze a database of 1.4 billion national medical claims found “… an average cost savings of $21,000 for the same encounter code bundle (for care which took place in) an ambulatory setting instead of an inpatient setting.”  (McKinsey page 4).

A Moran Company study found that “on average, hospitals charge 479% of their cost for drugs nationwide.”  “Most hospitals (83%) charge patients and insurers more than double their acquisition cost for medicine, marking-up the medicines 200% or more.  The majority of hospitals (53%) markup medicines between 200-400%, on average.”

Hospitals price oncology drugs at an average of 3.8 times their 340B acquisition costs or nearly 400%!  In fact, 340B hospitals often charge their cash-paying customers (known as the uninsured) the same as the median price for commercial insurers……400% of cost!  (See p. 14 of the Moto Bioadvisors for Community Oncology Alliance, “Examining Hospital Transparency, Drug Profits, & the 340B Program” report.)  The 340B program was established to help lower income populations.

[1] The use of such expansive terms as “conflict with” (line 6), “Impact” (line 6), “economic arrangement” (line 7), “any practice” (line 8), or “amending a provider manual” (line 9) – apparently, including those practices and amendments authorized by the provider contract, and “services contemplated” (line 13), etc. are not necessary if the true goal of SB 320 were to simply prohibit a contractual breach, including a change of contracted reimbursement rates.
[2] Line 10, lines 11-19, SB 320.
[3] See generally, “Antitrust Issues in Payer-Provider Contracting, Chapter 3, American Health Law Association, Contracting Handbook, 8th edition.   
[4] SOURCES: Cost/Savings Study References – Deloitte “Hospital Revenue Trends- Outpatient, home, virtual and other care settings…“; McKinsey “Walking Out of the Hospital –continued rise of ambulatory care..”; Moran Company-“Hospital Charges-Reimbursement for Medicines”; Moto Bioadvisors for Community Oncology Alliance, “Examining Hospital Transparency, Drug Profits, & the 340B Program”.

Attorney Pfundstein is admitted in the state and federal courts of New Hampshire.