Healthcare sales in Corona times: role of ACM, NZa and the courts

In 2020 and 2021 more than ever, healthcare contracting is a crucial issue for healthcare providers. The corona crisis is already taking a heavy toll on providers. No fewer than 90% of healthcare providers expect to see a significant drop in their operating profits due to the corona crisis. A number of residential care centres for elderly persons living with dementia have been faced with acute financial problems. Youth care and mental health institutions are also in dire straights. The Dutch mental healthcare association has already announced that the support provided by healthcare insurers is insufficient to compensate the loss of turnover caused by the corona crisis. Hospitals also have reason for concern. Dutch Hospitals Association NVZ has requested the government to make extra investments in the hospitals. If the first wave of the corona crisis has taught us anything, it is that a wait-and-see attitude will not solve the imminent financial and other problems. This blog lists the issues facing healthcare providers in 2020 and 2021. It also addresses the supervision by the Netherlands Authority for Consumers & Markets (ACM) and the Dutch Healthcare Authority (NZa), as well as the relevant court rulings.

ACM clarifies when healthcare insurers may work together as competitors

ACM announced in March 2020 that healthcare insurers may mutually agree to provide financial support to healthcare providers during the corona crisis. As ACM explained: “It is unthinkable that we may lose part of our healthcare services because providers cannot keep their heads above water. That would be harmful in both the short term and the longer term. This is therefore the time to financially support providers.” A continuity contribution, laid down in an NZa policy rule, aims to ensure that healthcare providers can continue to pay a large part of their fixed costs. Healthcare insurers may furthermore pay providers an advance. It will become clear in the next few months whether these continuity contributions suffice. In October 2020, ACM announced that healthcare insurers may distribute the extra costs of the corona measures among themselves in 2020 (and possibly in 2021). The continuity of healthcare might otherwise be jeopardised, according to ACM. In normal times, agreements among healthcare insurers on the distribution of costs among themselves would be in breach of the cartel prohibition, but the outbreak of the coronavirus gave rise to unprecedented uncertainty and urgency in the spring of 2020. ACM therefore believes that healthcare continuity calls for mutual cost-sharing agreements for 2020. Healthcare insurers may distribute the extra costs of the corona measures in 2020 among themselves, according to ACM. ACM notes that the same may conceivably apply in 2021, if the corona crisis continues.

NZa focuses on duty of care in healthcare procurement

The impact of the COVID-19 pandemic has kept the NZa busy these last few months. It has published policy rules, a Q&A and access to healthcare overviews. The NZa also gave an update to the House of Representatives; see here. Providers will be pleased to hear that the NZa recently published a clarification of the duty of care of healthcare insurers, set out in Article 11 of the Healthcare Insurance Act. The NZa has clarified what exactly it expects of healthcare insurers when the access to and continuity of healthcare are under pressure. That may be of help to them not only during the corona outbreak, but also in the event of a structural increase in the waiting lists for certain types of healthcare, or if a provider’s insolvency is imminent. More information on the NZa’s role in enforcing the duty of care, reducing waiting lists and dealing with bans on new admissions can be found in this blog and this blog.

How will this benefit healthcare providers in healthcare sales?

For healthcare providers the above means the following:

  • Healthcare insurers must fulfil their duty of care also in 2020 and 2021. They therefore may not argue that a continuity arrangement agreed upon among themselves serves as an absolute upper limit for an individual provider. It is apparent from ACM’s message that the agreements they have made among themselves are not intended for that purpose: “Individual healthcare insurers may always do more to help providers. The agreements made by healthcare insurers set minimum standards. And since those agreements are temporary and do not go beyond what is necessary, they fall within the statutory frameworks”;
  • Healthcare insurers cannot and may not argue that they can no longer bear the costs and refuse to pay a continuity contribution or an advance on that ground, since ACM has declared that healthcare insurers may distribute the additional costs of the corona crisis among themselves and sufficient funds are therefore available; and
  • Consumers continue to pay health insurance premiums as usual during the COVID-19 crisis. Healthcare providers that believe they are able to safely provide (more) healthcare could prevail on healthcare insurers to purchase more healthcare from them at this time in particular, and thereby to fulfil their duty of care.

NZa enforcement in healthcare procurement

Year in and year out, providers and consumers suffer from the consequences of breaches by healthcare insurers of the NZa Transparency in the Healthcare Procurement Process Regulations (the “Healthcare Procurement Regulations”) and the NZa Regulations on the Provision of Information by Healthcare Insurers to Consumers (the “Healthcare Insurers Provision of Information Regulations”). Healthcare insurers are tardy, for instance, in offering contracts to healthcare providers and they incorrectly inform insured persons about their policy or the available care options. An orderly contracting process is dependent on effective supervision of those mandatory NZa rules. After numerous reports and complaints, the NZa has taken the following steps in the past two years:

  • In 2019, the NZa issued five formal warnings for breaches of the Healthcare Procurement Regulations on Zorg en Zekerheid, CZ, VGZ (twice) and DSW. The NZa expressed several times that it would crack down on breaches of the Healthcare Procurement Regulations.
  • In August 2020, the NZa imposed a €100,000 fine on VGZ for making incorrect changes in 2019 to its healthcare procurement policy for medical devices, oral care and pharmaceutical care. Those practices took place despite two formal NZa warnings given to VGZ in 2019 for breaches of the Healthcare Procurement Regulations.
  • The NZa is also investigating two other cases related to complaints about breaches of the Healthcare Insurers Provision of Information Regulations by VGZ in 2019.

The NZa has rightly pointed out that breaches of the Healthcare Procurement Regulations are a thorn in the flesh of healthcare providers. The question remains whether first issuing two warnings and then, when those warnings are ignored, imposing a €100,000 fine for repeated breaches is a sufficient deterrent for healthcare insurers. Be that as it may, VGZ, which customarily brushes criticism aside, has also dismissed the latest NZa fine as ridiculous and has filed an objection. It is remarkable that the NZa has not opted for an approach that more directly guarantees compliance by healthcare insurers that indisputably continue to breach mandatory NZa rules. That problem is also apparent in the policy jungle that has been around for years. The NZa’s supervision would be much more effective if it focused on more efficient and deterrent enforcement at healthcare insurers. The NZa indeed has that authority and can do so in practice. In fact, it has been doing so for years at healthcare providers. Practice has shown that the same approach is called for at healthcare insurers also in 2020.

Litigating for cost-effective rates a necessary evil?

A combination of inadequate rates and the manner of healthcare procurement is forcing healthcare providers to take legal action in several sectors. In 2020, that has given rise to litigation in the fields of youth care, acute mental healthcare, forensic care and long-term care, among others.

Youth care

Since 2015, municipalities have been in charge of youth care, because they were deemed better able to provide personalised care. However, many municipalities lack the necessary funds. An investigation in 2019 showed that more than 30% of the municipalities have budget deficits of more than 20%. A damning report of the Inspectorate of Health and Youth Care (IGJ) and the Inspectorate of Justice and Security furthermore found that many young people are not receiving help in the right place and at the right time. Minister De Jonge nevertheless still believes in the decentralisation of youth care. To solve the problems, Minister De Jonge (Health, Welfare and Sport) and Minister Dekker (Legal Protection) intend to force municipalities to work together more closely. It must also be clarified at what level (local or regional) the various types of youth care are being organised. The Ministers have also noted that municipalities must set reasonable healthcare procurement rates.

  • In 2019, a court ruled in favour of youth care providers in the preliminary relief proceedings that they instituted against ten municipalities in the Haaglanden region (H10 Municipalities). The court found that the H10 Municipalities had not set realistic, cost-effective rates that met the requirements under the Jeugdwet (Youth Act).
  • In the appeal proceedings instituted by the H10 Municipalities, the Court of Appeal expressly noted that youth care rates are realistic only if regional and organisation-specific aspects are taken into account when setting the rate.
  • In January 2020, the Court of Limburg found that 16 municipalities applied an incorrect rate system.

These and other cases demonstrate the critical approach that courts adopt to youth care rates set by municipalities. Municipalities should beware that healthcare providers may successfully challenge unsubstantiated or insufficiently substantiated rates in court. An Order in Council is furthermore in the pipeline that sets the cost and other elements for a reasonable rate. A bill amending the Youth Act must first be adopted for that purpose. The Order in Council is scheduled to enter into force on or before 1 April 2021.

Acute medical care and forensic care

As from 2020, acute mental healthcare will be procured by healthcare insurers by representation in 28 different acute mental healthcare regions. The reimbursement for acute mental healthcare is then provided on the basis of availability. Providers must make agreements with the largest healthcare insurer per region on suitable acute mental healthcare, in accordance with the Acute Psychiatry Generic Module. The NZa then issues decisions on the basis of which providers may claim acute mental healthcare at the healthcare insurer. Until 2020, providers were confronted in practice with NZa decisions that were not cost-effective. Several mental healthcare providers successfully challenged those decisions. Forensic care providers also successfully challenged inadequate rates. In January 2020, a court ruled that the rates applied by the Custodial Institutions Agency (DJI) for forensic care were inadequate.

Long-term care

Although the court rulings referred to above demonstrate that realistic rates must be applied in healthcare procurement, the procurement of long-term care in 2020 (under the Long-Term Care Act) also fell through. Also in that sector, providers wish to receive realistic rates from care administration offices for the care provided to the elderly or disabled people and people with long-term mental disorders. Several preliminary relief proceedings instituted against five care administration offices by 68 providers of various types of long-term care in different parts of the Netherlands were successful. The care administration offices have appealed the judgments passed in those proceedings.

Those judgments clearly demonstrate that it is not uncommon for courts to be critical – all the more so if they find that healthcare procurement officers unilaterally apply (general) discount percentages to rates that have not been carefully investigated or whose impact has not been determined, for instance whether the healthcare to be procured can be provided at the reduced rates. In those cases courts do not easily accept the argument that healthcare procurement officers have jointly decided that a discount is required to give an incentive to providers to work more efficiently, or that macro healthcare costs savings are simply necessary. At the same time healthcare procurement officers are increasingly determined to apply discount rates in healthcare procurement and to organise the process in such a way that taking legal action is a necessary evil for providers. One ray of hope, however, is that case law shows that litigating can be worthwhile for providers.

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