NZa and ACM’s Emergis SMP decision puts the cart before the horse

In December 2020, the Dutch Healthcare Authority (“NZa”) imposed two SMP obligations on Emergis, a mental healthcare provider in Zeeland, in an SMP decision. They are (i) a contracting obligation and (ii) a transparency obligation. In the NZa’s opinion, Emergis must also accept contract terms that healthcare insurers are able to impose on other mental healthcare providers. The SMP measures were imposed because Emergis has significant market power (“SMP”) according to the NZa, which could give rise to a competition problem in the NZa’s opinion. This is the provisional outcome of a three-year investigation (2018 - 2020) carried out by the NZa of its own accord, in which the Netherlands Authority for Consumers and Markets (“ACM”) was also involved. The SMP decision is relevant not only to Emergis, but also to many other healthcare providers. This blog explains why the NZa and ACM’s SMP decision puts the cart before the horse. A few striking shortcomings of the SMP decision are highlighted first. The SMP decision is then placed in a broader perspective, followed by an appeal to the NZa and ACM to stop applying double standards in their supervision of healthcare providers and healthcare insurers, and to effectively supervise (excessive) procurement power of healthcare insurers.

SMP measures imposed on Emergis

Emergis has SMP, in the NZa’s opinion. The NZa believes that healthcare insurer CZ has insufficient procurement power to discipline Emergis, The reason for this is that, despite its procurement market share of more than 60% in the province of Zeeland, CZ cannot selectively procure mental healthcare, and access to the market for specialist mental healthcare is unlikely, according to the NZa. CZ therefore allegedly lacks effective negotiation instruments in relation to Emergis, in the NZa’s opinion. According to the NZa, it is irrelevant whether Emergis is causing an actual competition problem for CZ and others. The fact that Emergis might do so is sufficient reason for the NZa now already to impose SMP measures on Emergis. This raises the question why the NZa is intervening at Emergis in this manner. According to the NZa, Emergis might act in an anti-competitive manner by raising turnover ceilings that healthcare insurers impose on Emergis. Also, Emergis is allegedly providing insufficient outpatient mental healthcare. Emergis has stated that it does not wish to overcharge in healthcare procurement and does wish to provide more outpatient care, but has explained that the latter is impossible in Zeeland, partly due to the acute shortage of personnel in Zeeland and the distances that Emergis employees must travel. There are also numerous other bottlenecks in Zeeland that negatively impact Emergis compared with other mental healthcare providers elsewhere in the country, as in (primary) care. Also, there is no other institution in Zeeland that can treat “complex patients” with mental disabilities. The NZa is unimpressed by these arguments. It dismissed, for instance, Emergis’ entire response to the draft SMP decision in 2020.

SMP instrument used improperly

So what was the reason for all this? It is apparent from the NZa decision that in 2017/2018 the NZa received certain “signals” from healthcare insurers regarding Emergis’ “negotiating style” in relation to healthcare insurers. The signals entialed the announcement of a selective suspension of new admissions at Emergis in 2017. According to the NZa, intervention by the NZa with an SMP emergency measure under Article 49 of the Wet marktordening gezondheidszorg (Healthcare Market Regulation Act) was not necessary at that time. Moreover, healthcare insurers did not file any formal enforcement request with the NZa in or after 2017 regarding Emergis. Healthcare insurers also had no reason to apply to the court or the Healthcare Contracts Disputes Authority regarding the contracting at Emergis. This suggests that in and after 2017 no major or long-term problem existed regarding the healthcare procurement for healthcare insurers at Emergis. The NZa nevertheless considered it necessary to launch an almost three-year SMP investigation into Emergis of its own accord, together with ACM. Remarkably, the NZa noted in its SMP decision that it had considered refraining from imposing SMP obligations until the very last moment. Be that as it maybe, the analysis made before the drastic SMP measures were imposed on Emergis is disturbingly flawed. A few points are addressed below.

NZa fails to recognise procurement power of healthcare insurers

If a healthcare provider or healthcare insurer has SMP, the NZa may impose certain SMP obligations on that company for a maximum period of three years under Article 48 of the Healthcare Market Regulation Act. The NZa concludes in its decision that Emergis has large market shares on the market for specialist mental healthcare. According to the NZa, there is furthermore a lack of competition and “Emergis has the possibility and the incentive to engage in anti-competitive exploitative practices.” It is remarkable that the NZa is arguing that healthcare insurers have insufficient compensatory procurement power. CZ, for instance, for many years the largest healthcare insurer in Zeeland, with a procurement market share of more than 60%, is an insurer with which Emergis must always enter into a contract. If Emergis did not do so, it would soon be faced with acute financial problems. If only a single healthcare insurer were to suspend the advance financing, that could lead to an acute financial problem for a healthcare provider, as in the case of the Slotervaart Hospital. The fact that seemingly large healthcare providers prefer to keep their dependence on health insurers under wraps does not mean that that dependence does not exist.

Although the NZa reports that CZ and Emergis are dependent on each other, that does not preclude, in the NZa’s opinion, that “a healthcare provider can act independently to a great extent in relation to its clients”. That argument is very fragile from a legal perspective. In the healthcare sector, a healthcare provider’s large market share does not automatically mean that it has SMP; see our earlier blog. Healthcare providers permanently deal with (compensatory) procurement power of healthcare insurers and can rarely go without a contract with the healthcare insurers (in any event not for very long). The NZa has remarkably little to say in its SMP decision about CZ’s permanently strong position (more than 60% of the procurement market share in Zeeland). It is also remarkable that the NZa ignores the fact that Zeelanders did not switch to another healthcare insurer after 2017, in response to Emergis’ announced suspension of the admission of new patients insured at CZ. It would not be the first time that a competition authority underestimates the effectiveness of a healthcare insurer’s procurement power. Courts, however, are often aware of a healthcare provider’s dependence on a healthcare procurer: see here, here and here.

Obsolete data, no current problem and disproportionate SMP measures

Apart from the fact that the NZa is ignoring the actual procurement power of healthcare insurers, the following points of the SMP decision are noteworthy:

  • The NZa spent three years (2018-2020) on its SMP investigation. That is a great deal of time, particularly if the case involved both obvious SMP of Emergis and a specific healthcare procurement problem. Be that as it may, the NZa is basing its SMP decision exclusively on data from 2014-2017. That data is foreseeably obsolete (6 to 4 years old) and is insufficiently representative to impose the SMP measures for the next three years (2021-2023).
  • Emergis has asked the NZa in vain to explain why it has not included data from the 2018 claims year in its investigation, since that data is also available in Vektis. The NZa has not answered that question in its decision.
  • Three years is the longest possible period for imposing SMP measures (Article 48(5) of the Healthcare Market Regulation Act). In its decision, the NZa has not answered the question whether three years is proportionate. It merely states in the decision that “it has no reason to assume Emergis’ position on the relevant markets will change in the next three years to such an extent that no competition problems are to be expected.” But there is no problem at the current time. The NZa itself is also aware of that: it notes in its decision that it considered refraining from imposing SMP obligations until the very last moment.
  • The NZa would like Emergis to provide more outpatient care, while it is clear that Emergis is not (or not entirely) able to do so due to exogenous factors. Successful outpatient care cannot be organised by Emergis and healthcare insurers alone. The entire healthcare infrastructure plays a part in that respect and, as stated above, that infrastructure in Zeeland differs greatly from that in the rest of the Netherlands. The question is therefore what effect SMP measures will have, assuming that they may be imposed in this regard.
  • It is furthermore unclear how the measures imposed by the NZa are meant to contribute to more outpatient care. Moreover, the NZa has set Emergis an unreasonable deadline: it has given it three months in which to draw up a plan to implement this measure.

In sum, the SMP decision, which is based entirely on obsolete data, lacks any evidence of a current problem. If there were any acute and serious problem in the contracting at Emergis, there would be grounds for an SMP emergency procedure or civil proceedings. But that is not the case. Healthcare insurers have also never filed a formal enforcement request with the NZa. The NZa carried out the investigation of its own accord and doubted until the last moment whether measures should be imposed. In the absence of smoke, let alone fire, the drastic SMP obligations imposed on Emergis are untenable. It will come as no surprise that Emergis is contesting the SMP decision before the Trade and Industry Appeals Tribunal. Emergis is seeking preliminary relief before that Tribunal to suspend the decision until a decision is made on the appeal. The SMP decision has also given rise to questions in Parliament.

NZa aims to restore balance, but chooses the wrong instrument

The NZa reports in its Emergis SMP web message that the NZa wishes to “restore the balance in the negotiations, so that healthcare insurers can properly fulfil their procurement role.” The NZa’s SMP analysis provides no evidence whatsoever that healthcare insurers are currently unable to fulfil their procurement role. It is true that threats were made to suspend new admissions at Emergis four years ago, in 2017. But that has also occurred elsewhere in the country, such as here, here, here and here, and many more examples could be given. No healthcare provider willingly or entirely voluntarily opts to suspend new admissions. But the NZa does often primarily call the healthcare provider to account. It has argued, for instance, that patients should not fall victim to contracting disputes and that healthcare providers allegedly use suspensions of new admissions as a negotiating instrument. The healthcare procurer usually (also) plays a crucial role in the suspension of new admissions. Healthcare insurers also have a duty of care, or rather a healthcare procurement duty. What does that duty entail and is it adequately enforced?

Effective enforcement of duty of care/procurement duty has been a dead letter for 15 years

The NZa exclusively supervises the correct performance of the duty of care set out in Article 11 of the Zorgverzekeringswet (Healthcare Insurance Act). All healthcare insurers and healthcare administration offices have a statutory duty of care. A healthcare insurer’s duty of care means that it must ensure that its insured receive the care to which they are entitled in accordance with their (basic) insurance policy in time and within a reasonable travelling distance. A healthcare insurer can achieve this by contracting sufficient care from healthcare providers that provide it (contracted care insurance) or by reimbursing the costs in question (non-contracted care insurance). The duty of care is therefore de facto a healthcare procurement duty exclusively on the part of the healthcare insurance company. The NZa is meant to check whether a healthcare insurer has procured or reimbursed sufficient care, so that the compulsorily insured receive the care to which they are entitled in time (see this blog and this blog). Effective enforcement of the duty of care has been one of the NZa’s Achilles heels since its establishment (in 2006): see here, here, here and here.

For years, the NZa has sat by and watched waiting lists in the mental healthcare arise and increase. That is partly due to the fact that healthcare insurers use their procurement power to impose contracts on mental healthcare providers with too low a turnover ceiling. Vast use of those ceilings by health insurers means that too little care may have been procured at the start of a contract year compared with the actual demand for care in a region. That gives rise to problems in the course of the year if the ceilings are about to be reached. The NZa points out that additional contracting (raising the ceilings) in the course of the year (which could be avoided by procuring sufficient care in time) is often not an easy process. It is common knowledge that that process costs both healthcare providers and healthcare insurers a great deal of time, energy and resources. Those resources then cannot be spent on care. The NZa is regularly confronted with suspensions of admissions. That suggests that healthcare providers have “overproduced’ in the year in question. It often cannot be precluded that the healthcare insurer has aimed for a lower turnover ceiling than the actual demand for care of its insured. That need not be due to “overproduction”: it is also possible that the insurer set too low a turnover ceiling. It is also noteworthy that, according to the NZa Healthcare Contracting Monitor 2019, in roughly 50% of cases health insurers did not state reasons for rejecting requests from healthcare providers for timely additional contracting.

If a healthcare provider reaches the ceiling unilaterally imposed by the insurer early in the year, the (misleading) impression often arises that “overproduction” is definitely involved. The NZa could find out what exactly had occurred and whether, rather than “overproduction”, too little care has been procured. But in recent years the NZa has never inquired at all the healthcare insurers before the start of a calendar year, on the grounds that prevention is better than cure, whether they had procured sufficient mental healthcare and whether they had not set a (turnover) ceiling at some or all of the mental healthcare providers that was foreseeably too low, which could also lead to problems such as waiting lists in mental healthcare.

Where the NZa argues in the decision that Emergis is able to raise ceilings, that could mean that a ceiling is set at a more realistic level, as is often the case with “additional contracting”. The adjustment of ceilings is not necessarily problematic and, in the absence of a thorough investigation, certainly does not constitute conclusive evidence of a competition problem that must be solved by means of an SMP instrument: it could also mean that the health insurer(s) who procured insufficient care failed to comply with their duty of care.

The NZa and ACM often use the duty of care in an attempt to legitimise the need to take sooner or stricter action against healthcare providers (healthcare sales power) than against healthcare insurers (healthcare procurement power). A healthcare provider does not have a healthcare procurement duty, whereas a healthcare insurer or healthcare administration office exclusively has that statutory duty, and that duty weighs heavily, according to the NZa and ACM. This line of reasoning is unlikely to hold water in practice, partly because there has been no actual effective supervision of the healthcare procurement obligation in the Netherlands for years. The NZa cannot impose fines for violations by healthcare procurers of the healthcare procurement obligation; in that respect it resembles a toothless tiger. The NZa has been aware of this since 2006, but in the past 15 years never asked for that possibility to be created. The NZa has furthermore put its duty-of-care instruments to very little use. When it does deploy them, it does so very slowly: see our earlier blog and blog. Thirdly, frequent suspensions of new admissions could be reason for the NZa to deal with them differently than opting to impose SMP measures on a healthcare provider after the fact: with regard to the enforcement of the duty of care, the NZa is pre-eminently in a position to check beforehand whether healthcare insurers have procured sufficient care; for a supervisory authority, prevention is always better than cure. Although the NZa has the possibility and means to do so, it is still not doing so effectively. The NZa and ACM are, however, freeing up capacity for a three-year SMP investigation. For consumers, this is a case of putting the cart before the horse. The NZa and ACM’s capacity would probably have been better spent on effective enforcement of the healthcare insurer’s duty of care, as a means of helping to eliminate the waiting lists in the mental healthcare sector throughout the country.

Long-term pattern: NZa and ACM apply double standards in healthcare

It is remarkable that the NZa has opted for years (i) not to enforce the duty of care proactively and effectively and (ii) not to ask the legislature for more powers in that respect. In the 15 years of its existence, the NZa has also never used its SMP instrument to intervene (on its own initiative) in healthcare procurement for the benefit of healthcare providers. This is in spite of the fact that many developments are taking place in healthcare procurement that the NZa cannot have failed to notice. Why has the NZa not intervened on its own initiative in the procurement by healthcare administration offices (which by law hold 100% of the procurement market share in their regions)? Why has the NZa intervened on its own initiative in the healthcare procurement at Emergis? Why does the NZa invariably turn away healthcare providers, while being receptive to a signal from a few healthcare insurers concerning Emergis? The NZa could also state in that regard that until it receives a formal enforcement request, there is no sufficiently acute problem, or that the healthcare insurer(s) or ZN could simply apply to the civil court or the Healthcare Contracting Disputes Committee. That is the approach that the NZa has taken for many years in relation to healthcare providers. Whenever healthcare providers turn to the NZa regarding an imminent healthcare contracting dispute, they are immediately referred to those institutions. If healthcare providers do file an SMP enforcement request, the NZa invariably rejects it. ACM also repeatedly turns away healthcare providers. Before the NZa was established, ACM (named NMa at the time) rejected all complaints about abuses in healthcare procurement by healthcare insurers. Since the NZa’s establishment in 2006, ACM has referred all such signals and complaints to the NZa, which in turn refers them to the civil courts or to the Healthcare Contracting Disputes Committee. Remarkably, however, ACM has been assisting the NZa these past three years in the SMP investigation it is carrying out of its own accord into Emergis.

NZa and ACM want to clamp down on healthcare providers, but not on health insurers

It is also remarkable that, year in, year out, the NZa, ACM and the Ministry of Health, Welfare and Sport come up with proposals or a different approach to submit healthcare providers to ever stricter and closer scrutiny. The fact that a healthcare provider rather than a healthcare insurer is once again faced with an SMP decision is in keeping with that trend, as apparent from the 2015 bill amending the SMP instrument. That bill introduces new SMP measures that relate only to healthcare providers. The fact that no new SMP measures are being introduced that (also) relate to healthcare insurers is a notable omission. The bill and proposed transfer of the SMP instrument from the NZa to ACM have been the subject of criticism; see our response to the consultation on the bill, this contribution and this report of Erasmus University Rotterdam. In 2018, the Ministry of Health, Welfare and Sport came up with a legally unenforceable plan for a healthcare merger ban when a healthcare provider has SMP, see this blog and this blog. ACM was wide off the mark in 2019 with its informal suggestion to needlessly curtail the cooperation among the Santeon hospitals. That was not the first time ACM had done so; see this blog. In 2019, NZa also requested the statutory power to test healthcare providers against the Healthcare Governance Code. It is remarkable that the NZa has (still) not requested the statutory power to test healthcare insurers against the Healthcare Insurance Code of Conduct, even though healthcare insurers regularly colour outside the lines of their own Code; see here, here, here and here. When the NZa was asked to draw up more specific rules to take more effective action against excessive procurement power of healthcare insurers, hardly any action was taken. When the Ministry of Health, Welfare and Sport was asked to give the NZa more instruments to supervise the duty of care and the healthcare procurement duty more effectively, the Ministry was dismissive. In short, a remarkably one-sided approach and procedure. Developments at the NZa, ACM and Ministry of Health, Welfare and Sport regarding the supervision of healthcare providers are not to be found at healthcare procurers.

Time for reflection

Although it is possible, if the facts so warrant, to intensify the supervision of healthcare providers, there has been a remarkable lack of activity in the supervision of healthcare insurers, healthcare administrative offices and other healthcare procurers for many years. That is all the more remarkable since there have been numerous signals for years that healthcare insurers and healthcare administration offices are not adequately fulfilling their role in the healthcare system, to the detriment of consumers. At the same time, healthcare providers and their trade associations are spending a needless amount of time and energy on filing (repeated) enforcement requests to persuade the NZa to take action against breaches of mandatory NZa rules; see here, here, here and here. Even in the case of repeated breaches after several formal warnings from the NZa, the fine that the NZa imposed on healthcare insurer VGZ for a further three breaches of mandatory NZa rules amounted to no more than EUR 100,000. And VGZ then of course objected to that fine. It is no longer tenable that the NZa, after 15 years of enforcement, has never of its own accord taken up the gauntlet in the healthcare procurement process for the benefit of healthcare providers. The NZa and the ACM need to change course.

Negative effect of (actual or perceived) partiality on the part of the NZa and ACM

At least as long as effective enforcement of the NZa’s duty of care remains a dead letter, the SMP instrument should not be applied to healthcare providers on the basis of an investigation carried out by the NZa of its own accord. An SMP decision based on such an investigation costs the NZa and the healthcare provider in question a great deal of time and capacity, usually does not solve an acute problem, and is likely to be disproportionate. It also contributes to the image of the NZa as the “Dutch Healthcare Insurance Authority”. Any (actual or perceived) partiality on the part of the NZa (and ACM) as independent healthcare supervisors is highly undesirable. Among other things, it would increase the chance of signals and complaints about real issues in healthcare contracting not or no longer reaching the NZa and ACM. Healthcare providers will then shy away from biting the hand that feeds them (for instance if too low a turnover ceiling is imposed), because the assumption is that the NZa and ACM will not take any action in response to such a signal or complaint anyway. In short, there is no point in informing the NZa and ACM of what is really going on. That risk is real. It materialised in the Netherlands with regard to resale price maintenance. For years, ACM failed to give priority to the enforcement of the ban on resale price maintenance. As a result, parties that fell victim to it became aware or knew that it was pointless to apply to ACM. They therefore often refrained from complaining or sending a signal: a waste of time and money. In other EU Member States the ban on resale price maintenance was enforced, however, and complaints were successful. Not so in the Netherlands, until ACM started an investigation and in 2019 made a U-turn. That is exactly what ACM and the NZa should do in the healthcare sector as well. If the NZa and ACM want to avoid the appearance of partiality, which the SMP decision regarding Emergis has increased, they should focus more on enforcing the rules that apply to healthcare insurers, such as the duty of care, and draw up new rules where necessary. The NZa and ACM are receiving plenty of signals and other indications, and there is plenty of work to be done in order to deal with the excessive procurement power of healthcare insurers. The policy jungle is also still considerable. As for the SMP instrument, the following applies: now that the NZa has announced that it sets much store by “restoring the balance in the negotiations on mental healthcare procurement,” it has plenty of opportunity of it own accord also to impose SMP measures on healthcare insurers if there are signals that the balance is tipping away from healthcare providers. There are plenty of such signals; as a supervisory authority, you just have to be willing to see them.

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