Why does ACM's Santeon letter miss the point? ACM, solve real problems in the healthcare sector first!

ACM is increasingly critical about healthcare mergers. It prohibited a hospital merger in 2015 and later announced on several occasions that it was intending to evaluate healthcare mergers more critically. In 2018, ACM made suggestions for assessing healthcare mergers more strictly. It cannot, however, deny the fact that there are numerous reasons for healthcare mergers (medical and/or demographic). Nonetheless, ACM (along with the Dutch Healthcare Authority (NZa)) generally says that there is an alternative to a merger: why merge when collaboration (in part) is also possible? That leads one to ask the following question: would ACM tell us what kind of collaboration between healthcare providers is and is not allowed on the basis of the Dutch Competition Act (Mededingingswet)?

The sector wants clarity from ACM

When competitors in the healthcare sector collaborate, they are subject to permanent assessment under the rules of the cartel ban. The law provides that the onus of proof rests entirely on the care providers: they must always be able to prove that their collaboration is within the bounds of the cartel ban, or face penalties. They are therefore asking ACM for clarity. This summer, ACM published a letter setting out its intentions to restrict collaboration among the Santeon hospitals. This was surprising, as ACM had not previously objected to this collaboration. In what follows, we will explain why ACM’s letter and corresponding online statement miss the point.

180-degree turn in ACM’s position on collaboration among the Santeon hospitals

In 2015, ACM authorised collaboration among six Santeon Hospitals regarding the provision of care to breast cancer patients. In 2019, ACM reviewed this collaboration when plans were announced for the Maasstad Hospital to join it. The Santeon Hospitals were also planning to share financial information (on costs and revenue, for example) among themselves. Unlike in 2015, ACM believes there are risks attached to this collaboration and it is therefore stipulating as a condition of it that every healthcare insurer will be able to negotiate with every individual Santeon hospital. A person reading this would imagine that this 180-degree turn by ACM was based on thorough investigation. Unfortunately, however, ACM’s letter lacks proper substantiation. For instance, it does not provide any analysis showing that the number of hospitals able or allowed to provide care to breast cancer patients has fallen since 2015, or that these patients are now far more willing to travel. Nor does it say that the Maasstad Hospital that was due to join the Santeon collaboration is about 60 km by road from the next nearest Santeon hospital. ACM’s letter does confirm that the Santeon collaboration has not led to price increases. According to the letter, the fact that ACM nonetheless now sees risks is based on signals from a number of healthcare insurers and indications from a market study of hospital mergers in the United States. ACM’s online letter states: “ACM increasingly sees signs of possible negative effects of a stronger negotiating position of hospitals that negotiate jointly but are not in close proximity to each other. Healthcare insurers have indicated that this would force them to accept higher prices if these hospitals coordinated their care provision, for example. This would enable hospitals to make themselves indispensable. Recent market studies show that mergers between healthcare providers that are not in close proximity to each other can thus drive up prices.”

ACM mentions just one source in relation to the US healthcare sector

ACM did not encounter any price increases in 2019 as a result of collaboration among the Santeon hospitals. At the same time, ACM notes: “The concerns expressed by certain insurers echo the insights that ACM has gained from market studies [plural].” That would indicate that ACM had done a lot of homework. There are more disappointments in store for readers of ACM’s letter, such as:

  • ACM mentions just one source for its assertion quoted above: “See inter alia Dafny, Ho & Lee, (2018). The Price Effects of Cross-Market Mergers. NBER Working Paper #22106 and the references given in that article.” This single source concerns a study of the situation in the United States, not the Netherlands. Nor do the references cited in it have any bearing on Dutch hospital mergers. According to that study, mergers in the US between healthcare providers that are not in each other’s vicinity drive up prices. This approach raises certain questions. Would ACM embrace a reference by merging hospitals to a US study showing the functioning of far bigger hospitals in its monitoring of mergers? We think not, because ACM would disregard such a study, given that it relates to a system of care that is fundamentally different to the Dutch system and is therefore irrelevant. Even if ACM did want to adhere to Dafny, Ho & Lee, (2018) in order to its impose enforcement measures on collaborations among Santeon hospitals that were not fundamentally competing with each other, then it would first need to do some groundwork. Apart from the innumerable differences between the US care system and that in the Netherlands, the Dafny, Ho & Lee, (2018) study is of mergers and not collaborations in components of care provided by the relevant hospitals. In a nutshell, without presenting any empirical evidence that the Santeon collaboration (which is not a merger) has led to or will lead to problems, ACM’s letter states that it considers concerns from certain insurers to be “plausible” and sufficient for it to impose restrictions on the Santeon collaboration.
  • ACM’s letter also omits to say how many or which healthcare insurers have expressed concerns. It does note, however, that certain healthcare insurers do not consider the collaboration to be problematic. ACM therefore finds the concerns of certain insurers sufficient enough for it to impose measures. According to ACM, individual healthcare insurers must therefore be able to choose whether to negotiate individually or collectively with the Santeon hospitals.

ACM is ignoring the statutory framework and knows that its stance is legally questionable

ACM is of course perfectly entitled to take potential healthcare sector problems flagged by a few healthcare insurers seriously and to investigate them. Nevertheless, apart from the fact that there always has to be a genuine, serious problem before ACM takes action, it should always ask “preliminary questions” about whether there is not already a remedy available with a sufficiently deterrent effect for tackling it, even where ACM takes the position that “prevention is better than cure”. ACM’s letter fails to mention that there are already appropriate statutory tools for taking action if the risks alleged in the letter were ever to materialise or seem imminent. The NZa, for instance, has a significant market power tool (AMM-instrument) which enables it to take measures in response to an alert or complaint from one or more healthcare insurers, or to do so on its own initiative (urgently, if needed). One such measure is obliging healthcare providers to conclude a contract with the healthcare insurer(s) on reasonable terms. The NZa has already used this significant market power tool successfully against healthcare providers on a number of occasions; see here and here. ACM therefore knows that the Dutch healthcare system has a tool and a supervisory authority for taking urgent and proportionate action should the risks perceived by ACM ever actually come about. It is strange that ACM is ignoring this possibility, given that it and the NZa also cooperate (or may do so) when using the significant market power tool against healthcare providers that are placing obstacles in the path of healthcare insurers in relation to the purchase of care.

ACM also knows that its stance in relation to the Santeon hospitals is at least legally questionable. It is forcing through measures despite the lack of evidence of any risk of an infringement - let alone an actual violation - of the cartel ban. This is quite remarkable, particularly as previous penalties imposed by ACM for infringements of the cartel ban in the healthcare sector have been set aside by the courts; see here and here. A noteworthy detail of a court decision that set aside a cartel penalty in the healthcare sector (which ACM did not appeal) was the judge’s reprimand issued to ACM for not taking sufficient account of the healthcare insurers’ purchasing positions. Seen in that light, it is striking that ACM’s letter does not even mention the term purchasing power, even though one would be hard put to discern any lack of purchasing power on the part of the healthcare insurers.

There is more. ACM’s letter and online statement do not extend any offer of assistance to the Santeon hospitals. ACM could have expressed its support for benchmarking in the envisaged exchange of information, within the framework of the Dutch Competitive Trading Act. It refrains from doing so, even though it notes its perception of risks in the exchange of commercial information between the Santeon hospitals (which do not, or do not essentially, compete with each other). It is regrettable that ACM only points out the impossibilities of collaboration to healthcare providers and not any solutions in that regard. ACM has done this before; see this blog.

ACM’s stance on the Santeon hospitals is counterproductive

Collaboration in the sale of healthcare can be beneficial to healthcare providers and healthcare insurers as well as consumers. It can boost cost-efficiency and actually benefit the provision of care. ACM has acknowledged this previously. But ACM’s position on the Santeon hospitals is now that healthcare insurers should be able to negotiate individually with them. That is new, and the onus of proof in relation to this 180-degree turn is obviously a heavy one. ACM often claims it wants to provide clarity to healthcare providers or reassurance when they have cold feet for any reason. But even collaboration among non-competitors (fewer than eight hospitals with a wide geographical distribution in the Netherlands) that is limited to certain components of care now appears to be risky, according to ACM. ACM’s letter does not, however, provide any evidence that the perceived risks could actually materialise in the near future. If ACM wants to encourage healthcare providers to avoid entering into healthcare mergers, then it is not helpful to be critical even of collaboration among Santeon hospitals that are not (or are not essentially) competing with each other (particularly where there is no hard evidence of price increases). The stance taken by ACM could create the impression that it is not only opposed to mergers in the healthcare sector, but that it is also placing restraints on collaboration among parties that are not even competitors. The response of hospitals will be to wonder what ACM actually does allow. ACM previously noted that its healthcare sector policy could potentially lead to healthcare providers having cold feet and a paralysis in certain situations. This is an added reason for ACM to present the facts and evidence of any perceived risks before attaching consequences to them. As ACM also knows, its letter does not satisfy the onus of proof that applies in this regard. So why is it adopting this stance? ACM notes that it is important for healthcare insurers to be able to purchase care satisfactorily. While there is nothing wrong with this starting point, ACM’s letter strengthens the purchasing power of all healthcare insurers without providing specific evidence of any negative effects of the Santeon collaboration. This is a remarkable line to take, particularly because of all the long-standing, genuine structural problems relating to the (purchasing) positions of healthcare insurers that have so far defeated ACM. One striking aspect of these problems is that they not only directly affect actual competition and consumers (as well as their pockets) but that they are also far more palpable and relevant than the risks that ACM feels it perceives in the Santeon collaboration.

ACM is in the meantime failing to address genuine structural problems in healthcare sector

The purchasing power of healthcare insurers is positive if a number of requirements are met. One crucial requirement is that there should always be enough competition among them, as this ensures that the benefits of their purchasing power are passed on sufficiently to consumers (in the form of lower insurance contributions etc). It is doubtful whether this happens enough. ACM has for years been unable to solve the long-standing structural problems in this regard, despite noting itself in 2017 that there was room for improvement in competition among the healthcare insurers. ACM also reported that members of the Association of Dutch Health Insurers (Zorgverzekeraars Nederland (“ZN”)) claimed they felt constrained by ZN in what they could do. DSW had previously raised this problem, but according to ACM’s report (p. 92), several healthcare insurers themselves notified ACM/NZa that they felt pressured by ZN. Although these were of course indications of infringements of the cartel ban in the ZN context, ACM refrained from taking any specific action. Nor did ACM take any subsequent measures to promote competition among healthcare insurers.

A rampant jungle of policies, hampering effective competition among healthcare insurers and of no benefit to consumers

The government, ACM and the NZa have previously (and without success) put time and effort into encouraging consumers to switch to a competing healthcare insurer; see here, here and here. The jungle of policies on offer has impeded this process for years. According to ACM, the sheer number of policies available means that consumers can no longer see the wood for the trees when choosing one, which they must do by law. ACM (along with or separately from the NZa) has simply not been able to put an end to this situation, even though both authorities have the powers to do so. Despite reports issued in 2017, 2018 and 2019, this jungle continues to thrive. This lack of effective action to tackle a long-standing, genuine problem in the healthcare sector is quite remarkable. The damage to consumers is predictable: everyone in the Netherlands is required to have a basic insurance package and take out a new policy every year. This jungle is an important reason why competition among the healthcare insurers is not intensifying (or doing so more rapidly). One consequence is that the traditional core areas in which healthcare insurers operate remain intact and the dominant player in the market continues to enjoy substantial purchasing power. Outside the healthcare sector, ACM is deploying its capacities to the full to stamp out deception and false impressions of choice when it comes to products and services that are optional purchases; see here, here, here and here for example. It is strange that ACM (along with or separately from the NZa) is not intervening in the jungle of basic insurance policies, particularly since it knows (and acknowledges) that it is harmful to competition among the healthcare insurers as well as to the financial position of all Dutch consumers.

ACM is ignoring the healthcare insurers’ abuse of their purchasing powers

ACM has also turned a blind eye to the healthcare insurers’ abuse of their purchasing power for years, despite specific indications that the latter have been persistently ignoring the most elementary mandatory rules of purchasing care, to the detriment of healthcare providers and consumers; see here, here, here, here, here and here. The healthcare insurers are late in presenting contracts to the healthcare providers. According to the NZa, this is also harmful to consumers, as it means they cannot know in time what contracted care provision is (or is not) covered by their policies. In the paramedic sector alone, the NZa received over 800 complaints about healthcare insurers from 385 different care providers in 2018. This article, as well as complaints from ANT and KNMT, shows that this is just the tip of the iceberg. If ACM and the NZa were to devote their attention to this, they would kill several birds with one stone. And if healthcare insurers were to adhere to the mandatory care purchasing rules and comply with their duty of care to purchase sufficient care (and do this on time), then, as ACM and the NZa themselves know, the healthcare insurers might well have less reason to collaborate when purchasing care.

ACM, shift your focus and solve specific, persistent problems in the healthcare sector first

It is high time that ACM changed its priorities in the healthcare sector. We have previously called upon it to do so. If ACM were to examine its priorities, it would do well to solve specific, persistent problems before tackling ones that have not been shown to exist, thus limiting collaboration among healthcare providers due to ostensible risks of infringements of the cartel ban. If such infringements do seem imminent, then health insurers are quite capable of reporting them to the NZa (which can then deploy its significant market power tool). As ACM knows, there is a reason why healthcare providers sometimes refer to the NZa as the Dutch healthcare insurers’ authority. Accordingly, there is no pressing need for ACM to protect the healthcare insurers’ purchasing powers. What does merit ACM’s attention is a problem that consumers and healthcare providers cannot collectively solve themselves and which also goes to the heart of our healthcare system. In our view, what is needed is supervision of the actual competition among insurers (and the extent of it) (e.g. putting an end to the jungle of policies), their collaboration in the ZN context and tackling the consequences that this has for the legitimacy of their purchasing power in our healthcare system. ACM knows that there are more than enough specific, persistent competition problems in the Dutch healthcare sector and there is no need for it to reference literature from the US in this regard. All that is required at this point is the mettle to focus on and tackle these problems.

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