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States Lean on Legislation to Drive Competition, Lower Costs

Analysis  |  By Jack O'Brien  
   February 25, 2020

Seven states have entities specifically in place to boost competition and cap healthcare costs, according to a recent study.

States are taking on a more active role to spur healthcare competition and control costs, according to a Catalyst for Payment Reform (CPR) and University of California, Hastings (UC Hastings) Law study released Tuesday morning.

The study stated that employers and payers can affect change as healthcare providers continue to consolidate but argued that states can implement policies that boost competition as well. 

Twenty states have established mandatory all-payer claims databases, the study found, while another 20 states have banned "most favored nation" contracting clauses. Researchers stated that these provisions can "prevent other health plans from entering local markets" and stifle competition as a result.

The study also found that the most common approach by states to maintaining competition was to use existing antitrust statutes to block provider M&A activity.

Meanwhile, even among states that have approved provider mergers, many pushed for conditional settlements or consent decrees that "limit the ability of the newly consolidated entity to leverage higher rates through their increased market share."

Related: Denver Provider Market at 'Tipping Point,' Study Finds  

Additionally, seven states have created commissions to boost competition and cap healthcare costs. Tactics used by these entities include "exposing high and variable prices, implementing cost controls or overseeing provider merger activity."

"The vast majority of innovative approaches to lowering health care costs and promoting competition are coming out of the states," Jaime King, the Bion M. Gregory Chair in Business Law at UC Hastings Law, said in a statement. "States should share their ideas and collaborate to capitalize on the most successful legislative and regulatory approaches."

Related: Price Transparency Is Coming. How Will You Prepare?

Several states have taken other unique approaches to monitoring or regulating prices, the study found.

Massachusetts has a governing body to oversee healthcare price increases while Maryland has one to examine rate-setting issues.

Three states, (Vermont, Pennsylvania, and Maryland), have global budgets for hospitals, and four states, (Massachusetts, Delaware, Oregon, and Rhode Island), have healthcare cost benchmarking programs in place.

Related: Transparency Is Difficult  

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

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