The recent conflict between 32BJ Health Fund and New York Presbyterian exemplifies the critical need for legislative intervention against anti-competitive contracting terms in health care.
This occurred against a backdrop of soaring health care costs driven largely by provider consolidation and market dominance. State and federal policymakers should be motivated – and even compelled – to enact more robust measures to curtail these practices. Prohibition of anti-competitive contracting terms is an important first step to rebalance the power dynamics in health care negotiations.While the New York legislature has passed legislation to prohibit some of these terms, the hospital lobby was ultimately successful in stripping out one of the most meaningful provisions of the bill, which would have banned the type of conduct New York Presbyterian engaged in here.
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This situation illustrates the detrimental impacts of unchecked market power by dominant providers and argues for the adoption of broader reforms, accountability and transparency to foster a more competitive and equitable health care system.
First, some background on the most recent saga between 32BJ Health Fund and New York Presbyterian, a powerful, prestigious and high-cost hospital system that has had a fairly tumultuous history with the health fund. 32BJ represents building service workers, and the union’s aim has consistently been to reduce health care expenditures.It sought to continue to exclude New York Presbyterian from its new health plan with Aetna. However, the union was blindsided by a sudden demand from the hospital for $25 million, purportedly for unpaid bills related to past medical services, which was made known on the eve of the finalization of the Aetna contract. This unexpected financial claim effectively hindered the union's plan to tailor its insurance offerings to control costs. As a result, 32BJ was forced to abandon its preferred choice, Aetna, and continue with its existing insurer, which had provisions to exclude New York Presbyterian from the network, until at least January 1, 2025.
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The hospital system’s behavior in this scenario certainly sounds anticompetitive, but it’s important to understand the ways hospital systems use specific contract terms to execute their anti-competitive goals. Generally speaking, anti-competitive contracting terms are tactics used by dominant health care providers to manipulate market conditions to their advantage, often at the expense of payers like unions and employers. These terms can include:
All-or-nothing contracting, in which insurers must include all or none of a provider's facilities, often leading to the inclusion of higher-cost, lower-value services;
Anti-tiering or anti-steering clauses, which prevent insurers from directing patients toward more cost-effective health care options;
Most-favored-nation clauses, which ensure a provider offers no better prices to any other insurer, stifling competitive pricing; and
Gag clauses, which keep the terms of health care contracts secret, hindering transparency and informed decision-making by other parties.
As noted above, 32BJ Health Fund took proactive steps to challenge all such anti-competitive practices through legislative action and pushed for the passage of the Hospital Equity and Affordability Law (HEAL Act). Despite their efforts, the final legislation was significantly diluted. Intense lobbying by hospital systems like New York Presbyterian resulted in the removal of key provisions that would have directly targeted those anti-competitive practices. This legislative outcome left 32BJ and similar entities without the necessary tools to prevent the type of demanding conditions imposed by New York Presbyterian, highlighting a critical gap in the fight against health care monopolistic behaviors.
The dispute between 32BJ Health Fund and New York Presbyterian underscores the urgent need for comprehensive legislative reform against anti-competitive health care practices. The watering down of the HEAL Act in New York amidst heavy lobbying from hospital systems highlights the influence of health care monopolies over policy. It is imperative that state and federal legislators go beyond mere expressions of concern and take decisive action to enforce laws that curb these practices.
Policymakers must commit to substantial reforms that protect unions, employers, and consumers from the exploitative strategies of dominant health care providers. Their shock and awe of what was essentially a $25M extortion attempt by New York Presbyterian of the 32BJ Health Fund will only be believable for so long.
Chris Deacon, JD, is a health care executive and consultant recognized for her advocacy for transparency and accountability. She previously ran New Jersey's public sector health plan, covering 820k lives.
