Cui bono ? Is Australia taking a step to managed healthcare as in the United States?

Lucius Cassius, whom the Roman people used to regard as a most honest and most wise judge, was in the habit of asking time and again in lawsuits: ‘to whom might it be for a benefit?’

—Cicero: Pro Roscio Amerino

Proposal for a healthcare buying group

The Australian Competition and Consumer Commission (ACCC, 2021) is an independent statutory body that oversees competition and fair trading. It is currently reviewing an application by Honeysuckle Health (HH) and NIB to form and operate a buying-group to negotiate and manage contracts with healthcare providers on behalf of private health insurers (PHIs). HH is a joint venture of Australian health insurer NIB and Cigna Corporation, a global health services company based in the United States. Individual practitioners and healthcare providers have registered their concerns with the ACCC about the possible effects on choice and autonomy for patients and healthcare providers. The ACCC has released a draft determination that is broadly supportive of the proposal based on the balance of risks and benefits. We discuss the policy implications for patients and private psychiatrists in Australia.

Of concern is that the ACCC’s terms of reference are restricted to regulatory harms and benefits rather than broader effects on healthcare. We ask cui bono, who benefits from the approval of such a buying-group – patients, doctors or just health insurance companies? Accordingly, we discuss whether HH could be a vanguard for managed-care through selective contracting of healthcare providers, financial controls and increased administrative burdens for patients or providers (Looi et al., 2021)?

In terms of benefits, the ACCC considered that there will be

… a greater choice of buying-group for healthcare payers and more competition between buying-groups. The ACCC considers … [it] is likely to result in some public benefits in the form of better input into contracts, better information for participants in the HH Buying-groups and some transaction cost savings, mainly for healthcare payers other than private health insurers. (ACCC, 2021)

The concentration of financial bargaining power through the buying-group will facilitate benefits to consortia of PHIs and healthcare payers, without necessarily benefitting the public, especially if the savings are not passed on, but are added to company profits and executive salaries.

In terms of risks, the ACCC acknowledged that

…it is likely that some private health insurers, including major insurers, will join HH’s … Program. The ACCC considers, if all private health insurers are able to join the … Program, this potentially uncapped aggregation is likely to result in public detriment by reducing competition between acquirers of medical specialist services. (ACCC, 2021)

Given this possibility, the ACCC proposed that HH not provide buying-group services to more than 40% of the PHI market in any Australian jurisdiction. However, in their response, HH proposed a 60% share of the PHI market, effectively dominating the Australian market (ACCC, 2021). If accepted, this outcome would greatly reduce competition and be further against the public interest.

Buying-group mediated managed-care

The formation of the HH buying-group could be the first step to managed healthcare in Australia, with all the attendant disadvantages of similar models in Europe and the United States (Brown and Glied, 2020; Duijmelinck and van de Ven, 2016). Such a buying-group would allow for the selective contracting of healthcare providers. Although this may seem initially attractive through guaranteed patient flow, providers are then dependent on the buying-group for continued referrals and so potentially vulnerable to demands for large discounts (Duijmelinck and van de Ven, 2016). The concentration of care-purchasing through a buying-group, especially if it represented up to 60% of PHIs, would create an enormous differential of bargaining power between the buying-group and an individual psychiatrist.

Managed-care is presented as a way to improve efficiency through the use of financial incentives. However, a systematic review of financial incentives for improved performance in value-based healthcare (which has been a term used in the ACCC hearings by HH) found that schemes that reward doctors for performance have a lower chance of improving care than those that do not, and that incentives as a proportion of revenue were not associated with effectiveness of patient care (Scott et al., 2018).

Another characteristic of managed-care is aggressive utilisation management, as used in the United States, comprising techniques to manage healthcare costs through buying-group intercession into individual patient care decision-making, ostensibly to assess the appropriateness of care (Duijmelinck and van de Ven, 2016). Utilisation management would thus involve gatekeeping of access to private psychiatry, requirements for prior authorisation (especially pre-approval of psychiatric hospital care), review of care use concurrently and retrospectively, formation of PHI-buyer-designed disease-management-plans and care-networks – all greatly increasing the administrative burdens and reducing patient access to treatment (Duijmelinck and van de Ven, 2016).

The restriction of choice of psychiatrist, as well as allied health providers, through selective contracting may reduce access to psychiatric inpatient care and add to the difficulties already faced by those with mental health problems in obtaining treatment under their insurance cover. Public perceptions of selective contracting and financial incentives or controls may also adversely affect the patient–doctor relationship. For instance, such arrangements in the United States have included non-disclosure agreements between healthcare providers and managed-care companies about referral and financial arrangements, while patients have reported a lack of transparency about fees charged by healthcare providers (who may be further contractually constrained from discussion). The worst aspect of utilisation management for patients has been the administrative burdens and uncertainty of prior authorisation, gatekeeping and review of care, which has restricted access to providers, hospital treatment and even pharmaceuticals (Looi et al., 2021).

Managed-care has been ineffective clinically and in controlling healthcare costs in the United States, but highly effective in adding to PHI profits. The consequent weaknesses in PHI coverage, especially for psychiatric care, led to the Affordable Care Act, aimed at forcing PHIs to provide community-rating resembling the current situation in Australia (Brown and Glied, 2020). Managed-care has evolved to a further level of subcontracting in the United States, with buying-groups purchasing services from conglomerated managed-behavioural-care-organisations (Looi et al., 2021). The negative impacts of managed-care and restriction of access to private psychiatric hospital and allied health services in Australia would necessarily fall upon beleaguered public mental health services.

Conclusion

Buying-groups greatly increase the bargaining power of PHIs in comparison to private practitioners and hospitals. Licensing a buying-group to purchase healthcare on behalf of up to the proposed 60% of PHIs will facilitate managed-care selective contracting, financial controls and utilisation management, and thus reduce patient choice of psychiatrist, hospital venue and modality of care, as well as eroding the doctor–patient relationship. On this basis, the ACCC should reject the application.