Virginia legislature considers restrictions on vertically integrated health carriers

Senator J. Chapman Petersen’s (D-Fairfax) bill to establish standards for vertically integrated health carriers (VICs) received testimony at the Health Insurance Reform Commission meeting last week, with both sides claiming the other would increase health costs for Virginians. 

 

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Senate Bill 867 defines a VIC as a health insurer or other entity that also owns a hospital. The bill would require VICs to offer equal participation in their plan networks, as well as prohibit a VIC officer or director from simultaneously serving as an officer for an affiliated health care provider. 

Paul Harkaway, MD and Bruce Solomon, representing Chesapeake Regional Medical Center, provided testimony supporting the bill, and identified the risks VICs pose for the market.

“There’s a risk of abuse, just by the nature of the power involved in these vertically integrated structures. Other states’ real experience with this —  the rapidly evolving market, it would suggest you would try to stay ahead of — and the lack of a clear community benefit relating to quality and cost and access, leads to our conclusion that vertically integrated entities should be regulated to protect consumers.” 

The representatives from Chesapeake commissioned a report on neighboring entity Sentara Healthcare and its health plan, Optima, claiming its VIC structure stifled competition. Sentara, which has five hospitals in Hampton Roads along with its health plan, accounts for over 70% of Virginia Beach’s market share.

Chesapeake’s report found that Sentara/Optima “performs [the] same or worse” on quality, access, and cost metrics as non-integrated competing hospitals and plans. 

This is not the first dispute between the two heath systems. In late April, Chesapeake sued Sentara for $20 million in damages over a number of cardiologist transfers. 

Colin Drozdowski, senior vice president of provider network management for Sentara Health Plans, attempted to sway legislators against SB 867. Drozdowski said Chesapeake’s research did not accurately support their claim, and also pointed out that three Sentara hospitals performed better than Chesapeake, according to a U.S. News review. He also said health insurance premiums in Hampton roads are actually 10% lower than any other rates in the Commonwealth. 

“Virginians should find it deeply troubling that [SB 867] would seek to mandate contracting with a provider without consideration for the providers’ level of clinical outcomes. As health care providers, we should be focused on ensuring high quality, affordable, high value, and accessible care for Virginians.” 

Due to a lack of quorum at the meeting, the Commission was unable to vote on the bill. However, Commission Chair Sen. George Barker (D-Fairfax), said legislators would put together a stakeholder workgroup to assess the bill ahead of their next meeting.