President’s Executive Order Could Bolster Healthcare Competition in Virginia

by James C. SherlockYesterday President Joe Biden issued an executive order (EO) on competition that

has the potential to significantly affect Virginians, especially our monopolized regional healthcare markets. 

While an EO does not have the force of law, the president as chief executive can set priorities. The executive departments will honor the EO where not barred by law.  

Federal judges appropriately will not be influenced by an EO. However, EOs put the hand of the chief executive on the scales of executive department prosecutorial decisions and regulatory actions. That will affect the cases that the the Federal Trade Commission, the Justice Department, and the targets they bring before those judges.

In the healthcare sector, a White House Fact Sheet indicates that the EO “tackles four areas where lack of competition in healthcare increases prices and reduces access to quality care.” Those are prescription drugs, hearing aids, hospitals and health insurance.  

There is already fierce competition in the pharmaceutical industry. I consider the prescription drug portions of the order a threat to future drug development, but President Biden undoubtedly has already taken account of my opinion on that.

The hearing aid provisions are long overdue.

The order also addresses separately government oversight of labor markets in ways that will affect health care.  

Those include encouraging the FTC to ban or limit non-compete agreements.  That provision may prove helpful to physicians and nurses in avoiding career control by provider monopolies.

I will briefly explain the other main potential effects on Virginia’s hospital and health insurance markets. 

On the subject of hospitals, the order writes:

“Hospital consolidation has left many areas, especially rural communities, without good options for convenient and affordable healthcare service. Thanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market. Since 2010, 139 rural hospitals have shuttered, including a high of 19 last year, in the middle of a healthcare crisis. Research shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors.”

I am not sure that consolidation has driven rural hospital closings as much as the shrinking of the rural populations and the relative lack of commercially insured patients there. There are early indications that expanded Medicaid will help stabilize the rural healthcare market. Ballad just reopened a shuttered hospital in Lee County.

But the role of consolidations in the increase in prices is undeniable.

In the Order, the president:

“Underscores that hospital mergers can be harmful to patients and encourages the Justice Department and FTC to review and revise their merger guidelines to ensure patients are not harmed by such mergers.”

“Directs HHS to support existing hospital price transparency rules and to finish implementing bipartisan federal legislation to address surprise hospital billing.”

“Directs HHS to standardize plan options in the National Health Insurance Marketplace so people can comparison shop more easily.”

The FTC and Justice have been encouraged to challenge existing combinations that were not opposed by previous administrations, including the Obama/Biden administration.  

As we have published more than once in this blog, the Justice Department and the FTC have jointly for at least two decades officially encouraged states to repeal CON laws, so they will go after this with a will.

The new chair of the FTC is a 34-year-old zealot who has never run anything, but assuming she doesn’t cripple the entire agency, her appointment should help. The anti-trust division of DOJ will definitely be active in this.

A major component of market consolidation is the combination of provider regional monopolies with regionally powerful health insurers.  

If you go to a map of insurer participation in the ACA marketplaces, you will see that many Virginians outside the I-95 / I-64 corridor, especially in the poorest areas of Southwest and Southside Virginia, have only one ACA choice.  

The most prominent but not the only example in Virginia of hospital/insurer combinations is Sentara Health, which controls Optima Health, a big force in health insurance in Sentara’s core market of Hampton Roads, in the ACA marketplace and especially in Medicaid managed care.  

Optima caused a national scandal in 2018 when Anthem pulled out of the ACA marketplace in central Virginia for a year and Optima, the only remaining provider, “offered” the highest prices in the nation for ACA plans.

Beyond the ACA marketplace, provider-insurer combinations can use their insurance arms to pressure provider competitors and their hospital/physicians’ practice components to pressure insurance competitors. 

Sentara was successfully driven to abandon a takeover of North Carolina’s Cone Health in no small part because of the history of its use of its Optima arm.

It will be interesting to see if the Justice Department and the FTC turn their attention to such combinations, especially in Certificate of Need states like Virginia.  

Under existing law, the obstacle remains of the state action doctrine when suing state-awarded hospital monopolies in CON states. That obstacle is presumptively removed when targeting provider monopoly insurance arms.  Those were not awarded by the state

In sum, I am encouraged that the federal government will place new emphasis on increasing competition in the healthcare provider and insurance markets.

Few states need the help as much as Virginia.

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29 responses to “President’s Executive Order Could Bolster Healthcare Competition in Virginia”

  1. tmtfairfax Avatar

    State attorneys general regularly file or join antitrust suits. Herring has done so. But why not health care? Why pass more laws and impose more regulations when government won’t enforce the ones on the book? Government no longer cares about doing day to day things but only wants to telegraph virtue.

    We a law that requires every paid lobbyist that meets with a legislator or government decision-maker to file a summary of the meeting and have that summary posted online.

    1. James C. Sherlock Avatar
      James C. Sherlock

      Herring to my knowledge has never joined or filed an antitrust suit in Virginia.

      The healthcare monopolies are the only ones of significance here. Some of their business activities are illegal under both state and federal law, but Herring owes them too much to stir that pot. That is his use of his “prosecutorial discretion”.

      State action doctrine in federal courts addresses only how the monopolies were assembled, not violation of the law in the improper use of them.

      Herring could go to the DOJ and ask for a RICO indictment. That quickly would clear the bandits out from behind Virginia rocks.

      But he joins antitrust suits out of state where his political fortunes/donors will not be affected.

      That is as you know the answer to the question “Why not healthcare”. The state government in general and Herring in particular are too corrupt to clean up Virginia monopolies.

      The VDOH has been captured by them, and the SCC does not have jurisdiction over healthcare. It has jurisdiction over health insurance, but is not empowered to pry “internal” information from the combined monopolies concerning the internal exchange of planning and funds between the provider and insurer arms of the major players like Sentara.

      And Virginia has no restriction on interlocking directorates within those combined behemoths. It matters. Look at Sentara’s “corporate governance”.

      The President’s order addresses enforcement of laws and regulations already on the books. It can help.

    2. Nojdarb Avatar

      Like most state AG’s, Virginia’s has very limited resources to pursue antitrust cases. I think only 2 or 3 attorneys for all industries across the state. Most cases brought by government have multiple state AG’s partnering with or without DOJ, or DOJ alone.

  2. Mary Johnson Avatar
    Mary Johnson

    Once upon a time, as a hospital-based Pediatrician, I came to SW Virginia to “help”. My mission and focus throughout my career has been to provide/bring a higher level of Mother-Baby care to smaller/rural communities. ETSU recruited me to a MSHA facility in Abingdon – promising (with the merger) an interconnected system of university-affiliated community Pediatric services. I went “all in” – covering the call of almost two physicians at JMH in Abingdon. But Alan Levine’s COPAs – and the merger – blew ALL of that TO HELL – while the FTC watched. I was run out on a rail after two years of back-breaking/soul-sucking service (not paid for over two months of overtime and viciously targeted for retalitaion/elimination by Levine/his goons for reporting a potential EMTALA violation – a neonatal code resulting from an OB’s repeated refusal to come in stabilized his patient). ALL of this was reported to both states and the Feds/FTC pretty much as it happened (I should have been protected) – but the governmental “overseers’ of medicine did NOTHING and abandoned me to a interstate medicolegal quagmire. The university was USELESS in terms of affording protection (as they wanted all the “candy” Ballad promised to provide . . . oh, and “consolidation” benefited their bottom line in Johnson City). An award-winning community NICU (and trauma service ) in Kingsport was closed. The Pediatric service in Abingdon was decimated (I believe in favor of Bristol). Nurses and physicians have left the area in droves. The President’s EO is (1) a job that should have been taken on by a corrupt Congress and (2) WAY too little WAY too late. The ACA was supposed to “reform” healthcare and expand access. Instead it killed rural/community care – and has all but gutted Pediatric/nursery services in small hospitals. NO ONE in the political realm is acknowledging it.

    1. Nancy Naive Avatar
      Nancy Naive

      Well, there are twenty plus countries that have figured it out, maybe someday we’ll cheat off one of the smart kids’ paper. Until then, “for profit” healthcare will bring us good stories of back-stabbing, cork-screwing, and dirty-dealing with money trails that lead back to “blind” trusts in the halls of government.

      1. James C. Sherlock Avatar
        James C. Sherlock

        Nancy, all of the organizations to which Mary has referred are not-for-profits. What they really are is not-for-taxes. Regulation of the biggest business non-profits, those in the healthcare industry, is long overdue, starting with their governance.

  3. William Cover Avatar
    William Cover

    I think the EO is reasonable and will help consumers. I am concerned about importing pharmaceuticals from Canada. It most likely will be an avenue for China and India to remain in control of manufacturing the active ingredients of a pharmaceutical product with the final packaging or formulation steps carried out in Canada. It maybe a work around to allow China to continue to dominate in critical supplies while the public thinks we are shifting to Canada. Smoke and mirrors to controlling critical materials as we know is a long term problem for America as witnessed during the early stages of the pandemic.

    1. James C. Sherlock Avatar
      James C. Sherlock

      Excellent point.

  4. Stephen Haner Avatar
    Stephen Haner

    A useful summary, thank you. As commendable as several of these actions are, our president is not our king. He may be commander in chief of the military, but not of the economy. Doing all this by EO is a sign that our Congress is broken and corrupted in several of these areas, agreed, but it is still a problematic precedent. Seems like some of the actions are appropriate for this method, but not all of them.

    1. James C. Sherlock Avatar
      James C. Sherlock

      I don’t believe this is any sort of a precedent, Steve.

      As Chief Executive, any President is well within his rights and responsibilities to give direction to the executive branch and all of them have done so. That is one of the biggest consequences of elections.

      The executive branch is then constrained by the law as to what exactly they can do. Again, as it should be.

      The problem is in Congress.

      As the federal government has continued to expand, Congress has found their ability to write laws specific enough to both empower and constrain the agencies in accordance with its will has shrunken.

      Nancy Pelosi’s rule has featured the purposeful destruction of regular order – the careful and bi-partisan consideration and writing of bills in House committees staffed for that purpose. That has very much restricted the constructive role that Congress was designed to play in crafting legislation.

      So some laws are very precise, some are not. Some are partially or fundamentally rewritten by the federal courts, some are not.

      What we are left with is a great deal more executive branch discretion than the founders would have imagined. But that is precisely why the bill of rights was written – to constrain government.

      The courts will have to do it.

      1. Publius Avatar

        The problem is us!
        We are ruled by idiots. Corrupt plutocrats, and we vote them in and we pay them too much, and they have too much control over our lives, and they get a pension for their “service.”
        Massive reform is needed. Government by EO, even when its “my side,” is just another type of monarchy. And sucks.

        1. James C. Sherlock Avatar
          James C. Sherlock

          As long as an EO is within the laws of the nation, it is appropriate. The courts will rule on that in this case and every other one.

          1. Publius Avatar

            Agree. The Executive (except in the case of Orange Man) is entitled to be the Executive and control the Executive branch. But not a way to govern – SlowJoe goes and everything wiped out by EO and a new slew of EOs. Total dereliction of duty by Congress and we snore on…

        2. Nancy Naive Avatar
          Nancy Naive

          One could argue that we don’t pay them enough so they resort to theft and sketchy fund raising.

          1. Publius Avatar

            Bribe them not to be crooks?
            How come they all end up so wealthy on $175K a year?
            What happened to the “service” put of public service?
            And they get a pension for it!

      2. Dick Hall-Sizemore Avatar
        Dick Hall-Sizemore

        Come on, Jim! You are criticizing Pelosi because she has destroyed “careful and bi-partisan consideration and writing of bills in House committees staffed for that purpose”? When did that happen under Newt Gingrich, John Boehner, or Paul Ryan?

        Also, the major reason Congress is broken now is the indiscriminate use of the filibuster by McConnell. How did he escape any criticism from you?

        1. James C. Sherlock Avatar
          James C. Sherlock

          Paul Ryan was the foremost reformer of all of the people you mention.

          He eliminated member “marks” to appropriations bills and reinstated regular order in the House.

          Sen. McDonnell did not invent the filibuster. It has been used for a couple of centuries to “cool” the passions of the House.

          That said, what I defended was any President’s use of EO’s, which as Chief Executive is part of his job and a direct consequence of elections whether I agree with them or not.

          The job of the federal courts is to make sure that EOs don’t violate the constitution or federal laws.

    2. Nancy Naive Avatar
      Nancy Naive

      “Doing all this by EO is a sign that our Congress is broken and corrupted…”

      Biden makes the 5th President in a row who has had to govern via EOs in a strictly increasing number.

      I’m beginning to suspect Congress was broken before the ink dried on Article I.

      1. James C. Sherlock Avatar
        James C. Sherlock

        I am the son of one of the Defense Department’s first chief legislative liaisons.

        In the 50’s, he talked often about the “barons” as the House and Senate committee chairmen were known then. They had real power. Their committee staffs were comprised of true subject matter experts appointed by both sides.

        Some committee meetings even invited and got the testimony of administration deputy department heads that were not gotcha sessions but exchanges of ideas.

        Chairmen of the Appropriations Committees were not just barons, but demigods.

        That is why Wilbur Mills, the Chairman of House Ways and Means from 1958 to 1974, made such a big story (splash?) when caught twice consorting (cavorting?) with the stripper Fanne Fox.

        Back in Congress, deals were made – or not, and legislation was brought to the floor, where it was sometimes amended, unlike now. Speeches were made that actually mattered.

        In Defense, the bills were generally passed with votes from both sides.

        That was the role that the founders envisioned for Congress. It was a truly independent branch, with one house defending the interests of the small states, the other dominated by the big states and both working as checks and balances on the executive.

        Dad sometimes did not get all that DoD asked for (and sometimes things that they did not want), but he and his bosses always recognized the proper role of Congress and respected it.

        That was long after Article I was approved.

        1. Nancy Naive Avatar
          Nancy Naive

          Wait. You used Mills/Fox and conclude with it worked as envisioned?

          Okay. I like it.

          A better example might’ve been John and Rita Jenrette.

          1. James C. Sherlock Avatar
            James C. Sherlock

            That of course was an anecdote, not a validation. Nice try.

    3. Matt Adams Avatar
      Matt Adams

      We’ve been on this course for a good while now. Congress people don’t wish to be held accountable for their votes, as their only goal is to stay in Congress. Since that has been established they’ve seceded more and more power to the Executive. Which in it and of it self is ever expanding, thus placing the power of Government in the hands of the plethora of unelected bureaucrats in Executive branch beholden to no one.

  5. Nancy Naive Avatar
    Nancy Naive

    The “fun facts” given by the MSM on this EO is that as OTC, hearing aids will drop in price by 90%.

    Oh, and that Medicare pays 4, 5, 10x more for some Part D drugs than an uninsured person buying the same drugs at CostCo.

    1. James C. Sherlock Avatar
      James C. Sherlock

      The current government payments for prescriptions are governed by federal law. They represent a Congressionally mandated subsidy to keep the new drugs pipeline open.

      See for the complex details.

      Bills to change that have failed in both houses of Congress.

      President Biden won’t successfully overturn it with an executive order.

      1. Nancy Naive Avatar
        Nancy Naive

        What? You think grownups know what they’re doing? That’s just a hustle, kid. They make it up as they go.

        1. James C. Sherlock Avatar
          James C. Sherlock

          I don’t agree. The Congress is well stocked with grownups. There are 535 of them, so sometimes we get “variations” from the ideal.

          1. Nancy Naive Avatar
            Nancy Naive

            So, wanna go in halvsies on the lighthouse? 250 each and we can create a fishing outpost for charter. Sweatequity and a fishing boat… could be cool.

            I believe about half that 535 are adults.

  6. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    I immediately thought of the health industry in Virginia when I heard of this welcome action by Biden. I agree with you that it is an area ripe for examination of its anti-competitive practices. But, I am not going to get my hopes up.

    First of all, the executive order is so sweeping that the administrative agencies cannot handle all of it at once and, therefore, will need to set priorities. Politically, the top priority will be IT. That will be enough to occupy them fully for awhile.

    Second, the agencies will have to get up to speed. I don’t know much about the FTC, but the Antitrust Division of DOJ has not been active for a long time, including during Democratic administrations. It is going to have to recruit some expert staff to take on this agenda.

    Third, it takes a long time to develop an antitrust case.

    Fourth, there are the courts. As an article in the Washington Post recently pointed out, courts “have shown skepticism about competition arguments in the past.” A federal judge recently gave the back of his hand to a case brought against Facebook brought by the FTC.

    Fifth, even if antitrust case is developed and courts agree to hear it, litigation over such cases usually takes a long time, with multiple appeals.

    In summary, I fear that the case of Sentara and Optima is such a little fish in a big pond that it will take a very long time for it to be noticed.

    1. James C. Sherlock Avatar
      James C. Sherlock

      Perhaps. But we can always hope.

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