Australia’s competition watchdog has delivered its final ruling allowing the formation of the Honeysuckle Health buying group, however it has prevented the involvement of four major health funds that represent 70% of the market.
The Australian Competition and Consumer Commission (ACCC) has also addressed concerns the buying group’s ‘value based’ contracting model would lead to the introduction of US-style managed care in Australia, stating this was “unlikely” and was factored into the final decision.
Honeysuckle Health is an equal joint venture between nib and US-based health services company Cigna Corporation established in 2019. It operates independently from both entities and currently provides data analytics, contract negotiation, procurement and administration services for nib’s contracts with hospitals, medical specialists, GPs and allied health professionals.
The ACCC application sought authorisation for Honeysuckle to provide these services to additional PHIs and form a joint buying group.
The proposal was approved in the ACCC’s draft determination in May, which sparked significant backlash, with 204 submissions, compared with just 30 submissions during the initial consultation phase.
The Australian Society of Ophthalmologists also spearheaded a campaign called Send the Eagle Home, which had the backing of the Australian Medical Association, Council of Procedural Specialists Australia, Australian Private Hospitals Association and Medical Surgical Assistants Society of Australia.
The final determination was handed down on 21 September, with the ACCC largely sticking by its draft decision. However, it imposed a condition that major insurers Medibank, Bupa, HCF and HBF in Western Australia can’t join the buying group. It also only granted authorisation for five years until October 2026, rather than the 10 years sought, so it can review its impact earlier.
The Honeysuckle buying group is set to add another major player to the current crop of PHI buying groups that comprise the Australian Health Services Alliance (AHSA) and the Australian Regional Health Group (ARHG).
In its final ruling, the ACCC said the introduction of Honeysuckle would provide greater choice of buying groups for smaller PHIs and increased competition between the buying groups. It would also improve access to information for smaller PHIs, through the option of a particular type of data analytics based on aggregated data of all members of the buying group, which would not otherwise be available and will likely assist in offering more competitive products and services.
“Increased competition between buying groups is likely to foster greater innovation and incentivise the buying groups to provide better value to their participants. In turn, and in combination with the improved information available to them, smaller PHIs are likely to be able to compete more effectively with the major PHIs to attract customers by offering reduced costs or better services to the benefit of PHI consumers,” the ACCC sated.
The ACCC also believed the buying group would result in some public benefits for consumers through the Broad Clinical Partners Program (BCPP) whereby Honeysuckle signs agreements with medical specialists so customers aren’t charged out-of-pocket costs for hospital treatment.
“If the buying group expands to more of the smaller insurers, we consider that Honeysuckle Health’s BCPP likely to help reduce uncertainty for more consumers about out-of-pocket expenses for certain types of procedures. It is also likely to provide more consumers with greater access to medical procedures which attract no out-of-pocket expenses,” ACCC Commissioner Stephen Ridgeway said.
Consultation and amendments
During the consultation phase – in response to mounting opposition – Honeysuckle amended its original application to exclude major PHIs Medibank, Bupa, HCF and HBF from participating for hospital contracting, medical gap schemes and general treatment networks.
In the amended application, however, it did seek approval to provide contracting services to all PHIs, including major health funds, for the BCPP, subject to a condition that the buying group would be allowed to represent a maximum of 80% of the national private health insurance market.
“However, we were concerned about the potential effect on competition if the buying group involving Honeysuckle Health and nib became too large and gained too much bargaining power,” Ridgeway said.
“And we have accordingly imposed a condition that excludes the participation of other major health insurers. These insurers represent around 70% of the market in most states and territories.”
The ACCC went on to state that major PHIs have the scale to develop similar no gap experience programs and can do so without the need to join the BCPP.
Concerns about US-style managed care
A chief concern among medical peak bodies is what influence the Honeysuckle buying group may have on clinical care pathways.
This was a cornerstone in the ASO’s campaign, which stated that it could lead to US-style managed care and limit the amount of freedom patients had when choosing their care provider.
The ACCC said that it carefully considered these concerns but after an extensive investigation, it was not satisfied that granting the authorisation would result in the current Australian healthcare system changing to a US-style managed care model.
In reaching this conclusion, the ACCC considered several healthcare regulatory restrictions and policy settings. It also noted that health insurers are currently engaged in the ‘value-based’ contracting practices proposed for the buying group, and that these practices are likely to continue even if the authorisation was not granted.
“We also concluded that the condition that excludes the major insurers from membership of this buying group, and the shorter period of authorisation, are likely to address concerns about the long-term effects of the authorisation,” Ridgeway added.
Honeysuckle Health CEO Mr Rhod McKensey said the entity would differ from other buying groups because it of its focus on on value-based care and data science to inform decision making.
“Value-based care is not new. Many healthcare systems are exploring how to apply it, including NSW Health,” he said
“In the healthcare setting there is significant variation in costs, clinical outcomes, patient experience and provider experience with some hospitals and clinicians charging markedly more than their peers. We believe all this information should be readily available to both GPs and consumers and be used to help inform treatment options.”
He said criticism from the medical profession about its potential to influence clinical autonomy was not accurate.
“We have no intention to ever interfere in the clinical autonomy of doctors, rather provide optional tools and services to enhance the care they already provide. Honeysuckle Health is an exciting opportunity for the healthcare system and should be judged on its actions and outcomes, not assumptions,” he said.
“Pleasingly we’ve seen growing support from clinicians who share our belief in the principles underpinning value-based care and recognise that the health system needs to shift its focus from activity to value.”