What is a most favored nations clause and why is it relevant to healthcare? Put simply it means that the insurer is getting the best price that the doctor is willing to give. How do many people violate this? Cash discounts. Lets look into the details straight from Evan Sznol’s Issue Brief: Most Favored Nation Clauses.
Most favored nation clauses are also refereed to as “most favored customer clause” “non-discrimination clause” or “prudent buyer clauses.” It is all summed up in saying that the buyer will receive the best price from the seller. With two potentials for abuses mainly stemming from a cartel of providers imposing MFN on members or a dominant health plan raises rival’s cost. Let’s talk about the latter, in this case we see providers being discouraged from offering any type of discounts for fear of violating MFN agreements. This is where the majority of providers fall. They are afraid to or illegally offer cash discounts thus violating any MFN clauses in any contracts.
Prices in areas with MFNs tend to have very little cost savings due to the fact that there is no incentive for those providers to give a discount. This keeps the cost of healthcare very high. The FTC and DOJ have had several anti-trust lawsuits on the subject. The DOJ filed suit with BCBS in Michigan No. 10-cv-14155 (E.D. Mich. 2010), alleging that the use of an MFN by the dominant health plan raised prices to consumers and created barriers to entry for rival plans.
Some states have enacted bans on MFN clauses but that does not mean that the insurance companies are adhering to these bans. The best way to fight back and secure yourself from such accusations of violating MFN is joining Patient Options to protect your practice.
Special thanks to Evan Sznol For his brief on Most favored nations in the medical setting.