Healthcare providers and health plans are at it again, bickering over who holds the cards when it comes to negotiating rates. If you recall, late last year the Center for Studying Health System Change issued a report stating that in many markets, providers had enough clout to negotiate "higher-than-competitive prices," putting insurers at a disadvantage and ultimately driving up premiums.
In Miami, for instance, average inpatient hospital payment rates of four large national insurers were nearly 150 percent of Medicare's rates and 210 percent in San Francisco. "In extreme cases, some hospitals command almost five times what Medicare pays for inpatient services and more than seven times what Medicare pays for outpatient care," according to the study.
The American Medical Association (AMA) delivered its retort via the annual "Competition in Health Insurance: A Comprehensive Study of U.S. Markets" report. With 2008 enrollment data from HMOs and PPOs in from 359 metropolitan statistical areas throughout the country, AMA found that in 60 percent of the markets, the two largest insurers had a combined market share of 70 percent or greater.
In 18 percent of the metropolitan statistical areas, at least one insurer had a market share of 70 percent or greater, indicating "a significant absence of competition among insurers," according to the AMA. "When insurers dominate a market, people pay higher health insurance premiums than they should, and physicians are pressured to accept unfair contract terms and corporate policies, which undermines the physician role as patient advocate," said association President Cecil B. Wilson in a statement.
Of course, health plans were eager to defend their territory. "Competition is vigorous among health plans across the country," America's Health Insurance Plans (AHIP) Press Secretary Robert Zirkelbach told HealthLeaders. "They operate in highly competitive markets in which consumers have numerous choices among plan types and insurers."
While stopping short of calling the report erroneous, AHIP pointed out that a former Department of Justice staff economist who analyzed last year's study concluded that AMA's accuracy and reliability could be called into question. "For example, the AMA data exclude some types of self-funded plans, a large and growing portion of the market, and show significantly higher market concentration than data available from NAIC," according to Zirkelbach.
He went one step further stating that in many markets, provider consolidation is a significant factor contributing to rising healthcare costs, citing research indicating that states often cited as examples of high market concentration actually have some of the lowest premiums in the nation.
As an industry observer, I'm left scratching my head as to who's story to believe. Turns out they're both right. Buried deeper in AMA's research about the lack of insurer competition is the fact that small physician practices are really the ones bearing the scars from contract negotiations. But considering the constant downward pressure on Medicare reimbursements, it's a bit unfair to health plans as the ultimate unruly enforcer.
That still doesn't answer the question of who's responsible for painfully high healthcare costs. Judging by what each side has to say, perhaps both should share the blame along with John Q. Public who doesn't take nearly as good enough care of himself as he should.