Skip to main content

HL20: Steven Sonenreich—Talking Transparency

 |  By Philip Betbeze  
   December 02, 2013

In our annual HealthLeaders 20, we profile individuals who are changing healthcare for the better. Some are longtime industry fixtures; others would clearly be considered outsiders. Some are revered; others would not win many popularity contests. All of them are playing a crucial role in making the healthcare industry better. This is the story of Steven Sonenreich.

This profile was published in the December, 2013 issue of HealthLeaders magazine.

"It makes no sense that vendors are able to charge different hospitals different rates for the same products."

From Mount Sinai Medical Center in Miami Beach, Fla., Steven Sonenreich isn't afraid of making waves. He shocked many, including another health system CEO, during a radio talk radio show a few months ago by announcing that his health system would start publishing what it charges commercial insurers for procedures—something new that might make healthcare better or at least more affordable.

"We will post our prices relative to Blue Cross and Aetna, our contractual prices," said Sonenreich, during an appearance on WLRN 91.3-FM. He challenged other hospitals to do the same.

"We've all seen the cost of insurance rising at such an alarming rate, and that has caused the expense to the employer and the employee—in terms of employee contributions, deductibles, and copays—to also rise dramatically, and that's of great concern to me as an employer," he says.

The radio show visit was in the wake of the decision by the Centers for Medicare & Medicaid Services to release individual hospital reimbursement rates that, for the first time, allowed independent analysts to compare reimbursement rates among hospitals and health systems across the country, at least on Medicare and Medicaid.

The problem was and is that Sonenreich is not allowed to do what he promised—at least, not exactly.

Why? Contracts with insurers almost always preclude the release of this data on competitive grounds that some regard as dubious.

"The majority of insurers are marketing organizations that want to have the broadest network possible," he says. "They should do more to manage expense for policyholders in order to hold down the cost of health insurance."

Insurers argue that allowing hospitals to know what each other are getting from the insurer puts the insurer at a disadvantage. Maybe so, but conveniently, that custom also obscures whether the insurance company is in fact performing one of its key roles as an arbiter of prices for its customers—employees and employers. It dulls the incentive for the insurer to drive the best bargain, and it's yet another instance of opacity in an industry that is too unsafe and too expensive. Most agree that patients and employers would benefit from healthcare cost transparency as it relates to reimbursement rates, yet it's contractually forbidden.

Since that day on the radio, Sonenreich has walked back those provocative comments because he must. Instead of publishing prices for individual procedures, Mount Sinai will instead soon release its "blended rate" so as to avoid technically violating its contracts with commercial insurers. Sonenreich's determination to increase transparency in hospital-insurer contracting is not altogether altruistic. He's hoping the release will show his system as a low-cost, high-quality provider that could benefit local employers who might include Mount Sinai Medical Center in a so-called "narrow network" that would save costs.

He contends that most of the impetus for consolidation taking place in healthcare today is, for the most part, about monopoly power, and not economies of scale and scope that health system leaders tout when seeking approval for a merger. Yet he can't prove it to the general public because insurers insist on making the prices they pay healthcare providers a secret.

"Consolidation, which some would like you to believe is about efficiencies, has instead hurt competition and raised prices," he says. "When we looked at state data of large systems in our marketplace, the reimbursement and pricing they were able to receive from insurance companies was at times 45% higher than all other hospitals in the marketplace and their cost was 25% greater. So all consolidation did was drive up price and cost."

That's particularly true in south Florida, he says, because of the fact that the market is made up mostly of small and medium-sized employers who don't have the clout to force insurers to resist rising prices.

"When I look at rising cost of insurance for our organization and employees, it's alarming because a major component of price rises has been the consolidation of the hospital industry," he says. "What's occurred is we have many large hospital systems that are using that size to leverage insurance companies for much higher rates. They would like you to believe it's to improve operations, but it's really to drive pricing leverage."

Reimbursement rates for commercial insurers aren't the only place Sonenreich feels like his standalone academic medical center—a 672-licensed-bed hospital with four satellite centers that reported 2012 net revenues of $550 million—can make a difference. Similar "gag" clauses are embedded in contracts hospitals and health systems have with medical device suppliers.

"It makes no sense that vendors are able to charge different hospitals different rates for the same products," he says. "We want the playing field to be leveled. We meet the quality of others, so it's not fair that we should receive 40% less reimbursement for doing the same things others are doing. That makes it very difficult for us to grow our mission."

Philip Betbeze is the senior leadership editor at HealthLeaders.

Tagged Under:


Get the latest on healthcare leadership in your inbox.