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Health Plans Don't Always Play Hardball with Providers

Margaret Dick Tocknell, for HealthLeaders Media, May 9, 2012

When you're looking for healthcare cost drivers, don't overlook those high-prestige, must-have hospitals that payers need in their networks to keep their customers satisfied. Their rates are hobbling health insurers, or so it appears.

 

But get this: Sometimes health plans don't play hardball when it comes to provider negotiations. They'll agree to large increases in provider payments as long as their competitors pay even higher rates.

Must-haves, by the way, are often academic medical centers like Partners Healthcare in Boston. While they used to be referral centers for more specialized care, these must-haves are offering more primary and secondary care, as well as tertiary and quaternary care.

Robert A. Berenson has looked into this phenomena and produced a study that appears in the May issue of Health Affairs. Berenson is a fellow at the Urban Institute and serves as vice chair of the Medicare Payment Advisory Commission or MedPac. Along with Paul Ginsberg, president of the Center for Studying Health System Change, Berenson and his team conducted interviews with healthcare leaders in the 12 metropolitan communities involved the center's community tracking study.

Geography, specialized services and the size of the hospital system across multiple markets can also play a role being deemed a must-have. Berenson says that's the case in Miami where Baptist Health, which is not an academic medical center, effectively competes with the University of Miami Hospital and is considered a must-have for insurers.

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2 comments on "Health Plans Don't Always Play Hardball with Providers"


Margaret Dick Tocknel (5/11/2012 at 10:01 AM)
Thank you for your comment. Please note that I am not advocating that approach but rather reporting its existence as identified in the study, which reports on multiple occurrences based on interviews in a dozen metropolitan areas. Although there is a DOJ suit pending in Michigan and Indiana has a state law that bans favored nation clauses, the study notes that provider negotiations are very nuanced and some insurers are able to simply outbid competitors.

Maria Todd MHA PhD (5/9/2012 at 1:09 PM)
RE: "Sometimes health plans don't play hardball when it comes to provider negotiations. They'll agree to large increases in provider payments as long as their competitors pay even higher rates." I seem to remember that this tact was frowned upon on as an antitrust issue - especially in most favored nations arguments in Pennsylvania and elsewhere, as causing even smaller insurers to pay more, rendering them unable to compete in the market place and therefore creating a detriment to the market. Why would you suggest such an option in a positive positive light as a viable strategy?