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Health Plans Don't Always Play Hardball with Providers

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

Here are five instructive points gleaned from the study:

 

1.The haves sometimes help the have nots.
Berenson says there's evidence that some hospitals without must-have market power can get reasonably decent rates when health insurers are trying to maintain hospital competition in the market. In markets such as Indianapolis there is an effort, according to one healthcare leader, to "keep small providers alive, so there is less consolidation." Mid-tier hospitals can definitely get spillover rates from the must haves but that usually doesn't extend to hospitals that cater to low-income Medicaid and uninsured patients. Insurers don't think twice about leaving those hospitals out of their networks unless they house a level one trauma center.

2.Dominant insurers don't sweat rates.
Dominant insurers with 60% to 70% of a market don't need to muscle the must-haves to accept lower rates. "As long as they think they have the most favorable rates, they don't have to push their potential market power. They just have to be better than the competition," says Berenson. He explains that while the rates in these markets are lower than in markets where there isn't a dominant insurer, the rates themselves aren't bargain basement.

3.Tiered networks are a tough sell.
The must-haves are in a position to veto most efforts to make them part of a tiered network where there is higher patient cost sharing for selecting that hospital. Even if a must-have facility agrees to be part of a tiered network, it has the clout to define the terms of the tier to make sure cost sharing probably won't have much of an affect.

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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?