Some academic medical centers are being excluded from state health insurance exchanges because their costs are higher than other hospitals'. The resulting squeeze on revenues "raises very real worries about hospitals' ability to carry out their mission," says the New Jersey Hospital Association.
Though health plan coverage purchased through the exchanges take effect in just three weeks, it's still too early to say what impact the new policies' so-called "narrow networks" will have on some hospitals' multiple missions when plans reroute thousands of patients to other doctors and hospitals.
But for academic medical centers and their physicians, many of whom are excluded from many health plans products because their costs are higher than other hospitals', the ramifications are worrisome.
There are potential negative impacts not just on patients, but on the organizations' multiple missions to teach and perform research, and on maintaining margins to sustain a high quality of specialized care, such as transplant programs and cancer treatments.
Those are the views of Joanne Conroy, MD, Chief Health Care Officer at the Association of American Medical Colleges and a former hospital CMO and COO. "Right now, we're watchfully observing how many people move into the exchanges and what it actually means for the financial sustainability of academic medical centers," she says. The impact on hospitals' census numbers, she acknowledges, "is a concern, but it remains to be seen."
While most media reports have focused on patients' misperceptions of what they are buying with their premium dollars, few reports have examined the ultimate impact on these teaching and research hospitals and clinicians, many of which are located in the middle of low-income urban areas where many of the exchange customers live and work, and where many have long received whatever care they got.
'These Are Our Rates. Take It or Leave It'
"We expected, and had been talking about this for the last two and a half years, how important it was for academic medical centers to be designated as an essential community provider within these plans," Conroy says. "But that some hospitals were excluded from so many was a surprise. For example, some of the hospitals in the California exchange are just not included in some plans. And for others, patients have to pay more to go to hospitals in the top tier."
Conroy says that some hospitals "are not being given an opportunity to participate, where there are others to whom insurers are saying 'this is the price we're going to pay.' And it's 30% lower than what they pay in the non-exchange market. So quite a number of physician groups and hospitals are responding by saying 'that's far below our costs; we can't agree to that.'
"Insurers are saying, 'these are our rates. Take it or leave it.' And it's creating a tremendous amount of confusion for patients who might have joined a product because they thought a physician was going to be in that product, only to find that they're not."
Both hospitals and health insurers know this new population of insured patients includes many with serious illnesses that may have gone untreated for many years. "They have a pre-existing condition, or a combination of illnesses, and may have been uninsurable through other products," Conroy says.
'Serious Concerns About the Impact on Providers'
That may mean a more costly crowd of patients with a lot of diagnostic care and treatment required to get them on track to manage their conditions. The task is made tougher as federal disproportionate care money designed to pay for this care diminishes, according to federal schedule.
The situation in Detroit, Conroy says, is such that people enrolling in the exchanges are getting into plans requiring them "to drive over an hour to get to a facility where they would be covered in network."
Sarah Lechner, general counsel for the New Jersey Hospital Association, echoes similar woes.
"It's difficult to say exactly how this will play out here after Jan. 1, but we do have serious concerns about the impact on providers," she said in an e-mailed statement.
"Payers essentially are forcing hospitals into networks based on existing commercial contracts and not always engaging in rate negotiations. Any further squeeze on hospital revenues raises very real worries about hospitals' ability to carry out their mission – obviously the mission to provide care including to the uninsured, but also the ability to continue quality improvement initiatives, community benefit [activities] and to provide teaching and research in academic medical centers."
Officials for America's Health Insurance Plans declined to comment, saying they can't speak for individual contracts between plans and providers. Instead they referred readers to AHIP blog posts that say consumers and employers prefer smaller provider networks over higher premiums.
Seattle Children's Hospital
Many academic medical centers, Conroy says, are watching what happens to Seattle Children's Hospital, where Senior Vice President and Chief Strategy Officer Sandy Melzer, MD, says his 325-bed hospital has not been able to participate in products offered by three of the six health insurance companies in Washington State, and has sued the state for allowing the hospital's exclusion.
The situation means that parents of these children—knowingly or perhaps unknowingly—are buying plans that will mean half will not be able to get the specialized care available only at Seattle Children's, which is set up for complex cancer, trauma, heart, and other types of specialty care not available at surrounding community hospitals, Melzer says.
"Parents don't often know when they sign up for these products which hospitals are in and which are not. And insurance companies will often overstate" the capabilities of the hospitals that really are. A lot of these community hospitals that are in these narrow networks are woefully unprepared to provide care for children," he says.
As an example, one health plan initially would not include Seattle Children's in its exchange network, although it is now in negotiations to do so, Melzer says.
That health plan's CEO "said that services they provided in our market were at a community hospital… 30 miles from here, a small inpatient unit with virtually no pediatric subspecialists," he says. "And his answer to network adequacy was to say yes, when in fact it had none of the capabilities that would be available here."
Melzer says his hospital has not yet modeled the financial impact on his hospital, although that will come.
"The biggest risk now from narrow networks is a diversion of cases away from certain hospitals to other settings, reducing their revenue, reducing their cases available for teaching, etc.," notes Melzer.
"The associated risk is that those patients who have been sent to hospitals that may not be able to handle the problem… [may] end up back at Children's hospital and, in fact, the cost ends up higher than it would have been had they started out at the right point of care."
But for Melzer and Seattle Children's, "the broader issue is whether a state's networks should be allowed to operate without giving access for children."
Melzer says that at some children's hospitals around the country, which he declined to identify, "to avoid being tiered out of networks, [have] been forced to reduce their fees for certain types of non-unique services, like labs and radiology. We've seen this around the country, with some taking significant reductions to stay competitive, which has prompted other expense reduction efforts elsewhere in those organizations."
Cedars-Sinai Hospital
At 958-bed Cedars-Sinai Hospital in Los Angeles, president and CEO Thomas M. Priselac has similar concerns because only one health plan, HealthNet, has plans that include contracts with Cedars-Sinai physicians.
Those who buy plans through Blue Cross, Blue Shield, Aetna, and Cigna will go elsewhere under in-network pricing because, he says, "though we talked with all of them… at the end of the day we were not able to reach agreement on a price that was sustainable."
Priselac says that the scenario the AAMC's Conroy suggests, where health plans were offering rates 30% lower than what they pay for non-exchange commercial plans for care at that hospital, "is not atypical" of what happened at Cedars-Sinai.
He emphasizes that health plans are not seeing the academic medical center in the right context. Rather than excluding Cedars-Sinai because of its high costs, Priselac says, health plans should understand that academic medical centers like his are community resources that "provide a significant volume of treatment for the most advanced care medicine can provide," with large research and teaching programs, "that location is more expensive, but the system overall saves money because it's cheaper to have those costly services in one area so you don't duplicate the people and the equipment."
Where insurance companies get it wrong, he says, is that they make judgments based on cost comparisons in a narrow geographic area.
In time, when the population within the exchanges becomes clearer and patients realize what they have bought, Conroy hopes "clearer heads will prevail. We all want the exchanges to work. We just have to figure out how. And we can't anticipate all the bumps in the road that we'll have to work through to get there."