There's plenty more to say, starting with the providers

April 1, 2010

Eventually, the conversations attacking health insurers will tire out, and providers will become the next health-reform punching bag.

No doubt providers, who really should be called on to justify their charges, will have plausible explanations, beginning with painfully low reimbursement rates from Medicare and Medicaid. At that point, the discussion will end abruptly because the fingers will be pointed right back at CMS. Those inquisitive government officials will decide that cost shifting onto the private market is not necessarily a bad thing.

Of all the players seated around the healthcare reform table, payers are the only ones challenging the cost of care, and yet, they're the ones getting the beating. They know 20 bucks for two aspirin is a rip-off, but no one is listening.

A study from the Center for Studying Health System Change, funded by the California HealthCare Foundation, examined the power of providers in California. While the market share of insurers draws all the attention these days, this study, released in February, identifies provider clout as "the elephant in the room."

Hospitals and physicians are using tighter alignment to negotiate significantly higher payments from private insurers simply because of their size, not because higher quality care might warrant the increase. Study authors say the growing market power "has escaped scrutiny."

Unfortunately, creating accountable care organizations (ACOs) and other provider coordination efforts could also provide market leverage, and with a wide enough geographic area, a large ACO probably wouldn't have antitrust issues. Don't count on any savings from the ACO model getting passed along as lower prices for services, either.

In locations where specific types of providers are in short supply, negotiations are swift. If you're the only pediatric cardiology practice in town, you name your price. Because of customer needs and network-requirement rules, a payer won't have the choice to cut such high-cost providers out of the network. As hard as some payers try to direct members to high-value providers, sometimes there aren't any.

And now HHS is coming down hard on premium prices and seems unwilling to accept rising medical costs or increased utilization as a reason.

Give credit to AHIP President Karen Ignagni for drawing an excellent analogy in her statement about regulation of premiums as a method for controlling costs:

"To suggest that cost containment can be achieved by singling out health plans ignores the very inconvenient truth that premium increases reflect increases in the underlying cost of medical services," Ignagni says. "Regulating premiums won't do anything to reduce the soaring costs of medical care. This would be like capping the prices automakers can charge consumers, but letting the steel, rubber and technology manufacturers charge the automakers whatever they want."

President Obama believes we've said all there is to say about healthcare and that everyone has said it. But there's plenty more if someone would just listen.

Julie Miller is editor-in-chief of MANAGED HEALTHCARE EXECUTIVE. She can be reached at julie.miller@advanstar.com
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