Read how physicians and hospitals are joining together to increase their market share and purchasing power to better negotiate more favorable levels of reimbursement. This is a trend to watch, the net results may lead to an increase in health care premiums and out-of-pocket costs.
HFMA
An underlying driver of higher insurance premiums—the growing market power of hospitals and physicians to negotiate higher payment rates—has gone largely unexamined, according to a Center for Studying Health System Change (HSC) study published online today by Health Affairs.
Funded by the California HealthCare Foundation, the study examined the growing market power of many California hospitals and physicians, finding that providers are using various strategies, such as tighter alignment of hospitals and physician groups, to negotiate significantly higher payment rates from private insurers.
“Provider market power is the elephant in the room that no one wants to talk about in the national healthcare reform debate,” said HSC Senior Consulting Researcher Robert A. Berenson, M.D., of the Urban Institute, a coauthor of the study with HSC President Paul B. Ginsburg, Ph.D., and Nicole Kemper, M.P.H., a former HSC research analyst.
“Health insurers have been squarely in the crosshairs and blamed for the high cost of private insurance, while the role of growing hospital and physician market power has escaped scrutiny,” Berenson said.
The study also points out that California offers a cautionary tale for reform proposals that encourage hospitals and physicians to form tighter relationships through accountable care organizations.
“Reform proposals that encourage hospitals and physicians to integrate have the potential to improve quality and increase efficiency, but the savings may not be passed on to private payers if provider market power to command higher prices goes unchecked,” Ginsburg said.
The authors conclude that “unless market mechanisms can be found to discipline providers’ use of their growing market power, it seems inevitable that policy makers will need to turn to regulatory approaches, such as putting price caps on negotiated private-sector rates and adopting all-payer rate setting. Indeed, some purchasers who believe strongly in the long-term merits of increased integration of care delivery believe that price regulation may be a prerequisite for payment reforms that encourage integration.”
