Study Spotlights Provider Market Power to Negotiate Higher Payment Rates

March 15, 2010March 17, 2010 J Roberts

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.”

Healthcare Spending Expected to Have Outpaced GDP Growth

February 10, 2010 J Roberts

Healthcare Financial News

Healthcare spending is on track to grow faster than the nations GDP for 2009. Unfortunately, we’ve seen this trend for the past few years and 2010 will promise nothing different. One thing is for certain, to combat the increased expenditure in medical services, employers and health insures alike are passing more costs onto employees and consumers.

Growth in U.S. national health expenditures (NHE) is expected to have increased faster than the growth in the gross domestic product (GDP) in 2009, according to a report issued today by the Centers for Medicare & Medicaid Services (CMS) and published online by Health Affairs. In 2009, NHE is projected to have reached $2.5 trillion and grown 5.7 percent, up from 4.4 percent in 2008 (the latest available historical year), while GDP, with the economy still in recession, is anticipated to have declined 1.1 percent. Health spending estimates for 2009 are projected because data for all of CY09 are not yet available.

The projected acceleration in growth for 2009 was due in part to faster spending growth for the Medicaid program (9.9 percent, up from 4.7 percent in 2008), reflecting increasing growth in enrollment associated with the recession. Also contributing to the acceleration was faster growth in the use of a variety of healthcare services as many people sought treatment for the H1N1 virus and an expected increase in the take-up rate for coverage provided through COBRA in response to the government’s subsidies for COBRA premiums. As a result of NHE growth outpacing GDP growth in 2009, the health share of GDP is expected to have increased from 16.2 percent of GDP in 2008 to 17.3 percent in 2009, which would represent the largest one-year increase in history.

Spending growth in three of the major healthcare sectors is expected to have accelerated in 2009. Hospital spending growth is expected to have increased 5.9 percent in 2009, up from 4.5 percent in 2008, and reached $760.6 billion. Physician and clinical services spending growth is expected to have increased 6.3 percent in 2009, up from 5.0 percent in 2008, and reached $527.6 billion.

Negotiate Your Medical Costs: Interview with Derek Fitteron, CEO of Medical Cost Advocate

January 25, 2010January 25, 2010 J Roberts

Medical Cost Advocate is in the news! Reporter Miranda Marquit from All Business News recently spoke with CEO Derek Fitteron about negotiating medical costs. Read on to learn about Medical Cost Advocate and what they are doing to help consumers who have large medical expenses. It’s great to know that there is a company working as an advocate on behalf of consumers to reduce healthcare costs.

Miranda Marquit

I recently saw an increase in my health insurance premium, and I will see it again quite soon, thanks to age-based premium increases. As a result, I am seriously thinking of a Health Savings Account and a high deductible plan. The ridiculousness of rising medical costs is really starting to be annoying — and increasingly moving toward unaffordable. Many people already experience the fact that health care in this country is unaffordable for them. So it was interesting to learn a little bit about a company that works to negotiate medical costs.

I recently spoke with Derek Fitteron, the CEO of Medical Cost Advocate, and he gave me some insight into what his company does to help consumers reduce their health care costs.

“Expectations were that health insurance premiums would go up six to eight percent,” Fitteron told me. “Instead, they are going up 10 to 12 percent. That means that employers are passing more costs on to employees, and consumers find that they have to pay more out of pocket. What we do is work to negotiate out of pocket expenses so that consumers pay less.”

The way it works, he explained, is that consumers can submit their out of pocket expenses, spent to meet a deductible or due to out of network treatment, and Medical Cost Advocate will attempt to negotiate a lower payment. Fitteron said that the company only charges if the fee is successfully renegotiated. “We take a percentage of what we accomplish. If the bill isn’t reduced, we get nothing.”

“We also help the uninsured,” Fitteron continued. “About 15 percent of the people we serve are not insured, and we can help them get a better rate, since they don’t have the advantage of a group rate through insurance.”

Fitteron also told me about a program that can help manage a family’s health care costs. “For 200 dollars a month, it is possible for us to track bills, review insurance and negotiate your costs. And this is for the whole family.”

Services offered by Medical Cost Advocate can be paid for using money from Flexible Spending Accounts or Health Savings Accounts. I haven’t used these services, but they seem intriguing. If I decided to go with a Health Savings Account, and have to pay out of pocket for more of my health care, it might be worth it to see if cost negotiation can save me a little more. I’m not sure that I would need the monthly service, but it might be worth it to check into the negotiation service offered.