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Health Insurer Negotiating Power Declining?

Posted on April 16, 2013 by Randy Cox   (all articles)

insurer_negotiating_power_melting

This post is not about insurance premiums, which are the monthly fees patients pay insurance carriers. It's about the rates on medical procedures and services that insurance companies negotiate with hospitals and other medical facilities on behalf of their patients.

I doubt you’ll find any studies or hard data on this, because insurer-negotiated rates are under lock and key. Medical providers and facilities are under contract not to share them, as are most self-insured providers and their vendors. The carriers themselves are beginning to disclose a few of them, either via their cost estimator tools or via developer APIs, but this is incomplete, and only very recently available.

The studies I would like to see would require historical data compared to current data, because I believe the negotiating power of these carriers is in decline, which may push the actual payments for services paid by patients much higher. There are two reasons for this.

Hospitals are increasingly monopolistic. More and more hospitals are merging and buying out physician groups in their areas. The larger hospitals get, the more power they have to control the prices they set.

Hospitals and insurers are merging. The article The Quiet Takeover: Insurers Buying Physicians and Hospitals was published by Becker’s Hospital Review nearly two years ago, and the phenomenon is becoming more frequent. One of the reasons for this is the creation of Accountable Care Organizations (ACOs), which is a relatively new payment and care delivery model aimed at basing reimbursements on quality metrics and reducing overall care costs in an area.

Regardless of the reason, the result is that insurers are either less able to negotiate lower rates for consumers, or less interested in doing so in the name of their own profits.

Until there is more downward pressure on insurer-negotiated rates, consumers will continue to get the short end of the stick. It's an expensive end, and it's going to break patients. Public visibility and the ability to compare insurer-negotiated rates between providers is a must.  Pricing Healthcare is the only company building a platform to give patients this kind of information.