Health Plans Don't Always Play Hardball with Providers

Margaret Dick Tocknell, for HealthLeaders Media , May 9, 2012

4.Bluffing doesn't work.
If an insurer doesn't have a reasonable threat of excluding a hospital from a network, then it loses a lot of negotiating leverage. In that case, Berenson says the only hospitals an insurer can legitimately threaten are facilities that don't see a lot of the insurer's members.


5.Employers often look the other way in insurer-hospital confrontations.
Berenson says Boston is a perfect example of this phenomenon. Employers may complain about their healthcare costs, but when Tufts Health Plan tried to take on the powerful Partners,  employers balked at the possibility of not having the healthcare system in their networks. "You don't do business in Boston if you're a health plan without Partners. So what's the threat against Partners? It's a must have for employers."

In the end, Berenson says negotiating leverage between insurers and hospitals is a more nuanced process than previously considered. It makes you wonder if public policy focused on health plan rates increases is really getting to the root of the problem. Berenson and his team conclude that "a range of other market and regulatory approaches also need to be examined."

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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2 comments on "Health Plans Don't Always Play Hardball with Providers"

Margaret Dick Tocknel (5/11/2012 at 10:01 AM)
Thank you for your comment. Please note that I am not advocating that approach but rather reporting its existence as identified in the study, which reports on multiple occurrences based on interviews in a dozen metropolitan areas. Although there is a DOJ suit pending in Michigan and Indiana has a state law that bans favored nation clauses, the study notes that provider negotiations are very nuanced and some insurers are able to simply outbid competitors.

Maria Todd MHA PhD (5/9/2012 at 1:09 PM)
RE: "Sometimes health plans don't play hardball when it comes to provider negotiations. They'll agree to large increases in provider payments as long as their competitors pay even higher rates." I seem to remember that this tact was frowned upon on as an antitrust issue - especially in most favored nations arguments in Pennsylvania and elsewhere, as causing even smaller insurers to pay more, rendering them unable to compete in the market place and therefore creating a detriment to the market. Why would you suggest such an option in a positive positive light as a viable strategy?




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