Insurer-Provider Payment Negotiations: Implications for Health Spending
December 10, 2010
Mary Ellen Stahlman
Several recent studies have examined the variation in payment rates negotiated between private insurers and providers. Payment rates commonly vary from one geographic area to another for a number of reasons, including geographic differences in salaries, rent, historical payment amounts, and many other factors. More remarkable, however, may be the variations in payment rates within a community—hospitals or physician groups in some communities are paid markedly different amounts by insurers. The process by which insurers and providers negotiate payment rates is largely a black box to those not a party to the negotiations. However, these payment negotiations are key in determining health insurance premiums and ultimately overall health care costs. Hospital and physician groups that seemingly cannot be left out of insurer networks due to location, reputation, or other factors—so called “must-have” providers—can command higher payment rates during negotiations, while providers with less leverage in that market cannot.
This session focused on how negotiations between health plans and providers really work, and what factors contribute to such wide variation in payments. It explored whether it is realistic to exclude higher-priced must-have providers from health plan networks, given consumer preferences and lack of meaningful employer support in many cases. The implications of both market consolidation and the presence of must-have providers on health care spending and ACO development were discussed.
James Roosevelt, Jr., JD, President and Chief Executive Officer, Tufts Health Plan; Ellen M. Zane, President and Chief Executive Officer, Tufts Medical Center (formerly New England Medical Center); Paul B. Ginsburg, PhD, President, Center for Studying Health System Change
The Forum held two related meetings this year: "Health Care Cost Drivers in Massachusetts: Lessons for Federal Policy Makers" (June 21, 2010), and "The Cost of Hospital Care" (October 8, 2010).
See also the Massachusetts Attorney General's report, "Examination of Health Care Cost Trends and Cost Drivers: Report for Annual Public Hearing" (Office of Attorney General, Commonwealth of Massachusetts, March 16, 2010).