'Providers Have Been Pretty Satisfied' with Negotiated Rates

Modern Healthcare
October 5, 2013
'Providers Have Been Pretty Satisfied' with Negotiated Rates

Featuring: Howard Gold, Executive VP, Managed Care and Business Development, North Shore-LIJ Health System

Hospital systems seem to be doing better than expected in rate negotiations with insurers offering plans on the state insurance exchanges in 2014. Analysts and hospital executives interviewed by Modern Healthcare say hospitals will be paid nearly the same rates by health plans sold through exchanges as by plans sold to employers outside them.

Hospital analysts with Fitch Ratings said hospital reimbursement rates offered by exchange plans are mostly similar to those paid by commercial insurers, despite initial fears that rates would be closer to the lower rates paid by Medicare. “The early information has been fairly favorable for hospitals,” said Megan Neuburger, a for-profit healthcare analyst and senior director with Fitch Ratings.

Jim LeBuhn, a senior director and analyst of not-for-profit healthcare, agreed. “I think providers have been pretty satisfied with the rates they've been able negotiate.”

But in the case of health plans that have restricted provider networks to one health system, providers in those plans often have agreed to lower rates. Health plans that limit patient choice through such narrow networks are expected to offset the lower rate with more patient volume.

How much more volume will depend on how many Americans sign up for coverage through the exchanges, the heart of the Patient Protection and Affordable Care Act's insurance expansion. That likely won't be clear until December, when consumers face a deadline to buy coverage effective Jan. 1.

Catholic Health Initiatives, which operates across 16 states, agreed to reduce rates by 5% to 10% in narrow-network health plans on the exchanges, said Juan Serrano, senior vice president of strategy and operations with the Englewood, Colo.-based system. The system entered into four narrow-network plans. Insurance companies' early bids sought steep discounts without establishing narrow networks, which Serrano described as “doesn't hurt to ask” proposals. The health system refused and negotiated higher rates.

CHI officials anticipate that some exchange customers may be people formerly insured through an employer plan paying higher rates rather than previously uninsured people.

WellStar Health System, based in Marietta, Ga., entered into talks and found that some insurers were unwilling to budge on demands for deep discounts, said Jim Budzinski, the five-hospital system's executive vice president and chief financial officer. “There wasn't a lot of discussion,” he said. “It was like, take it or leave it.”

Budzinski said his system ultimately agreed to participate only in provider networks with commercially competitive rates. They are now in about 40% of the exchange health plans sold in the Atlanta market, which has a lot of insurance participation.

North Shore-Long Island Jewish Health System in New York entered the state's insurance exchange with its own health plan, which offers a narrow network of its own providers. But the system also entered into separate narrow-network contracts with commercial insurers for their exchange plan offerings, said Howard Gold, executive vice president of managed care and business development. Those agreements included reduced rates, he said.

North Shore-LIJ has contracted with about 70% of exchange health plans in its market. Some insurers sought discounts of 10% to 50% from what employer-sponsored plans pay, Gold said. The system agreed to discounts based on the possible benefits contracts could offer, including greater volume via the narrow networks.

Follow Melanie Evans on Twitter: @MHmevans


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