Pressure on hospitals to lower prices

Today’s Boston Globe reports that insurers are increasing pressure on hospitals to decrease their rates (or to stop increasing their rates as fast as they have been in the recent past.)   The three major nonprofit health plans have each sent letters to hospitals, in many instances demanding reopening of existing contracts to decrease agreed-upon rates.   The Blue Cross letter says “In the coming weeks, we will work directly with individual hospitals and physician groups on ways to reduce the payments we make to physicians and hospitals in the near term.”

The health plans make the point that freezing premiums isn’t sustainable if the underlying medical costs continue to increase.  The ‘safety net’ health plans which serve predominately Medicaid patients feel this in the extreme, going three years without an increase as their provider costs have continued to climb.

Will the health plans be successful at lowering unit costs through recontracting?

The Attorney General’s report  puts substantial pressure on the highest paid hospitals, which will be reluctant to use their leverage to maintain such a large payment differential.  The AG’s report also could embolden some of the facilities which are (relatively) underpaid to demand higher rate increases. 

I suspect that it will be very difficult to bring prices down substantially through the negotiation process as long as we demand that all health plans include essentially all providers.  Health care reform in Massachusetts has asked health plans to develop narrow networks – that could help in the efforts to lower unit cost here.