4 ways payers can offset provider consolidation


As doctors and hospitals continue to consolidate, insurers are seeing prices soar. To counteract the effects of provider consolidation, a new analysis from the Commonwealth Fund offers several steps insurers can take to reduce rising costs. 

Insurers consistently blame the increased rate of provider consolidation for high costs. America's Health Insurance Plans alleged that frequent mergers and acquisitions have led to excessive out-of-network charges, which can be anywhere from 30 percent to 100 percent more than Medicare rates, FierceHealthPayer previously reported.

AHIP also claimed inpatient hospital prices, which increased more than 8 percent each year from 2008 to 2010, were driven by the increase in provider consolidation, providing hospitals with the power to resist insurers' attempts to negotiate lower payments.

"Consolidation in the healthcare industry is a double-edged sword: It can improve quality and efficiency, but it also can give providers excessive market power and the ability to command high prices," Paul Ginsburg, president of the Center for Studying Health System Change, and Greg Pawlson, executive vice president of the National Committee for Quality Assurance, wrote in the analysis.

To minimize provider consolidation's effect on rising healthcare costs, the authors suggest insurers consider the following:

1. Provider price and quality: Launch tools that inform consumers what their out-of-pocket costs would be based on which provider they see. Such information can enable consumers to be more price-conscious when choosing doctors and hospitals.

2. Narrow provider networks: Insurers can outright exclude expensive providers from their health plans when they incorporate narrow networks, as many have done with policies sold on the health insurance exchanges.

3. Point-of-service, reference pricing: Insurers can categorize hospitals into tiers with different cost-sharing responsibilities for their members, so consumers pay more for expensive services like cardiac procedures or orthopedics. They also could set a reference price, where they determine a reasonable price based on certain criteria, that requires consumers to pay more when they select a doctor or hospital that charges more than the reference price.

4. Physician organizations: Insurers can support the development of physician organizations, particularly accountable care organizations and patient-centered medical homes, where providers assume a larger share of the risk for consumers' care.

To learn more:
- here's the Commonwealth Fund analysis

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