Payers thin provider networks to cut costs

Specialty hospitals face the chopping block; state says 'sympathetic patient base' not grounds for appeal

Insurers, feeling the financial pinch of reform implementation, are dropping specialty and community hospitals from provider networks and driving customers to providers that accept lower rates in exchange for higher patient volumes, Bloomberg reported. The move is an unexpected consequence of reform, the article noted, which has payers scrambling to keep a lid on premiums while faced with new taxes, added benefits and restrictions on age-based premium variation ushered in by the Affordable Care Act.

As a result, patients' healthcare provider options are narrowing. But cost-conscious Americans may accept the trade-off of less choice for lower premiums, as FierceHealthPayer reported.

In Washington, for example, Seattle Children's Hospital is excluded from five of seven plans on the state exchange. In a lawsuit against the state insurance commissioner, the hospital argued for its inclusion in the networks, saying that since it provides specialty care to sick children, its costs can't be compared fairly to those of a community hospital. 

"Nothing in the law dictates inclusion of a specific provider, regardless of their preeminence or sympathetic patient base," the state of Washington said in a court filing responding to the lawsuit. "So long as insurers meet the legal standards for adequacy and covered services, the OIC does not manage their business arrangements for them."

Some insurers, including Washington-based Premera, have taken a middle-of-the-road stance when it comes to excluding coverage for services by out-of-network hospitals: Premera will pay for unique services offered there, but routine care, such as asthma visits, is still excluded. For example, a pediatric appendectomy costing $23,000 at Seattle Children's costs $14,000 in network hospitals, Premera spokesman Eric Earling told Bloomberg.

However, the federal government may not tolerate excessive network cuts: The Centers for Medicare & Medicaid Services proposed a new policy requiring payers to expand their networks to include 30 percent of essential community providers in their areas or risk being kicked out of the marketplaces, as FierceHealthPayer recently reported.  

For more:
- here's the Bloomberg article

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