How much will hospitals reduce聽prices in an effort to win what are expected to be聽millions of newly insured patients聽under the Affordable Care Act? A little, not a lot,聽if聽deals disclosed this week by are any indication.
The Dallas-based聽hospital chain told聽analysts that its first contracts to treat patients buying policies in the ACA’s online marketplaces next year include聽total discounts of聽less than 10 percent compared with existing business. The agreements聽were made with three聽Blues plans in undisclosed locations.
“At an investor conference in January, there was some talk about the possibility of deeper discounts in pricing — at [low] Medicare and Medicaid levels,” told stock analysts on a Tuesday conference call.聽“Our recent negotiations聽should reassure you that this is not the case and that this market is turning out as expected.鈥
What insurers pay for聽hospital care will be聽a key factor in聽the affordability of聽plans聽for people seeking聽coverage in the ACA marketplaces, also known as exchanges. With聽the health act’s requirement that everyone obtain insurance,聽exchanges are projected to furnish coverage聽for 24 million by 2016. But even with generous subsidies for those on lower incomes,聽questions loom about whether those lacking coverage will feel they can afford the plans on the exchanges or will choose to pay relatively low penalties for remaining uninsured.
Insurer-hospital contracts are rarely made public. Tenet disclosed only聽outlines of the聽Blues contracts, and only for three deals. Still, those details suggest聽that insurers can’t cut that deep聽a bargain even聽by promising patient volume in return for聽discounts at select hospitals.聽Many have expected聽insurers to聽fight聽hospital consolidation and pricing power by steering patients into “narrow” provider networks聽with attractive prices, including in the exchanges. One of the Blues/Tenet deals involves a narrow network; the others聽are聽tiered networks, a variation on the same theme.
For聽Tenet shareholders and hospitals generally,聽Tenet’s ability to land what’s likely to be聽substantial Blues exchange business with聽moderate price concessions seems like聽good news, even for an industry accustomed to raising prices for聽private payers, not lowering them.
“We believe the movement聽to exchanges will eventually lead to a more price-competitive environment” for hospitals, and colleagues wrote in a report to clients.聽“However,聽we expect the pace of change to be slow聽and we see little risk to aggregate commercial [hospital] rates over the next few years.”
Consumers聽who will pay聽hospitals’ prices via聽their exchange plans, on the other hand, might be wishing that the Blues had had a sharper pencil.
