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.
鈥淎t an investor conference in January, there was some talk about the possibility of deeper discounts in pricing 鈥� at [low] Medicare and Medicaid levels,鈥� told stock analysts on a Tuesday conference call.聽鈥淥ur 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鈥檚 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鈥檛 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 鈥渘arrow鈥� 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鈥檚 ability to land what鈥檚 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.
鈥淲e believe the movement聽to exchanges will eventually lead to a more price-competitive environment鈥� for hospitals, and colleagues wrote in a report to clients.聽鈥淗owever,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.鈥�
Consumers聽who will pay聽hospitals鈥� prices via聽their exchange plans, on the other hand, might be wishing that the Blues had had a sharper pencil.