Nar­row ne­go­ti­a­tions

Hos­pi­tals fear dis­rup­tions from limited net­works

Modern Healthcare - - THE WEEK IN HEALTHCARE - Rich Daly

Large safety net hos­pi­tals and aca­demic med­i­cal cen­ters fear they will be cut out of the pic­ture by the nar­row net­works on steroids that many in­sur­ers will of­fer in the new in­sur­ance mar­ket­places that open for busi­ness Oct. 1.

Nar­row net­works—where a limited set of providers are fully cov­ered by an in­sur­ance plan—have emerged as a com­mon theme in re­cent ne­go­ti­a­tions be­tween hos­pi­tals and in­sur­ers, par­tic­i­pants say. The re­stricted net­works are likely to ex­clude pub­lic and aca­demic med­i­cal cen­ters be­cause of their gen­er­ally higher rates, which those hos­pi­tals say are due to their treat­ing more se­ri­ously ill pa­tients.

Tru­man Med­i­cal Cen­ters, a safety net hos­pi­tal in Kansas City, Mo., has seen the em­pha­sis on provider net­works in its dis­cus­sions with in­sur­ers plan­ning to sub­mit plans for the fed­er­ally run Mis­souri health in­sur­ance ex­change, ac­cord­ing to Ger­ard Grimaldi, the hos­pi­tal’s vice pres­i­dent for govern­ment re­la­tions. Al­though Tru­man ex­pects in­clu­sion in some ex­change plans, the out­look may be worse for other fa­cil­i­ties.

“I can eas­ily see how a sim­i­lar in­sti­tu­tion like Tru­man Med­i­cal Cen­ters and the pa­tients who rely on them in an­other mar­ket­place could see dis­rup­tions in their provider-pa­tient re­la­tion­ships” due to nar­row net­works, Grimaldi said.

Pa­tients locked into nar­row net­works could see pro­hib­i­tively higher co-pays and de­ductibles when they seek care out­side of the net­works, which is typ­i­cal of most man­aged-care plans. Their use in ex­change-of­fered plans is ex­pected to ac­cel­er­ate, though, be­cause reg­u­la­tions in the Pa­tient Pro­tec­tion and Af­ford­able Care Act limit in­sur­ers’ abil­ity to re­strict ser­vices, in­crease en­rollees’ cost shar­ing or spread costs to peo­ple with pre-ex­ist­ing con­di­tions or the near-old, health pol­icy an­a­lysts say.

The use of a limited group of providers with whom in­sur­ers have ne­go­ti­ated re­duced rates is among the few ways plans have to lower their costs. The law’s ex­change rules “make it in the in­ter­est of health plans to keep their net­works tight,” said Ellen Pryga, di­rec­tor of pol­icy for the Amer­i­can Hos­pi­tal As­so­ci­a­tion.

Com­mer­cial in­sur­ers and for-profit hos­pi­tals have in­di­cated in in­vestor calls in re­cent months that they are ne­go­ti­at­ing nar­row net­work ar­range­ments for plans that will be of­fered on the new ex­changes.

While the ex­change net­work ad­e­quacy rules in­clude a pro­vi­sion that es­sen­tial com­mu­nity providers (ECPs) be in­cluded in any plan with a limited net­work, of­fi­cials at large pub­lic safety net hos­pi­tals are wor­ried those safe­guards may have been un­der­mined by re­cent guid­ance is­sued by the Cen­ter for Con­sumer In­for­ma­tion and In­sur­ance Over­sight at the CMS. On April 5, the of­fice wrote in­sur­ers con­sid­er­ing plans for the 33 fed­er­ally op­er­ated ex­changes that they could meet the ECP re­quire­ment by adding a sin­gle hos­pi­tal of any type to their net­works.

“There are a lot of hos­pi­tals that qual­ify un­der the fed­eral def­i­ni­tion of ECP, and not all of them are true safety net hos­pi­tals,” said Xiaoyi Huang, as­sis­tant vice pres­i­dent for pol­icy at the National As­so­ci­a­tion of Pub­lic Hos­pi­tals and Health Sys­tems. Huang’s group is writ­ing the CMS about its con­cerns, but the use of guid­ance in­stead of a for­mal rule means the CMS is not re­quired to re­spond.

Al­though the full im­pact of large-scale use of tight provider net­works in ex­change plans may not be known for sev­eral years, pub­lic hos­pi­tals and aca­demic med­i­cal cen­ters are con­cerned it could re­duce their num­ber of in­sured pa­tients, raise un­com­pen­sated care costs and boost their bad debt. Pa­tients in nar­row net­work plans who seek care at out-of-net­work safety net hos­pi­tals will be more likely to fail to pay the high pa­tient co­pays that fed­eral rules al­low in such cases.

That leaves the hos­pi­tals to ab­sorb those costs. “There’s not go­ing to be out-of-net­work cov­er­age ex­cept for very limited ser­vices,” said Sara Rosen­baum, a pro­fes­sor of health pol­icy at Ge­orge Wash­ing­ton Univer­sity.

Such un­com­pen­sated care costs have tra­di­tion­ally been off­set by fed­eral and state as­sis­tance for hos­pi­tals with high num­bers of unin­sured pa­tients—so-called dis­pro­por­tion­ate share pay­ments. But gov­ern­ments at all lev­els are plan­ning to cut back on such as­sis­tance due to the ex­panded cov­er­age pro­vided by the fed­eral health­care over­haul.

Mean­while, hos­pi­tals that have ag­gres­sively ex­panded to de­velop their own net­works of providers and can of­fer in­sur­ers a one-stop nar­row net­work are likely to be big win­ners from the nar­row net­work plans. They are ex­pected to gain wide ac­cep­tance in ex­change plans.

“They stand a bet­ter chance be­cause what the plan wants to do is buy a spe­cialty pack­age in a box,” Rosen­baum said. “It’s cheaper and you only have to shop once.”

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