New Rules For Insurer-Provider Negotiations

Once again, a major healthcare system has sent letters to patients warning that it may terminate its relationship with an insurance company. This time, it’s Atlanta’s WellStar Health System, which has mailed letters to 14,000 patients saying that it may not renew its contract with Aetna. As always, the fight is over money. An Aetna spokesman said WellStar is asking for too much, and a WellStar spokesman said that Aetna should pay WellStar what it’s paying other local hospitals. The two sides are still negotiating.

There’s nothing new about this. In 2006, another big Atlanta health system, Piedmont Healthcare, fought Georgia Blue Cross and Blue Shield with letters to patients, and both sides ran newspaper ads and did television interviews. In that standoff, about 130,000 Piedmont patients had no coverage for a month until the parties reached an agreement. Similar tussles occur regularly all over the country.

To quote Harry and Louise, “there must be a better way.”

If we’re going to retain private insurance, as it appears we will under the current reform proposals, we should no longer allow patients to be used as pawns every time a healthcare provider and a health plan can’t agree on terms. Instead, we should try the system that Germany uses: hospital associations and physician associations negotiate with regional groups of “sickness funds,” and, if they can’t strike a bargain, they know the government will step in.

Free-enterprise advocates will cry foul, saying that each buyer and each seller should be allowed to bargain individually for the best deal they can get. But while that may work in some commercial situations, it has failed abysmally in U.S. health care. One reason is that bargaining power varies dramatically, depending on the size of the entity and the nature of the market. That’s why the dominance of a few insurers in many markets is so concerning to providers, and why the dominance of a few health systems in some cities—such as Milwaukee—has driven costs through the roof.

To those who say that health plans differentiate themselves in the market by the prices they are able to deliver to employers and consumers, I have two responses: First, insurers’ main strategies for controlling costs are avoiding sick people and denying claims. And second, it is way past time for health plans to compete on the value they add to health care, rather than on price.

What both sides should remember is that this is not just a business. They are financing and delivering health care that helps patients stay well and that manages or cures their illnesses. This is a public trust, and patients should come first.