Category: Antitrust

Hospitals v. Insurers: Mississippi Version

Ann Marie Marciarille1 Comment

I love the movie Cowboys & Aliens for its retro edge.  The story is ever the same, though the players may be altered slightly.

And so it is with the epic battles between hospitals and insurers over network participation and rates. I tell my students these battles are among the hardest fought and most continuous in all of health care contracting, whether or not what is going on behind the scenes is glimpsed by the public.

Occasional public glimpses over the bare-knuckled negotiations between hospitals and insurers occur when the negotiations threaten to blow up and plan enrollees are informed of impending changes to hospital "in-network" provider status. The issue can become quite heated.  People develop considerable loyalties to specific in-patient facilities, loyalties cultivated between and among friends and acquaintances (giving a whole new meaning to the idea of hospital "network"). You can read about a thought experiment probing patient acute care hospital selection here: http://www.psychologytoday.com/blog/the-doctor-is-listening/201308/how-do-you-choose-hospital.  It may come as little surprise, then, to see Connecticut's Stamford Hospital, apparently trying to harness patient loyalty in opposition to the breakdown of their negotiations with Blue Cross & Blue Shield here:  http://www.stamfordhealthintegratedpractices.com/About-SHIP/News.aspx.

What is going on in Mississippi takes one of these same kinds of disputes and writes it large. Negotiations have apparently broken down between the Blue Cross Blue Shield Network and Hospital Management Associates for-profit hospital chain over the in-network or out-of-network status of ten HMA facilities. After BCBS dropped these hospitals from their network, Governor Phil Bryant issued an executive order temporarily (for a maximum of 60 days) reinstating these ten HMA facilities into the BCBS network on contract terms based on the old contract rates. Yes, the facilities appear to have been commandeered and hospital-insurer contract rates have been set by the Governor.

Of course, this is already in federal district court.  Whether the Mississippi Patient Protection Act of 1995 requirement that insurers provide "reasonable access to care with minimum inconvenience" means that BCBS cannot walk away from what it says is a losing deal remains to be seen.  The real back story is that BCBS holds a near monpoly in some of  Mississippi's health insurance markets. You can see 2010 data on health insurance market concentration (looking at the individual insurance market) here: http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8242.pdf  And at least three of the hospitals are sole acute care providers in their rural settings, deeply dependent on reimbursement from BCBS.

This Mississippi story tells a tale of health insurance market concentration.  And it tells a story of the stark vulnerability of rural hospitals who need all the reimbursement they can get.  "Narrow networks" may be the topic of the month, when discussing cost-containment measures in the ACA but the possibility of non-existent rural networks has been out there for some time because of the high incidence of uninsurance in rural populations.

Governor Bryant is a well-spoken opponent of Medicaid expansion in Mississippi. In January he told a reporter, "I would rather pay extra to Blue Cross [to help cover uncompensated costs for the uninsured], rather than have to raise taxes to pay for additional Medicaid recipients." (You can read the text of that interview here:  http://www.kaiserhealthnews.org/stories/2013/january/23/mississippi-gov-bryant-medicaid-interview.aspx).

It is beginning to look as if he may get his chance.

Competition in the Exchanges

Ann Marie Marciarille1 Comment

Peter Gosselin has an interesting post on exchange competition you can read here: http://about.bgov.com/2013-10-08/exchange-competition-cuts-health-insurance-costs-bgov-insight/.  In it, he looks for some kind of connection between larger numbers of insurers operating in a federally facilitiated health insurance exchange and lower anticipated premiums.  His focus is on rating areas with ten or more participating insurers, showing a 31 percent to 35 percent lower rate than those for the same policies in areas with only one issuer.

Now, some of this is old hat. There has been concern for some time that the ACA might simultaneously increase competition in markets that already have robust insurance market competition while simultaneously solidifying the virtual health insurance monopolies in some states.  You can read an excellent two-part Kaiser Health News series on this here:  http://www.kaiserhealthnews.org/stories/2013/april/23/stateline-lack-of-competition-hamper-health-exchanges.aspx

From this perspective, the remarkable thing would be to observe exchange-generated or exchange-enhanced health insurance market competition in states like Alaska, North Dakota, and Alabama.

Still, this is well done, so insightful that I have to wonder if it will be picked up by the general press where the focus tends not to be on the whole point of the ACA: to improve access while lowering costs and improving quality. Whatever the ACA's faults — and they are many — it deserves to be measured against its own goals. 

Bodegas Clinicas: Diagnosing an Outbreak of Competition

Ann Marie MarciarilleLeave a comment

The New York Times today has an interesting article about the
ambivalence of the Los Angeles medical establishment over the
proliferation of what are known as  "bodegas clinicas" –small
storefront licensed physicians' offices that operate on a cash economy
without the intermediation of health insurance.  These bodegas clinicas 
specialize in offering primary care services to some of California's
uninsured including some of California's estimated 2.5 million
undocumented residents.

What's not said in the article is as telling as what is.  Bodegas
clinicas have been thriving in California for some  years. Their growth
is of a piece with the growing number of medical clinics found in
Mexican border cities — clinics that cater to undocumented California
residents who may re-cross the border for care as well as uninsured or
underinsured American residents who cross the border for care in Mexico.

Why the hue and cry now about quality concerns in Los Angeles' bodegas clinicas?

One reason is surely that some of the documented now using these cash-based programs have (under California's early Medicaid expansion) or will
become eligible for Medicaid.  And whatever can be said about Medicaid
reimbursement rates in California, they are certainly higher than zero. 
The newly or about-to-be low income insured, as a result, are in the
genuinely odd position of being sought after as customers. 

Competition appears to be breaking out on the low end of the health
insurance scale between bodegas clinicas and safety net providers for
newly or about-to-be Medicaid eligible and soon-to-be subsidized health
insurance exchange purchasers. Students of competition policy will note
that one way to drive competition from the marketplace is to attempt to
raise rivals' costs, say — for example — by activating expensive
licensing investigations into the business models of thinly margined
competitors.

California has some of the lowest Medicaid reimbursement rates in the
entire country.  They are on a downward trajectory. This does not and
will not make Medicaid beneficiaries particularly sought after in
facilities with a better payor mix.  But California's Federally
Qualified Health Care Centers (FQHCs) and FQHC look-alikes are fighting
for their financial lives.  And Medicaid reimbursement may look good to
them.

In fact, if California's 100 plus FQHCs cannot make the case for
their own newly insured to stay with them as well as to solicit the
business of newly insured from others, they will be in trouble.  This is
because they serve the undocumented — the outsiders to the Affordable
Care Act. An FQHC will be hard pressed to make the successful business
case for a patient panel consisting entirely of the undocumented
uninsured. The problem is that some FQHCs have behaved exactly like
providers of last resort — impersonal and inflexible.

What I do like about the New York Times article is how it offers
insight into why some consumers with options might prefer bodegas
clinicas for primary care over an FQHC.  The article points out the good
neighborhood access of these facilities, the extended hours designed to
accomodate the many service worker patients who work the night shift, 
and the linguistic competence of all levels of the staff. I have written
elsewhere on what patients at all income levels seek from the clinical
encounter. (You can read more here:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2078684.)

Is it possible that, in one of the more modest corners of our
country's health care delivery system we can learn lessons about health
care delivery success that is neighborhood based, culturally competent,
and forgiving of those without the foresight to fall ill only inside of
bankers' hours?

 

X posted at http://prawfsblawg.blogs.com/

Do We Even Need Hospitals Anymore?

Ann Marie MarciarilleLeave a comment

Cross posted at http://prawfsblawg.blogs.com/

 

You may have also received an invitation to participate in tomorrow's
"Future of the Hospital" forecasting game.  (An open invitation is
found here:  
http://www.iftf.org/future-now/article-detail/future-of-the-hospital-infographic/ 
for those among you who have yet to register.) Sponsored by the
California Health Care Foundation and others, this twenty four hour
competition looks like an attempt to crowdsource the question: "Do we
even need hospitals any more?" 

This is a very good question.

Intrigued, I have explored the forecasting game's website, twitter
feed, "challenge" posts and decided to register.  Why this one? I
receive invitations to a number of such "let's re-invent health care
before  we become obsolete" type events. I occasionally participate by
helping formulate questions. 

But this is the first time I would like to help brainstorm answers
in this format. The difference is the series of smart questions posted
under the first challenge: "Construct a 21st century safety-net system
that is fair, economically sustainable and delivers high-quality
emergency care services to all in need." This challenge includes these
sub-topics:

  • Should hospital relocations and closures be stopped through the
    legal or political systems?  What if minority communities could sue to
    prevent a hospital closure?
  • What if the drop in operating EDs
    across the country is a positive sign of market forces at work, creating
    a more efficient healthcare system?
  • Could EMTALA (the
    act that requires hospitals to provide care to anyone needing emergency
    health treatment regardless of citizenship, legal status or ability to
    pay) be strengthened to restrict closures in medically underserved
    areas?

This is great stuff, much of it resonant of the 2006 Institute of Medicine's study on challenges facing 21st century hospitals.

Hospital closures — whether full closures or partial closures such
as  stand alone Emergency Department closures — are complex and, often,
emotionally fraught.  Whoever said every divorce, from the perspective
of family life, is the death of a civilization might have known a thing
or two about community hospital closures. In a secular society, schools
and hospitals often substitute as the institutions where all of our
paths eventually cross at transcendent moments of our lives — birth,
death, life-threatening illness. Hospitals, while primarily health care
institutions, are also civic institutions.

As a result, in the throes of a pending closure, it can be a
challenge to address the larger questions about efficiency, the changing
nature of hospital delivered care, and equity. I look forward to the
forecasting game's insights. As a warm up,  I offer here a few thoughts
on the topic of permission to close a hospital.

Permissive hospital closings are the inverse of the long-debated
hospital building certificate of need ("CON") process.  In some states
— but no longer on the federal level — a hospital's advance permitting
to build requires a determination of need. A CON is not required in
California, for example, but is required in New York.  There is
considerable diversity of approach in between the hands-off wild wild
west approach and the fairly searching scrutiny required in some states.
Just as you might imagine, this means hospitals are often built on spec
as it were in some states, in anticipation of demographic trends, and
then have to be re-purposed as other kinds of facilities.  There are
risks.  In other places, it can be arduous to open a hospital,
essentially protecting market share for long-established institutions. 
There are risks to harm to competition in these places.

In these different contexts, you can see that requiring permission
for full or partial hospital closure might seem more or less consistent
with that jurisdiction's thinking about hospitals as public goods. All
of this is further complicated by the fact that, though the majority of
hospitals in the United States are not for profit, states like
California have substantial for profit hospital chain presence.

Add to this mix the reality that some parts of the country are
over-supplied with acute care hospital beds (and their attendant
hospital-based medical specialty providers) and some are under-supplied
and realize that tomorrow's forecasting game ought to be lively.

Reinvent community hospitals for the 21st century? I'm game.