How COVID-19 Distorted Pay-Supplier Contract Negotiations


The COVID-19 pandemic has resulted in a year of thanksgiving to healthcare workers. In Chicago, residents held nighttime light shows to thank their suppliers. In New York, people were singing in the streets.

A year later, some experts believe healthcare systems could use their post-COVID-19 publicity shine to pressure insurers to raise tariffs, indicating a wave of tense negotiations that have erupted in the public sphere .

“This is something we have to watch out for for the kind of lingering public support and then the argument that ‘we have lost money, we have to make up for it’,” said Glenn Melnick, professor of nursing care. health at the University of Southern California, which is conducting research on pay-provider negotiations. “I think we’ll see that this year and next year.”

Over the past 10 years, the number of payor-provider disputes that have been made public has declined as hospitals consolidated their systems and powerful insurers into all-in-one contracts, Melnick said. In most cases, he said, insurers feel pressured to bow to increased provider tariffs as they risk losing members, and disconnecting from the network with major healthcare systems may prove to be more expensive in the long run.

But the pandemic has pushed many negotiations to the last hour of the witches, with health organizations trying to recoup some of the money they lost by canceling elective procedures, while health insurers try to cut costs. .

Hospitals are banking on a wave of positive publicity after years of negative consolidation coverage amid soaring profits, Melnick said. Except there’s one problem: He believes health systems haven’t lost as much as they expected during the pandemic.

At the end of the year, sicker, commercially insured patients helped boost hospital outcomes and strategic cost-cutting measures helped reduce expenses. Federal grants that health systems have received have also helped, although many have repaid some of that money.

“We were worried about this post-COVID price spike, driven by widespread losses, but the losses were not as severe or as deep as expected,” Melnick said. “So this argument won’t be that strong. But that doesn’t mean they won’t try to use this.”

In New York, the Greater New York Hospital Association posted full-page ads in the the Wall Street newspaper, New York Post and New York Daily News, stating that “Insurance companies have resorted to intimidation of New York hospitals into agreeing to one-sided terms for the essential and life-saving care they provide 24/7. After a year Traumatic for hospitals, Big Insurance sees an opportunity to squeeze every last penny from them — just to boost their profits even more. ” The hospital association also issued separate announcements against specific insurers, slamming the site’s preferred care policies and drug prices.

“A lot of our hospitals are strapped for cash. They lost hundreds of millions of dollars during the pandemic, and federal money has been very, very helpful in keeping them afloat, but it’s still a bit difficult,” said Kathleen Shure, senior vice president of health finance and managed care at GNYHA. “I think there is a perception that they are weak right now.”

She said insurers were trying to exploit the dire financial situation of hospitals by asking for rate cuts. A GNYHA spokesperson added that he had seen many negative stories about hospitals during the pandemic, rendering the account that systems are trying to cash in on people’s love for their hospitals moot.

“I would push back the insurance industry a lot by saying that we are riding a wave of great stories,” said Brian Conway, senior vice president of communications at GNYHA.

The positive public perception of providers has not necessarily translated into health systems. A recent NORC survey at the University of Chicago found that 32% of consumers said they lost confidence in the healthcare system during the pandemic. Consumers said they generally trusted doctors and nurses more than their healthcare systems, although 72% of respondents always said they trusted their hospitals. The survey did not address consumer attitudes towards health insurers, which are generally very poor. But a separate report, from the Edelman Global Trust Index 2021, noted that the pandemic had plunged insurers’ perceptions even further. Edelman found that respondents’ confidence in the United States in health insurers fell by four percentage points in 2020, with most saying they “distrust” their benefit provider.

“I think a lot of people feel like the health insurance industry has made disproportionate profits from the pandemic, which it really isn’t,” said Brad Ellis, senior director of insurance at Fitch. Ratings.

While insurers pocketed huge profits in the first half of 2020, thanks to the postponement of consumer care, an increase in COVID-19 cases and costs at the end of the year made up for much of the the money earned, Ellis said. A Fitch report released earlier this month found that the margins of the seven largest for-profit insurers remained stable from 2019 to 2020, with average EBITDA of 7.5% for both years.

“At the end of the year, everything has stabilized and quite frankly even that 7.5% margin is very reasonable. It’s not a disproportionate profit margin,” Ellis said. “People don’t usually see it that way. They just see the big numbers and just think of insurance companies making a ton of money.”

Many health insurers also gave back during the crisis. Blue Cross and Blue Shield of Oklahoma have invested $ 100 million for COVID-19 relief for members and have offered $ 20 million in premium credits to fully insured employer clients. The nonprofit insurer, which is a subsidiary of Health Care Service Corp., recently found itself in conflict with the public network with St. Francis Health System and OU Health Physicians.

The pandemic played into the narrative of the negotiation by OU Health Physicians, as St. Francis accused the insurer of trying to trick the Tulsa-based health care system by changing contract terms at the last minute. Physicians, St. Francis Health System, and Blue Cross and Blue Shield of Oklahoma have all said they hope to reach deals.

“Overall, I would say that hospital operating margins in general have been squeezed by 20,” Ellis said. “But it’s not like when there was a lot of fear at the start of the year, when the pandemic first happened, when they imposed moratoriums on elective procedures, and hospitals were afraid of losing. their shirt. That didn’t turn out to be the case.

While contract disputes sometimes surface publicly, the pandemic has exacerbated this trend, and we can expect more dirty laundry from payers and providers to be released over the next two years, said Adam Block, an economist. of health based in New York. But unlike past disputes, he said the public will be able to see which side wins. The new price transparency rules will give more information on how contracts work, Block said, although most large hospitals still do not display their prices. A better understanding of the prices paid will make the public’s perception of healthcare systems an even more critical negotiating tactic in the future, he said.

“Hospitals are riding a wave of popularity after a brief period of relative unpopularity,” Block said. “They should definitely use this to add weight to their contract negotiations.”


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