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 The study in Health Affairs puts some hard numbers to a basic
economic concept of market dominance and the bargaining that
accompanies it.
In 2014, an insurance company with less than 5 percent of the market
typically paid $86 for a basic office visit. Just increasing their
market share to 5 to 15 percent reduced the average amount the
insurer paid to $70, or 18 percent less.
But those amounts varied depending on the size of the healthcare
provider.
Providers with only a small share of the market typically received
$88 for an office visit from an insurance company with less than 5
percent of the market. But when the insurance company commanded at
least 15 percent of the market, that office visit earned the
provider just $70 per visit.
When a large healthcare provider controlled at least 15 percent of
the local market share, it could get an extra $9 per visit (or $97)
from insurance companies with a small market share and $6 more (or
$76) from insurers with a large market share.
The same pricing pattern was seen for office visits when patients
had more complex problems, the researchers found.
When it comes to consolidation efforts, "we're showing that for
insurers it lowers prices and with providers it increases prices,"
coauthor J. Michael McWilliams of Harvard Medical School in Boston
told Reuters Health in a telephone interview. "It's really uncertain
where that will end up. But in the process, we are losing
competition in both markets. And when markets become less
competitive, consumers generally lose out."
The authors estimated that every time a provider's market share went
up 10 percentage points, the amount received for an uncomplicated
office visit rose by an average of $3.16. The increase was $6.23 for
a visit with a patient with complicated problems.
"Those are underestimates," said McWilliams, the Warren Alpert
associate professor of health care policy, "because we could measure
provider market power less well than we could insurer market power."
The study comes amid concern that a consolidation of healthcare
providers, particularly hospitals, might give them more power to
raise prices and that a similar consolidation of health insurance
companies might make prices artificially low. Aetna, Anthem, Cigna
and Humana, four of the largest insurers in the United States, are
working on mergers. Previous research has shown that when providers
consolidate, prices go up.
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Unlike previous work, the new study looked at price data for
multiple insurers covering patients in many markets, taking into
account market share and the bargaining power that comes with it.
The study also revealed how the same insurer can pay significantly
different amounts to different practices.
The numbers were based on data from each insurer's preferred
provider organization and point-of-service plans. Data where it was
clear that out-of-network billing was involved were excluded, as
were visits to outpatient facilities and offices owned by hospitals.
“Insurers consolidating to negotiate lower prices and providers
negotiating to produce higher prices produces an unclear effect on
prices in the end," McWilliams said. "So, in the end, this cycle of
insurer-provider consolidation may be a zero sum game."
He and his colleagues do not offer a specific solution.
"It's unclear whether regulations can be smart enough to insure
savings get passed along to consumers," said McWilliams. "The horse
has left the barn in many markets in terms of provider-insurer
markets already being pretty concentrated. So we do need to consider
some new forms of regulation."
SOURCE: http://bit.ly/2hMYPVi Health Affairs, online January 9,
2017.
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