How hospitals' contracts with insurers block cost-cutting efforts

Hospital systems ink exclusive contracts with various payers. These secret contracts often contain language barring health insurers from excluding market-dominant providers from their network or adding less-expensive rivals, according to The Wall Street Journal.

The publication interviewed dozens of current and former hospital officials, health insurance executives, employer executives, researchers and other experts to get an inside look at closely guarded deals between hospitals and health insurers. Here are six takeaways from the report:

1. WSJ found several contracts between hospitals and payers included limiting terms about how health insurers could design plans. Some of the contracts concerned systems like Baltimore-based Johns Hopkins Medicine, Columbus-based OhioHealth, Aurora Health Care in Milwaukee, and Nashville, Tenn.-based HCA Healthcare.

2. Contract terms between commercial health insurers and the providers outlined several restrictive provisions. These included allowing hospitals to shield prices from consumers on health insurers' online shopping tools, limit claim audits, tack on fees and impede efforts to remove healthcare providers from networks based on quality and cost. In addition, some contracts included antisteering clauses, which block insurers from pushing patients toward less-expensive or higher-quality providers. Other limits included preventing insurers from offering plans that cut out a certain system.

3. Today, some health insurance members cannot find prices for hospital systems on their insurer's online shopping tool for systems like St. Louis-based BJC HealthCare and New York City-based NewYork-Presbyterian. BJC Vice President J.C. McWilliams told WSJ sometimes the health insurer's tool offers inaccurate information and may present a narrow view of the total cost of care, adding that patients can receive cost estimates from BJC directly.

4. WSJ also found that Cigna and New Hyde Park, N.Y.-based Northwell Health had a plan to launch a narrow-network policy, according to people with knowledge of the matter. However, Cigna and Northwell never developed the plan, as Cigna had a separate contract with Northwell's rival NewYork-Presbyterian. That contract included restrictive language blocking Cigna from selling health plans that did not include NewYork-Presbyterian, according to the report.

5. A Northwell spokesperson told WSJ, "Negotiations and other conversations with our insurers are confidential." In response to the report, Aurora Vice President Carrie Nelson, MD, said the system, which is now affiliated with Downers Grove, Ill.-based Advocate Health Care, approaches "all of our contracts through the same lens that guides all of our clinical and operational decisions: what will ensure the highest quality of care at the lowest cost for our patients." HCA told the publication the system "provides patient access to healthcare in a variety of settings and contracts with healthcare payers for all of its services and sites of care in the communities it serves." NewYork-Presbyterian, Johns Hopkins and OhioHealth declined WSJ's request for comment.

6. Restrictive contracts between hospitals and health insurers have also prevented big employers from moving forward with their own low-cost health plans, according to the report. For instance, Home Depot asked Anthem a few years ago to develop a narrow-network national policy in an attempt to lower costs and improve quality for its workers. However, Anthem declined Home Depot's request, a major barrier being restrictive contracts the health insurer had with hospital systems.

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