Trying to control healthcare costs is like trying to pick up Jell-O pudding with a pair of chop sticks. It is virtually impossible. The employer-based healthcare system relies on their intermediaries – primarily the large national insurers – to negotiate discounts, provide claims-paying acumen, fraud oversight and clinical expertise, among other things, in the administration of their plans for their employees.
Historically, insurers have been able to use competing health providers as leverage against each other in their provider negotiations. In many regions of the country, one hospital or hospital-based system could be dropped or moved to non-participating status in exchange for a more favorable cost arrangement from their competitor.
What we are seeing unfold in the New York City area is an erosion of this practice, right before our eyes, as health providers band together. The Yale New Haven system now dominates Connecticut. North Shore and LIJ, once fierce competitors, have formed a massive system – rebranded as Northwell Health – that stretches across Long Island with reaches into New York City and Westchester County. NYU, NewYork-Presbyterian and Mount Sinai have created massive footprints anchored in Manhattan. The same is going on in New Jersey with their hospitals.
Cost transparency tools and claims analysis are showing us that there are large cost differences between certain systems. NewYork-Presbyterian vastly outpaces the other systems in New York and employs tough contract language to protect their “franchise.” For example, a recent client cost analysis revealed maternity-related charges at NewYork-Presbyterian are double that of Mount Sinai.
Employers and insurers are gearing up for a fight with the hospital systems and the dispute will undoubtedly spill over to state lawmakers as restrictive contractual covenants will be challenged. Points of contention, such as emergency care being considered out-of-network if received at a non-participating hospital (Anthem recently invoked this around the country in many of their BCBS plans) and provider tiering are a couple that will be on top of the list. NewYork-Presbyterian does not allow any insurer to place its system into a tier where members are financially motivated to use other systems or penalized for using their system. They are clearly banking on a continuation of the fee-for-service model with a focus on topline revenue growth.
Employers are discussing and implementing reference-based pricing, tiered or high-performance networks, fee-for-value models, Accountable Care Organizations (ACOs) and rapid shifts to consumer-directed plans. It will be interesting to watch this unfold in the coming years as this massive reconfiguration takes hold and a search continues for the middle ground.