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Addressing Increasing Provider Leverage
Paul B. Ginsburg, Ph.D.
May 19, 2015
Powerful Trend towards Provider Consolidation (1)
• Driven by fear as well as greed– Highly challenging environment for hospitals
and physician practices• Future is coordinated/integrated care• Large investments needed to prepare• Less attractive to be a small hospital or
physician practice
Powerful Trend towards Provider Consolidation (2)
• Record on hospital mergers well known
– Recent FTC successes in blocking horizontal mergers
• Additional concerns from vertical integration with MDs
– Besides higher payment rates
• Barrier to steering of patients to high-value hospitals• Reduce competitors in ACO/risk contracting
market
Approaches to Address Provider Consolidation
• Market approaches
• Government efforts to facilitate market approaches
• Direct regulation of prices
Better Information on Price and Quality for Enrollees
• Online tools for enrollees
– Great progress but disappointing use• But most opportunities on outpatient side
– Few incentives on inpatient provider choice in high-deductible plans
– Barriers to price estimates for an inpatient episode
• Inherent conflict with approaches emphasizing integration/coordination of care
Limited Networks (1)
• The most powerful market approach
– Leads to lower prices in two ways: steering and increased leverage
– Potential in concentrated markets as well– Far simpler for patients than price
transparency– Exchanges create ideal incentive structure
• Also avoid “one size fits all” requirements
Limited Networks (2)
• Regulatory threat: network adequacy and AWP
– Political economy 101– Muted so far
• Prominence of affordability issue• Pressing challenge for insurers: network
transparency
– Major vulnerability of approach– Resources to make directories more accurate– May require more structured network contracting
“Surprise” Balance Bills
• Physicians that patients do not choose
– Hospital-based– Issue in broad as well as limited networks
• Market solution: incorporate into hospital contracting
• Regulatory approach: Limit charges for such physicians to percentage (>100) of Medicare rates
Tiered Networks
• Potential for broader appeal than limited networks
– Point of service rather than annual decisions– Popularity of PPOs, tiered formularies
• Obstacle of anti-steering and all-or-none contracting by prominent hospitals
– Massachusetts barred anti-steering
• Blossoming of tiered networks– Fewer obstacles with physicians
• Key challenge is with data
Reference Pricing
• More aggressive approach to tiered networks
– But applies to smaller share of spending—only “shoppable” services
• CalPERS experience with joint replacement
– Successful but hard to do—small percentage of spend
• Works best with discrete outpatient procedures
– MRI, colonoscopy– Challenge is alerting patients
Fostering Physician Organizations (1)
• Goal: Slow movement of physicians to hospitals
• Payers acquiring practices
• Financial/technical assistance to independent practices
– Support for HIT– Advanced PCMH models with global upside
Fostering Physician Organizations (2)
• Policy options
– Loans/grants to establish infrastructure
• ACOs, practices– Eliminate higher Medicare payments for
physician services in hospitals
• Artificial incentive for hospitals to acquire practices
Anti-Trust Policy
• Need to develop policies on hospital acquisition of physician practices
• Recent FTC success in Boise not based on vertical combination issues
• Research base is developing– http://www.ipr.northwestern.edu/publicatio
ns/papers/2015/ipr-wp-15-02.html
Concluding Thoughts
• Upside in developments in financing and delivery has downside in increasing consolidation
– Proceed with developments and address the consolidation
• Significant opportunities for market approaches to offset growing provider leverage
– Important government role in fostering these market approaches
– Rate setting is a “stick in the closet” if market approaches cannot do the job