The growing market power of hospitals and physicians to negotiate higher payment rates has gone largely unexamined, according to a recent study by the Center for Studying Health System Change.
Published last month in Health Affairs, the study examined the growing market power of many California hospitals and physicians and found that providers are using various strategies, such as tighter alignment of hospitals and physician groups, to negotiate significantly higher payment rates from private insurers.
“Provider market power is the elephant in the room that no one wants to talk about in the national healthcare reform debate,” said Robert A. Berenson, MD, of the Urban Institute.
Berenson co-authored the study with HSC President Paul B. Ginsburg and Nicole Kemper, a former HSC research analyst.
“Health insurers have been squarely in the crosshairs and blamed for the high cost of private insurance, while the role of growing hospital and physician market power has escaped scrutiny,” Berenson said.
The study, funded by the California HealthCare Foundation, points out that California offers a cautionary tale for reform proposals that encourage hospitals and physicians to form tighter relationships through accountable care organizations.
“Reform proposals that encourage hospitals and physicians to integrate have the potential to improve quality and increase efficiency, but the savings may not be passed on to private payers if provider market power to command higher prices goes unchecked,” Ginsburg said.