The Healthcare Reform Battlefield’s Front Line:
Hospitals Versus Insurers & Uncle Sam

Uncle Sam and Insurers & Hospital Groups At War As Consumers Face Fears and Risks
Humana Versus Baptist & United Versus Tenet

Before my daughter was born, nearly 15 years ago, I recall driving by Baptist Hospital’s main location on Kendall drive, this was just after they’d opened their large, new, maternity building that, at the time, had a big inflatable baby or some such thing on its roof to tout its ‘arrival’, and Juli saying, ‘Bob, that’s where I want to have my babies’. That building, and whatever was sitting on top of it, and most all else about their business has always had my admiration for how that growing hospital chain runs its business. Both of our children were, of course, born in that very building and, in the years since then, most everything about the business of healthcare has been rapidly evolving.

HOSPITALS FACING NEW GOVERNMENT RULES ON PATIENT CARE & SAFETY

As America’s effort to reform healthcare marches on consumers are often being caught in the painful middle between some very large businesses as they fight and struggle to adapt to entirely new business models. The pre-healthcare reform business model, for example, had hospitals eager to fill their beds and buildings with patients for as many days as possible, often building larger and larger buildings with gleaming amenities that rivaled some nice hotels.

Part of America’s new healthcare reform law, however, focuses on the outcome of one’s care and intends to pay hospitals based on how quickly a patient is healed and whether they return or not for the same ailment, as well as whether folks get sick or hurt while in a hospital.

Some estimates suggest that the federal government could reduce what it would otherwise pay by some $330 Million per year for under-performing providers and that, of course, has the hospital industry’s attention. In fact, the Harvard School of Public Health estimates that 39% of all large hospitals and 22% of medium ones face penalties. The same study suggests that 27% of public, 23% of not for profit and 19% for profit hospitals face sanctions. The biggest impact could, some say, be to teaching hospitals where Harvard suggests that 54% of such facilities could be penalized and while all of this is hotly debated, what is clear is that the government focus on outcome changes the long established business model we, as consumers, grew up with.

The reform law included three areas that seek to improve patient outcomes. The first penalizes hospitals with high readmission rates. The second awards bonuses, or penalties, based on two dozen quality control measures. The third measure is known as the Hospital Acquired Condition (HAC) Reduction Program and it begins this year. With all three programs in place, hospitals will be at risk of losing up to 5.4% of their Medicare Payments. Considering that one out of every eight patients in a hospital in 2012 suffered some sort of potentially avoidable complication during a hospital stay, part of the new healthcare law intends to use the government’s payments in the form of Medicare and Medicaid as leverage to require improvement in the results consumers enjoy.

Whether it is this shift towards a patient’s care outcome or the emerging concept of Accredited Care Organizations or any number of other changes in this new, ever evolving world of the healthcare business, the new law has created some significant anxiety for medical providers (and I dare say insurers too) who wonder what the future of their industry will look like. And as so often happens, we as consumers get placed in the middle of the ‘fight’ yet have little say in what is happening between these giant businesses.

HUMANA VERSUS BAPTIST & UNITED VERSUS TENET

Humana-Medicare-HMO-to-Split--with-Baptist-HealthTwo of the current battles taking place locally are between insurers and medical provider groups. It is not a new type of fight but one that I suspect will become more common in the near term as providers and insurers try to figure out their new business models that the reform law demands.

Case in point is the June 10th letter health insurer Humana sent to its agents and clients announcing that unless their negotiations progress they will no longer have the Baptist facilities in their network as of August 15th. Humana had called me in the days before sending that letter to consumers and assured me that they were doing all they can to negotiate a new agreement. I’ve talked to the insurer’s management a number of times since then and have stressed what they know; that they must have Baptist in their network so as to be viable to their clients in Central and South Dade, amongst other places, as the hospital continues to grow into Monroe and even Broward counties. Humana, of course, knows this. So too, however, does Baptist and thus these large, sophisticated, businesses battle one another.

Humana-Changes-in-Provider-NetworkHumana is, however, not alone. TENET Healthcare Corporation, in its June 23rd letter announced that it would no longer accept United Healthcare as of August 1st. Tenet operates 77 hospitals, 185 outpatient centers and a business called Conifer Health Solutions, a health care company serving more than 700 hospital nationwide. Tenet operates numerous local hospitals including Coral Gables, Hialeah and Palmetto General to name just three.

All of this fighting, that between these hospital groups and insurers, reminds me of two similar negotiations that took place recently. The very same Baptist that is currently in negotiations with Humana mailed a letter to about 75,000 former and then current patients about the fact that their negotiations with Blue Cross had collapsed and that as of a given date they’d no longer accept Blue Cross. In some ways one could say that the letter was rather brilliant business in that it included Blue Cross’ contact information and suggested that if anyone had any concerns that they should contact the hospital or the insurer. Noticeably absent, however, was either a phone number or email address for the hospital. Blue Cross’ contact information was, however, prominently included. Needless to say the phone rang off of the hook here at Morris & Reynolds as clients called and demanded that their coverage be changed, that as much as they might have wanted to keep Blue Cross that we needed to immediately replace them with another insurer that had this hospital group in its network. As I recall, no one changed insurers and decided to patiently wait while the negotiations resolved the insurer and hospitals differences.

TenetShortly after the contract ended Blue Cross and Baptist came to an agreement and a day or two later I ran into the top executive at Blue Cross that led the negotiations. He was pleased with the fact that what had been a stressful, protracted, negotiation had ended and when I asked him how it had concluded he said that the insurer had had to agree to a large increase in the fees paid to the hospital, something akin to 30% over two years if I recall correctly. When I asked how they would handle such a large increase he said something along the lines of; ‘our members demand that the hospital be included in our network and thus we will have to pass the increase along to them in the form of higher rates’.

I also recall that in 2012 Aetna, another large, national, health insurer was engaged in a protracted negotiation with the gynecological and obstetrics practice Femwell/VitalMD Group Holdings which impacted 21 primary care physicians (PCPs) and 231 specialists and, of course, their patients. Those negotiations dragged on for months and in fact the contract was terminated on September 1st of that year. By October 15th the matter was resolved with both Aetna and the doctor’s group coming to terms.

All of these negotiations illustrate that that whether it’s a hospital, doctor group or insurance company, these are businesses and, as such, they have their own economic priorities and goals. None of this is unique to South Florida. These types of transactions, these negotiations, are taking place all over America and I’d venture to guess they will not stop anytime soon given the transformative times that we are in much less the type of dollars at stake for their businesses.

Tremendous change is underway within the business (and governance) of healthcare. Changes the likes of which we have never seen in our lives and changes that will, at least from time to time, create fear and frustration for consumers. Please continue to count on the professional agents and underwriters here at Morris & Reynolds to help answer our questions and provide you the solutions, and peace of mind you need and deserve. For that honor, thank you kindly.

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