Health insurers may see renewed power in negotiating prices with area hospitals in the wake of a Federal Trade Commission complaint alleging price fixing at Evanston Northwestern Healthcare.
Analysts say the FTC’s action against one of the area’s largest hospital operators could temper increasingly contentious contract negotiations between insurers and health-care providers throughout the country–and possibly reduce costs for consumers if insurers share what they gain at the table.
“The antitrust enforcement activity of the FTC and Department of Justice will definitely lead to more competitive markets, and that will result in lower prices for consumers and more appropriate relationships between health-care providers and health plans,” said Michael Ile, vice president for network advocacy for United Healthcare, a subsidiary of Minneapolis-based health insurance giant UnitedHealth Group.
The FTC filed a complaint Tuesday against Evanston Northwestern Healthcare alleging that its January 2000 acquisition of Highland Park Hospital resulted in significantly high and abnormal price increases–up to 200 percent in one case–to consumers and other purchasers of insurance.
The fallout from the FTC’s enforcement action, as well as intensifying pressure the agency is putting on doctors and hospitals across the country, could weaken the negotiating clout health-care providers have when asking for rate increases from insurers, analysts say.
“I believe [health-care providers] should and will become less aggressive,” said Michael Bissegger, a former FTC lawyer now with the Washington law firm of Epstein Becker & Green. “If the magnitude of the price increases alleged by the FTC are accurate, the hospitals have a huge problem on their hands because it is highly unlikely that other hospitals were able to obtain price increases anywhere near the price increases alleged.”
In the FTC’s case against Evanston Northwestern, the government cites a price increase of nearly 200 percent for in-patient care within a year of the merger, in at least one case.
Evanston Northwestern is fighting the FTC’s allegations, which will be brought before an administrative law judge in Washington this spring.
Evanston Northwestern described price hikes alleged by the FTC as “catch up” that was needed to deal with more than $80 million in reimbursement reductions implemented as part of the Balanced Budget Act of 1997, which dramatically reduced spending on Medicare through 2002.
In the last three years, Evanston Northwestern said, the rate of its payment increases from insurers has been lower than premium hikes for its employees.
“The rate of increase in our premiums as the second-largest employer in Evanston are far in excess of increases in reimbursement as a provider of care,” said David Loveland, senior vice president of corporate relations at Evanston Northwestern, the parent of Evanston Hospital in Evanston and Glenbrook Hospital in Glenview.
It added Highland Park Hospital four years ago as part of the deal that is being challenged.
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Doctors and hospitals suggest that the additional clout will only help health plans fatten their bottom lines.
“This is one way for [health plans] to get clout and shift the blame,” Loveland concurred. “But look at the record profits of the insurance industry in the last three years.”
Most major health insurers are enjoying record profits while their stock prices have increased by 50 percent or more in the past year.
Consolidation of health plans is also on the rise, with giants like Wellpoint Health Networks Inc. and UnitedHealth Group finalizing acquisitions to become even larger.
The announcement last year of Wellpoint’s merger with Anthem Inc. caused the American Medical Association to reiterate its call to investigate health plan mergers.
With health plans gaining more muscle, medical-care providers believe they are losing power at a time they already are hurting financially. Providers have been hit with soaring medical malpractice premiums, rising numbers of uninsured patients who cannot pay and a squeeze in payments from government health programs.
The FTC is stepping up its scrutiny of hospital operators and medical groups. It is investigating whether a unit of Advocate Health Care, the Chicago area’s largest provider of medical care, violated antitrust laws by negotiating fees from health insurers on behalf of more than 1,700 independent physicians on its hospital medical staffs.