Hospitals’ Secret Contracts With Insurers Are Keeping Health Care Expensive: Report

Evie Fordham | Politics and Health Care Reporter

Hospital systems are making secret contracts with insurers that are keeping health care costs high, a Wall Street Journal report revealed, prompting alternative health care advocates to point out the flawed nature of the U.S. health care system.

“Health care is the only industry I can think of where technology is used as an excuse for price to go up and productivity to go down because of these perverse incentives,” The Health Rosetta founder Dave Chase told The Daily Caller News Foundation. “The perverse incentives at a high level are generally, either directly or indirectly, the worse job [the hospitals] do, the more they get paid.”

TheWSJ’s Tuesday report detailed “dozens of contracts with terms that limit how insurers design plans” so they cannot exclude powerful hospital systems, which when included in health plans can drive up costs for employers and employees.

These secret contracts often include clauses that mandate insurers steer consumers away from less costly health care providers or give hospitals the ability to “mask” their prices, according to TheWSJ. If plans did not include these more costly health care systems, they could be up to 10 percent cheaper, the report stated.

Some major health care systems with insurer contract clauses that could be driving up health plan costs reportedly include:

  • Johns Hopkins Medicine in Maryland
  • Northwell Health in New York
  • OhioHealth in Ohio
  • Aurora Health Care in Wisconsin
  • Atrium Health in North Carolina
  • Sutter Health in California

Atrium Health is facing a civil antitrust lawsuit from the Department of Justice, and Sutter Health is facing an anticompetitive practices lawsuit from the California attorney general. Both Atrium Health and Sutter Health say the lawsuits have no basis, TheWSJ reported.

Hospital systems have increased their leverage with insurers through mergers and takeovers, often becoming the only providers in certain areas. There was “the highest number recorded in recent history” in 2017 with 115 of these types of deals, a 13-percent increase from 2016, according to a report by health care forecasting firm Kaufman Hall.

“It’s the insurers that retain the greatest leverage,” Melinda Hatton of the American Hospital Association told TheWSJ.

Many in the hospital industry maintain that insurers have controlled the game for a long time, and these secret contracts are just a way to gain a little bit of control back. But hospitals are already “the largest single component of health-care spending in the U.S.” at over $1 trillion each year, TheWSJ reported.

Because of this dichotomy, some predict major changes in how consumers pay for health care coming down the pike. CNBC columnist Jake Novak predicted a rise in hospital systems offering their own insurance plans in a 2017 article. (RELATED: Big Pharma Making Big Money With Illegal Kickbacks? Drug Companies Face More Scrutiny After News Of Humira Lawsuit)

“The insurance industry gets its justification to exist by selling the idea that only it can help make those mysterious health care costs affordable,” Novak wrote. “If the bean counters figure out a way that hospitals can do better without the private insurers around, it’s hard to see why they wouldn’t simply sweep them away faster than Amazon put an end to your local book store.”

Follow Evie on Twitter @eviefordham.

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