Key Payer Trends That Will Impact Hospital CFOs
According to the director of AHIP, one of the most significant trends impacting the cost of health care is the continued consolidations and acquisitions of hospitals.
The healthcare workforce crisis, along with rising costs to deliver quality care, will dominate the top issues facing healthcare CFOs in 2022. But the reduced or insufficient reimbursements that many hospitals and health systems receive payers are equally important.
Quite simply, as much as the healthcare industry is going through upheaval, so is the health insurance industry, which accounts for the lion’s share of revenue that hospitals depend on. Unfortunately, payor reimbursement rates do not keep up with inflation.
With rising labor, procurement, and pharmaceutical expenses, hospitals will seek higher rates from paying partners and continue to focus on improving operational efficiencies to counter these expenses. growing, according to Charlton Park, chief financial officer and chief analytics officer at the University of Utah. Health.
HealthLeaders spoke with AHIP Director of Communications and Public Affairs David Allen about key payer trends that will directly impact the healthcare industry and consumers.
The impact of hospital consolidations and medical practice acquisitions
One of the biggest trends impacting the cost of healthcare is the continued consolidations and acquisitions of hospitals, especially in crowded markets, Allen says.
“Every day, Americans feel the brunt of hospital consolidation. Hospitals in highly concentrated markets may charge higher prices for medical services and have more leverage to negotiate higher prices with health insurance providers, resulting in ever-increasing health care costs for individuals and families,” Allen says. “Additionally, hospitals continue to buy up and take over doctors’ practices, either buying out their practices or hiring them directly. And hospitals are driving up prices.”
To reinforce this last point, Allen says that at the end of 2020, almost half of American doctors were employed by hospitals or health systems, or 49.3%, according to an analysis by the Physicians Advocacy Institute.
“That’s not surprising, given that 18,600 physicians left independent practice and became hospital employees in 2019 and 2020,” Allen said. Meanwhile, data from the institute reveals that hospitals acquired 3,200 medical practices during this two-year period, for an 8% increase in hospital-owned practices.
“Evidence shows that this type of consolidation — when more and more physicians in an area work for the same hospital or health care system — leads to higher health care prices for Americans,” Allen says. “When hospitals gain more market power by acquiring medical practices, they can control referrals and demand higher prices, which in turn further increases premiums and costs for everyone.”
The high cost of prescription drugs
Drug prices are spiraling out of control, putting lifesaving drugs out of reach for too many American families, Allen confirms.
Indeed, while inflation will have serious repercussions in many areas of health care, this is especially true with the price of drugs.
“Drug inflation has been the most severe,” says Denise Chamberlain, executive vice president and chief financial officer of Edward-Elmhurst Health, a $1.7 billion healthcare system in suburban Chicago. “According to a Kaufman Hall report, the average drug cost per patient in September 2021 increased by 40.4% compared to September 2020.”
The biggest problem here is that drug prices are set by brand-name drug makers based on what they think the market will pay, Allen says.
“Generics and biosimilars provide much-needed competition to drive down drug prices. But the uptake of biosimilars has been limited because previously neither has been approved by the Food and Drug Administration as interchangeable,” says Allen.
Biologics and biosimilars are important medical advances that are used to manage many chronic diseases, as well as to prevent, treat and even cure disease, Allen says. They represent the future of prescription drugs.
“But an innovative new drug is useless if no one can afford it,” Allen points out.
Addressing the social determinants of health and health equity
To achieve health equity so that every person has a fair chance to live a healthy life, we must address the socioeconomic and sociopolitical root causes of ill health and health disparities, Allen says.
“The cost of inaction on social barriers to health care has emerged starkly during the COVID-19 pandemic, exposing the glaring inequalities that exist in America and demonstrating the critical link between socioeconomic barriers and outcomes. health,” Allen said.
The good news is that many health insurance providers recognize the importance of meeting the basic needs of their members and have used policy levers to alleviate the socio-economic barriers they face.
“Health insurance providers respond to socio-economic barriers in a variety of ways, from offering services covered by the insurance scheme to designing and implementing innovative new programs, often in partnership with community organizations,” says Allen.
“Many health insurance providers also invest in grants, reserve funds, or savings in community infrastructure and community resources to improve the socio-economic living conditions of the communities they serve. Thus, the emphasis is not only about reducing disparities for their members, but also about promoting health equity in the community by increasing opportunities to live healthy lives,” Allen said.
Increased competition can lead to lower premiums
Perhaps the best financial news for many hospitals and healthcare systems is that the average consumer has an increasing number of options when it comes to health insurance providers. This has the potential to reduce the cost of such insurance for an individual.
“Every American deserves comprehensive, affordable coverage, regardless of income, health, or pre-existing conditions,” Allen says. “The Individual Marketplace provides affordable, high-quality health care to hard-working Americans who purchase coverage themselves. Through the Affordable Care Act [ACA] health insurance exchanges, health insurance providers compete to provide Americans with coverage that protects their health and financial security.”
Competition among health plans is on the rise, Allen says, which could mean lower costs or increased coverage for an individual subscriber.
“ACA exchanges allow Americans to compare plans and choose the benefits that best suit their needs. On the Federal Exchange via healthcare.gov, the average consumer has 6-7 issuer options, versus 4 to 5 in 2021,” Allen notes. .
Competition reduces premium costs for consumers. Research shows that counties with an additional health insurance provider in 2019 saw a 2.5% reduction in benchmark premiums compared to 2018. Average premiums for benchmark plans in healthcare.gov states decreased by 3% from 2021 to 2022, after a drop of 3% from 2020 to 2021.
Finally, at the state level, Allen says AHIP continues to focus on affordability through a competitive marketplace.
“This includes pushing back against drugmakers who seek to pass legislation that allows their drug prices to remain obscured to the consumer, and providers who want to limit the use of medical management tools to promote safety and treatments. the most effective,” says Allen.