Hospitals' negotiating leverage with health plans: how and why has it changed?

OBJECTIVE: To describe how hospitals' negotiating leverage with managed care plans changed from 1996 to 2001 and to identify factors that explain any changes. DATA SOURCES: Primary semistructured interviews, and secondary qualitative (e.g., newspaper articles) and quantitative (i.e., InterStudy, American Hospital Association) data. STUDY DESIGN: The Community Tracking Study site visits to a nationally representative sample of 12 communities with more than 200,000 people. These 12 markets have been studied since 1996 using a variety of primary and secondary data sources. DATA COLLECTION METHODS: Semistructured interviews were conducted with a purposive sample of individuals from hospitals, health plans, and knowledgeable market observers. Secondary quantitative data on the 12 markets was also obtained. PRINCIPAL FINDINGS: Our findings suggest that many hospitals' negotiating leverage significantly increased after years of decline. Today, many hospitals are viewed as having the greatest leverage in local markets. Changes in three areas--the policy and purchasing context, managed care plan market, and hospital market--appear to explain why hospitals' leverage increased, particularly over the last two years (2000-2001). CONCLUSIONS: Hospitals' increased negotiating leverage contributed to higher payment rates, which in turn are likely to increase managed care plan premiums. This trend raises challenging issues for policymakers, purchasers, plans, and consumers.

Physicians more likely to face quality incentives than incentives that may restrain care.

Concerns that physician financial incentives may lead to withholding needed care have caught the attention of legislators, regulators and even the U.S. Supreme Court. While the spotlight has been on how health plans reimburse physician practices, this Issue Brief provides unique nationally representative data on physician practices' use of incentives, which have a more direct effect on physician behavior. According to 1999 data from the Center for Studying Health System Change (HSC), physicians are more likely to be subject to incentives that may encourage use of services, such as patient satisfaction (24 percent) and quality (19 percent), than to financial incentives that may restrain care, such as profiling (14 percent). The complexity of physician financial incentives and their relatively low prevalence raise questions about effective regulation and public reporting of their use.