THE NEW WORLD OF PROVIDER RELATIONSHIPS

Changes in health provider relationships continue.  The last year alone has dramatically changed provider relationships with insurance companies/payors.  Our experience is that insurance company payors have stopped any pretense of negotiations, much less good faith negotiations, with providers over reimbursement rates.  We see primarily that providers may take it or leave it, be in or out of network, but will have no opportunity to have intelligent discussions of fair reimbursement rates with their insurance company payors.

This will have a profound impact on planning for the future of medical practices and hospitals.  In essence, since providers appear to have only a participate/don’t participate in network choice, in the absence of a mass opt out from a payors’ system, the payor will simply dictate the rate it will pay.  In many cases, the provider will reserve the ‘right’ to periodically and apparently arbitrarily change (lower) that rate.  The payor will also continue to avoid any liability for delaying or avoiding payments to providers.

How we got here:

• Healthcare reform is certainly a cause of change.  The rise of ACA and the insurance companies’ response of creating “narrow” networks of providers who are those generally willing to take the least reimbursement has encouraged insurance company payors to expand the concept of arbitrary reimbursement rates set by the insurer.  While insurers will cite any number of excuses and reasons why they are the only protectors of the healthcare system, most insurers continue to report massive profits and margins far exceeding those of healthcare providers (with some provider exceptions).
• Shared information – as information becomes more available, useful and transparent, we are now able for the first time, at least in modern times, to begin the process of trying to measure the effectiveness of our healthcare expenditures and our healthcare providers.  Again, while insurance company payors’ analyses and data remain generally hidden, the rest of the participants in the healthcare system are now being subject to historically immediate and deep analysis of healthcare experiences.  Shared quality data, utilization rates, prescription data and other data sets are likely to lead to continued profound changes in how we look at and utilize healthcare.
• Reimbursement changes – on the other side of insurance company payor matters, the change to value based payments from volume based payments is either the cause or the result of other healthcare system changes.

Recently, the more the procedures one performed, the more reimbursement one received.  With the change to value and/or outcome based payments, providers are looking at affiliations with hospitals, ACOs or other physicians, to reduce the cost of EHR, data sharing and data analysis systems, and reducing overhead for administrative and compliance matters.  Most of the physicians and practice groups I deal with are outsourcing their medical billing, seeking EHR partners, and taking other steps to try to focus on their practice and scale their expenses and risks to an affordable point.  Both hospitals and physicians are realizing that they will have to have some common connections, systems and standards in order to create, share and understand quality and utilization data.

This need for alignment and sharing still covers an entire realm from simple and practical tasks sharing (think call coverage) to real time sharing in integrated networks.

What we see coming:

• Hospital consolidations are likely to continue, whether these are out and out takeovers or purchases, or network affiliations.  Costs and economics will drive this trend forward.  It is becoming less and less likely that rural and small hospitals can continue to exist without alignment with nearby hospitals that are larger and serve larger patient bases to spread the continuing costs of compliance and the realty of lower reimbursements.
• Hospital employment of providers – this trend will continue to go forward.  Whether this will be a good long term result for physicians remains to be seen.  Whether hospitals will be able to gain the productivity of physicians compared to those who are self employed also remains to be an open question.  Past experience indicates that physician employees are not motivated to make personal and family sacrifices that result in no additional compensation (obviously there are exceptions).  The question then will be is the control and consistency gained by the hospital by having employee physicians, outweigh a marginal loss of productivity?
• Acquisition of large scale provider groups – while this has not occurred locally, elsewhere we are seeing some of the large scale provider groups being acquired by hospital systems as a way of entering new markets or gaining a perceived advantage over competitors.  Whether this trend will continue into smaller regional markets and provider groups is an open question for 2014.

This newsletter is edited by Paul Wallace of Jones • Wallace, LLC, a member of the American Bar Association Healthcare Law Section and the American Health Lawyers Association who has been representing physicians and healthcare practices for over 25 years.  Mr. Wallace assists physicians in health practices in contract items, federal legal compliance, creation of practice entities, estate and wealth planning and similar issues.  Please feel free to call if you have any questions on this newsletter or legal matters at (812) 402-1600 or pwallace@joneswallace.com.