AutoInsuranceMM.Info – Low income insurance – Provider Market Concentration Outweighs Payer Concentration
– Healthcare provider systems tend to be bigger, more consolidated, and have more market share than payers in the same metropolitan areas, leaving some payers with less power to negotiate pricing and other contracts, according to the Commonwealth Fund.
Researchers found that providers are more likely to create areas of “super” and “high” market concentration than payers within the nation’s metropolitan statistical areas (MSAs).
“For providers, the vast majority of the MSAs were at the concentrated end of the spectrum, either being highly concentrated (47.1 percent of provider markets) or super concentrated (43 percent),” the Commonwealth Fund said. “By comparison, for insurers, almost all the MSAs fell into the middle categories, either being highly concentrated MSAs (54.5 percent) or moderately concentrated (36.9 percent).”
A highly consolidated market, in which very few providers or payers serve the majority of patients, can create imbalances in negotiating power that impact pricing. When providers gain scale and drive out competitors, they gain a greater ability to dictate financial terms to payers responsible for the geographic area, and reimbursement rates may rise.
However, when payers outmuscle providers, physicians and hospitals may be pressured into accepting lower reimbursement rates or risk losing the contract all together. Patients may also be impacted by having fewer insurance choices, and premium rates tend to rise.
In order to keep a balance across the healthcare equation, state governments may need to make additional effort to identify anti-competitive practices, the report suggests.
State and federal officials should also identify opportunities to capitalize on market concentration and transfer the benefits onto healthcare consumers.
“State officials better understand the nuances of their local markets and are able to ascertain what steps, if any, may be required,” the team said. “More populous MSAs may have lower measured concentration levels because they comprise more than one market. And even if a market is found to be highly or super concentrated, regulators should examine other competitive factors that may mitigate the potentially harmful impact of high concentration.”
“For example, as healthcare diagnoses and treatments become more complex, larger, more-integrated, and well-capitalized health care providers may be better equipped to lower costs and improve quality,” the team added. “Still, it is important for regulators to increase the likelihood that the benefits of consolidation ultimately flow to consumers and employers.”
The report concluded that other efforts to evaluate payer and provider concentration would be welcome, in order to reduce both the cost of healthcare services and premiums.
“It’s important to understand how concentration levels vary across the country, as well as examine the relative concentration levels between providers and insurers at the local level,” the Commonwealth Fund said.
“Our previous research has shown that in markets with both high provider and insurer concentration, insurers have bargaining power to reduce prices, yet consumers and employers don’t usually benefit. Regulators can use this information to determine if policies are needed to protect consumers, as well as employers that provide health benefits to their workforces.”