More Networks Exclude Pricey Hospitals

Employers are increasingly willing to choose networks that exclude prestigious high-priced research institutions, according to a report by HealthLeaders-InterStudy. The state’s health insurance exchange, Covered California, will only intensify the trend toward narrow networks since most health plans have excluded these research institutions from their exchange networks.

Los Angeles is already is preparing for models that benefit large delivery networks. The City of Los Angeles’ decision to choose an Anthem Blue Cross HMO illustrates this trend. The arrangement excludes physicians from Cedars-Sinai Medical Center and UCLA Health System in order to eliminate referrals to those more expensive hospitals.

Jenny Kerr, market analyst at HealthLeaders-InterStudy said, “We expect pressure on the high-priced, academic hospitals in the market to reconsider pricing. Employers are sending a message that they are no longer willing to pay for hospitals that charge higher rates for routine services to cover costs of their teaching and research missions.”

The growth in accountable care organizations (ACOs) is another key driver in this trend. Los Angeles has 23 ACOs, which is the most in the state and the second most in the nation. Kerr said, “The rapid creation of ACOs, which are primarily physician-led in this market, means that physicians will be incentivized to prescribe the most effective medication rather than the least expensive to ensure quality outcomes.” For more information, visit

Last Updated 06/29/2022

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