Inflation-Dogged Health Systems Confident Payers Will Concede Higher Rates In 2023 Contract Negotiations

Health systems confident payers will concede higher 2023 rates

Source: Fierce Healthcare, by Dave Muoio

Executives from some of the country’s largest for-profit health systems say it’s likely their organizations will be able to pass rising cost pressures along to commercial insurers during the next round of contract negotiations.

 
 

Speaking to investors during earnings calls this past week, the hospital chains each reported limited non-COVID volumes, supply chain interruptions and pricey contract labor rates that are expected to persist through the end of the year.

Those challenges took their toll on the for-profit health systems, which have across the board adjusted their financial projections downward or, in Community Health Systems’ case, led to a second consecutive quarter of losses.

These hurdles have only been exacerbated by skyrocketing inflation rates that have recently struck the country and are expected to continue in the near term. But here, at least, the health systems say their commercial contracts can help blunt the damage.

HCA Healthcare’s Sam Hazen told investors that the company is “pretty much contracted for 2022.” Those agreements have terms that provide “some protection in the short run” that “allows us to reposition some of our pricing as we move through the next few years to reflect more accurately the inflationary pressures that we’re seeing,” he said.

 

Looking to the coming year’s commercial negotiations, Hazen said HCA has already seen “some early success and recognition by the payers” and that some of its recently renegotiated contracts reflected higher price escalation than those of the past.

“I think it’s reasonable to assume that we were in 3.5% to 4% zone previously with our commercial pricing,” he told investors. “We’re in a competitive positioning as a company globally and that allows us to negotiate based upon the inflationary pressures. … I believe our relationships will allow us to get to a number that makes sense for both organizations, but I do anticipate it being somewhere around the mid-single-digits.”

Universal Health Services Chief Financial Officer Steve Filton said his company is “aggressively” looking to trim under-earning managed care contracts and seek out higher prices in the coming year.

Both its acute and behavioral care hospitals are identifying contracts that “are not even remotely” keeping pace with inflationary and labor pressure and giving those payers notice of terminations “at a pace faster than, quite frankly, I can really remember,” he told investors.

 

The country’s largest health insurance company has already signaled some pricing flexibility.

During UnitedHealth Group’s investor call a few weeks back, CEO Andrew Witty, for instance, said the payer will be “very, very respectful of the kind of underlying phenomena within the cost trends of the environment.”

Brian Thompson, CEO of UnitedHealthcare, echoed those comments with respect to inflation and providers’ labor costs with a warning that those factors will have “more impact” on contract pricing in 2023.

Filton said those were the first such acknowledgments he could recall ever coming out of the massive payer—blood in the water for hospitals gearing up to negotiate.

“It struck me, at least, that there was a different tone from some of the payers,” he told investors. “So, our expectation is that payers will be more receptive to [rate increases] in 2023, but we’ll also continue to be aggressive and try and grab the bull by the horns where we’re able to and wrangle rate increases from reluctant payers where we can and where we can’t.”

The ink has already dried on negotiations between Tenet Healthcare and UnitedHealthcare, with the former announcing its hospitals, ambulatory facilities, physicians and other providers all contracted straight through 2025, Tenet Healthcare shared during its earnings call.

Tenet CEO Saum Sutaria, M.D., wasn’t able to share the contract’s specific terms but told investors his company is “pleased with the terms.” While the pricing of managed care isn’t going to cover this year’s 8% to 9% consumer price index increases, he said the arrangement does include escalators and removes some uncertainty surrounding long-term pricing.

As for the remainder of its contracts for 2023 and beyond, Sutaria said he expects inflation to be a central focus of negotiations.

“Every conversation we are having with plans, [the] inflation environment is obviously top of mind,” the CEO said. “Overall, where do we think rates will be? … We see rate increases [in the] 3%, 4%, 5% type of range.”

Elsewhere in the industry, Fitch Ratings warned in a recent research note for the nonprofit hospital market that commercial payers will likely earn some wins in the fight on rate increases due to their often larger size and the inflationary pressures affecting their own bottom lines.

“Nevertheless, providers may be able to pursue rate increases above those achieved in recent years, considering the interdependent relationship of providers and payers,” Fitch wrote.

Payers, Providers And States Likely Have More Time Until COVID-19 Health Emergency Ends

Payers, providers, states have more time until COVID emergency ends

Source: Fierce Healthcare, by Robert King

The healthcare industry likely has until this fall to face the end of the COVID-19 public health emergency (PHE) as a key deadline came and went with no notice Monday.

 

The Department of Health and Human Services (HHS) promised to give states a 60-day notice when the PHE will end, giving a vital heads-up for when a slew of regulatory flexibilities that have been in place for more than two years will go away. The current PHE will run until July 16, and HHS did not provide any notice that it won’t be extended again for another 90 days.

The decision to not give a 60-day notice comes after an intense lobbying effort from healthcare providers that are worried about the flexibilities of the PHE going away amid a potential new surge of COVID-19.

“The risk from COVID-19 variants remains, and case rates are currently rising across the country,” said the letter from 16 health groups to HHS leadership dated May 10. “Throughout the pandemic, we have painfully learned that the rapid global spread of new variants has resulted in significantly increased transmission rates and infections in the U.S.”

Some health groups and state Medicaid officials have asked HHS Secretary Xavier Becerra to give them more than a 60-day notice of the PHE going away. A key reason is that states agreed to get a 6.2% increase in federal Medicaid matching funds in exchange for not dropping anyone off Medicaid for the duration of the PHE. Once the PHE ends, states will have up to 14 months to fully redetermine whether Medicaid beneficiaries are still eligible.

Becerra has shot down giving more notice, previously saying the PHE can only be extended for 90 days at a time. Becerra has also said that any decision on the PHE will be made via the science.

 

The PHE brought a series of major regulatory flexibilities that could go away once it expires, chief among them in telehealth. The Centers for Medicare & Medicaid Services temporarily removed barriers that include originating site requirements and audio-only restrictions for telehealth services, enabling providers to get reimbursement from Medicare for the new technology.

The flexibilities, however, only last through the PHE. Several bills introduced this session aim to offer to extend the telehealth flexibilities for several months past the PHE to determine what should be made permanent.

Last Updated 08/10/2022

Arch Apple Financial Services | Individual & Family Health Plans, Affordable Care California, Group Medical Insurance, California Health Insurance Exchange Marketplace, Medicare Supplements, HMO & PPO Health Care Plans, Long Term Care & Disability Insurance, Life Insurance, Dental Insurance, Vision Insurance, Employee Benefits, Affordable Care Act Assistance, Health Benefits Exchange, Buy Health Insurance, Health Care Reform Plans, Insurance Agency, Westminster, Costa Mesa, Huntington Beach, Fountain Valley, Irvine, Santa Ana, Tustin, Aliso Viejo, Laguna Hills, Laguna Beach, Laguna Woods, Long Beach, Orange, Tustin Foothills, Seal Beach, Anaheim, Newport Beach, Yorba Linda, Placentia, Brea, La Habra, Orange County CA

12312 Pentagon Street - Garden Grove, CA 92841-3327 - Tel: 714.638.0853 - 800.731.2590
Email:
Jay@ArchApple.com
Copyright @ 2015 - Website Design and Search Engine Optimization by Blitz Mogul