CA patients often suffer when hospitals and insurers clash

By Craig Wagoner, especially for CalMatters

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No one wants to see health insurance go up. Individuals, small businesses and large employers are already under inflationary pressure. But it will be much worse if health insurance companies fail to help address the problem the rising costs faced by healthcare providers.

Lengthy contract negotiations between health insurers and health care providers are becoming the norm, leaving patients—our shared customers—in a confusing and worrisome “out-of-network” status while health insurers and providers point fingers at each other.

An overused but accurate phrase applies: Health care providers are facing a perfect storm of pressure, especially in California, and especially systems that serve large shares of Medi-Cal and Medicare patients.

Among our nation’s 6,000 hospitals, our flagship hospital, Fresno Community Regional Medical Center, serves the fourth highest percentage of Medicaid patients and is fifth for overall state recovery.

While being one of America’s most important hospitals is rewarding, recent federal changes designed to slow the growth of health care costs have resulted in a 15 percent cut in Medicaid funding — an estimated $1 trillion in cuts nationally over the next decade.

At the same time, California law increased the minimum wage for healthcare workers up to $25 per hour. Although no one deserves this more than healthcare professionals, the ripple effects are significant. In our organization, these adjustments add $100 million a year in labor costs and will continue to grow.

Further constraining hospitals are legal requirements to treat anyone who arrives at their emergency departments, regardless of ability to pay. What other industry is required to provide a service first and figure out how to get paid for it later?

Our health care system took on a $231 million reimbursement deficit last year for care of state-insured patients, and we need to prepare for more. Higher emergency department visits from underinsured patients, as well as higher levels of charity care and bad debt, will further widen the gap between our costs of providing care and the amount we are reimbursed.

Meanwhile, insurance companies want hospitals to accept rates that have not kept pace with rising costs. While government payers offer predictable approval processes and payment timelines, private health insurers increasingly rely on cumbersome prior authorizations, payment denials, paying less for services and slow reimbursements. These practices add administrative costs, strain cash flows, reduce overall recovery, and threaten our fiscal stability.

Insurers are facing pressure from employers and members to limit premium growth. But too often this pressure is used to oppose necessary and reasonable rate increases for providers. Health insurers often blame providers for the high cost of care, but hospitals like ours are highly focused on greater efficiency. In fact, we are a leader in low costs compared to the average California hospital.

In some cases, insurance companies offer quality incentive programs as a substitute for adequate reimbursement, then publicly criticize health care providers when we find this unacceptable. I wholeheartedly support performance incentives as a tool for improvement, but not when these programs are used as a mechanism to shift more of the financial burden onto hospitals.

As stalled negotiations become more common, regulators and policymakers need to take a broader view of health care spending by examining health insurers’ reserves and their administrative and marketing costs.

For healthcare providers like us, modest profit margins are not just about staying afloat, they are critical to reinvestment in technology, facilitiesour workforce and public health initiatives that are essential to the communities we serve.

There’s a lot at stake if payers win the war of words over contract rates. Access to health services, health care jobs, and the stability of institutions that communities rely on will decline.

When providers are forced to make deeper cuts to manage this convergence of pressures, patients ultimately pay the price.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.