Health care costs a pain at the bargaining table

NEW YORK — Tension typically defines contract negotiations between health insurers and health care providers, but the haggling has taken an ugly turn lately.

Two hospitals in New York sued UnitedHealth Group Inc. for fraud earlier this year. An ad by HCA Inc.-owned hospitals in Las Vegas warned patients’ health could be jeopardized if its properties are dropped from the Sierra Health Services Inc. network. A UnitedHealth executive’s home was vandalized in Denver during negotiations with HCA. A Blue Cross Blue Shield of Georgia ad accused a Piedmont Healthcare official of lying.

Experts say the spate of acrimonious, public disputes signal years of rising health care costs are taking a toll on all those involved. Hospitals accuse health plans of skimping on payments to boost their earnings, while health plans say they are under pressure from clients to lower costs, and that providers balk at tying payment to performance.

“As costs go up, the pain threshold is starting to be met,” said Les Funtleyder, an analyst at Miller, Tabak & Co. “Maybe we are just reaching some kind of a tipping point.”

Last year, the cost of covering an employee’s health care rose 6.1 percent, the 8th consecutive year of increases, according to Mercer Health & Benefits LLC.

High cost has squeezed demand for health insurance, so plans are under pressure to lower premiums to win business.

Plans forced to price more competitively must control costs to grow profits for shareholders, said Phillip Seligman, an equity analyst at Standard & Poor’s. Hospitals represent a prime target because they account for the largest percentage of costs, he said.

Declaring a winner in these brawls is difficult. A health plan that covers a large percentage of an area’s population will use that as an advantage over a hospital that needs those patients. But a hospital that controls most of a city’s market can call the shots with health plans.

“It isn’t clear whose power is growing in the market. Maybe these showdowns are an attempt to sort it out,” said Paul Ginsburg, president of Center for Studying Health System Change, a nonpartisan policy research organization.

Wellpoint Inc. Chief Financial Officer David Colby said health plans have the advantage because there are more tools to compare hospital quality — a powerful bargaining chip. He said Wellpoint’s stance isn’t a ploy to increase profits.

“You are not guaranteed a rate increase. We want to tie increases to quality because that is beneficial to our members,” Colby said.

Linking rate increases to quality measures was a sticking point between Blue Cross Blue Shield of Georgia, which is owned by Wellpoint, and Piedmont Healthcare. The contract was ultimately settled to include quality measures, but two of Piedmont’s hospitals and its doctor group were out of the BCBS network for a month.

“We felt we had to take a stand for what is right. These insurance companies are big conglomerates that are becoming very profitable on the care we provide,” said Piedmont spokeswoman Nina Montanaro said.

Hospitals aren’t exempt from allegations that their demands for higher rates are designed to bolster their finances. Several of the recent battles involved HCA, which is slated to go private in a leveraged buyout. Some analysts suggested HCA needs to increase its cash flow to pare down the debt resulting from the deal. HCA spokesman Ed Fishbough denied that speculation.

HCA and UnitedHealth reached a nationwide agreement earlier this month, ending nasty disputes that banished hospitals in Denver, Southern Florida and Tampa, Fla. from the insurer’s network for nearly two months.

HCA is still battling over rates with Sierra in Las Vegas for a contract that expires in December. Meanwhile, employers and patients sit on the sidelines of the disputes, attempting to figure out how they’ll be affected.

“They (the health plans) couch this as ‘we are trying to lower costs’, but we don’t know if they are just trying to get more from the health care system,” said Joe Hodas, spokesman of Frontier Airlines Holdings Inc.

The ultimate losers may be the patients, who have to adapt to changing networks of hospitals and doctors, experts said.

“The poor consumer is being told to do a better job researching their health care and then find out the facility they want isn’t in their network,” said Jane DuBose, health plan analyst for HealthLeaders-InterStudy, a health plan research company. “Our health care model still leaves the consumer at the bottom of the heap.”