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Hospitals attempt to stay afloat amidst nasty contract negotiations

While health insurance companies enjoy record profits, hospitals struggle to survive. The fight is in their contract negotiation.

Every few years, contract negotiations between payors and providers pull back the curtain on the innerworkings of the American healthcare system.

The findings are gruesome.

For reference, a recent article in Becker’s Payer Issues details one of the ugliest contract breaks in the last year. In Mississippi, the state’s largest payer is battling the state’s largest hospital. Since April 1, the University of Mississippi Medical Center (UMMC) has been out of network with Blue Cross Blue Shield (BCBS) because the two couldn’t agree over reimbursement rates. As a result of the contract dispute, 750,000 people in the country’s poorest state have reduced access to healthcare. The disagreement has culminated in several lawsuits: BCBS is currently suing three UMMC executives for defamation.

While some negotiations have resulted in a positive outcome, the reality is that “millions of patients around the country have or are unwillingly stuck in a corporate tug of war this year,” reports Becker’s.

Over the last decade, we’ve seen health insurers get increasingly nastier and more aggressive in their contract disputes with hospitals, demanding significant rate cuts. To make it worse, many insurers will issue ultimatums, and if hospitals won’t bite, these payors will often terminate contracts outright rather than sit at the negotiation table.

So, what causes such nasty disputes?

According to the article, “hospitals and insurers face drastically different financial realities.” UnitedHealth Group and Elevance Health experienced third quarter profits that were 28 percent and 7 percent higher than the same period last year, respectively, while Molina’s profits were up 60 percent and Cigna’s increased 70 percent.

Meanwhile, hospitals have been struggling. Tennessee health system HCA Healthcare’s third quarter profits were down 50 percent, and Texas-based Tenet Healthcare’s were down by a whopping 70 percent. Community Health Systems (CHS), also based in Tennessee, lost $42 million in the third quarter. And over the last year, Catholic health system Trinity Health has lost $1.4 billion. And these are some of the biggest systems in the country – let alone smaller hospitals or regional systems.

Americans seem to be waking up to the reality that insurers are not on their side. In a January 2021 nationwide poll, 33 percent of adults said they completely or somewhat trusted health insurers, compared to 72 percent of hospitals.

The data is in — and it certainly suggests insurers are not to be trusted. And every contract negotiation season, we’re reminded why.

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