Hospitals' Negotiating Leverage with Health Plans: How and Why Has It Changed?

Abstract

Objective To describe how hospitals' negotiating leverage with managed care plans changed from 1996 to 2001 and to identify factors that explain any changes. Data Sources Primary semistructured interviews, and secondary qualitative (e.g., newspaper articles) and quantitative (i.e., InterStudy, American Hospital Association) data. Study Design The Community Tracking Study site visits to a nationally representative sample of 12 communities with more than 200,000 people. These 12 markets have been studied since 1996 using a variety of primary and secondary data sources. Data Collection Methods Semistructured interviews were conducted with a purposive sample of individuals from hospitals, health plans, and knowledgeable market observers. Secondary quantitative data on the 12 markets was also obtained. Principal Findings Our findings suggest that many hospitals' negotiating leverage significantly increased after years of decline. Today, many hospitals are viewed as having the greatest leverage in local markets. Changes in three areas—the policy and purchasing context, managed care plan market, and hospital market—appear to explain why hospitals' leverage increased, particularly over the last two years (2000–2001). Conclusions Hospitals' increased negotiating leverage contributed to higher payment rates, which in turn are likely to increase managed care plan premiums. This trend raises challenging issues for policymakers, purchasers, plans, and consumers.