Poor Performance, High Costs May Lead to Hospitals Being Cut From Insurance Exchange

In what appears to be the first proposal of its kind, the California insurance exchange is threatening to drop hospitals from its network for poor performance or high costs. The new proposal, which aims to make coverage more affordable while improving the quality of patient care, has been met with stark opposition from both health insurers and providers.
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Hospital’s performance and safety measures, including readmission rates, hospital-acquired infections, and adverse drug events, would be judged under the Covered California plan.

The 5-member California insurance exchange board will vote on the proposal in April. If approved, by 2018, insurers will have to single out hospitals on cost and quality, and by 2019, poor performers would be expelled from their exchange networks.

To do this, health insurers would first need to disclose their negotiated rates with providers—something they have long resisted. The exchange argues, however, that the transparency would allow them to identify high-cost providers and allow policyholders to see price differences before undergoing care.

Peter Lee, executive director of the Covered California exchange, told NPR that health insurers have not been tough enough on hospitals or doctors.

Critiques of the proposal argue that measuring quality can be difficult and hospitals may be penalized for things outside their control, like treating sicker patients or serving lower socioeconomic areas. Additionally, in areas where hospitals or doctors are already sparse, exclusions could be difficult regardless of quality or cost.

Charles Bacchi, chief executive of the California Association of Health Plans, told NPR that he believed the idea will end up “discouraging hospitals and doctors from participating in the exchange and driving up premiums as a result.”—FRMC Editor

Reference: Terhune C. California Insurance Marketplace Aims To Kick Out Poor-Performing Hospitals. NPR. March 18, 2016.