It's finally clear: The insurance tail wags the provider dog

While insurance companies have troubles of their own, generally speaking they seem to be doing a lot better than hospitals and medical practices. Hospitals and physician groups have made very deep cutbacks and still barely keep afloat, while in many cases, health plans have managed to lower the amount they spend on care and raise premiums.

Let's stop kidding ourselves here, if we ever did. We don't have a relationship of peers here. We have a relationship in which the intermediary--the insurance company--has the means, the motive and the ability to ratchet down prices to providers repeatedly over time. Oftentimes, the provider doesn't have too much of a recourse--other than coming together and negotiating as a group, and risking being accused of anti-competitive behavior by the FTC.

This has been the case for many years, but it's particularly obvious now that a deep recession has sunk its claws into the healthcare industry. As you'll see, the health plans are posting decent numbers in most cases--and some, such as Humana, very good ones--but hospitals, in particular, are lucky to make modest operating gains or stay level, even when they've made deep cuts.

If this is the case even when money is at its tightest, how much more so is it the case when the economy is normal and the health plans have the extra cushion of better investment income earnings and stronger capital reserves?

The truth is, calling health plans an intermediary doesn't really cover it. They ARE the dog, not the tail, and providers have every right to object to how things work; they always have. But now that the recession has really exposed the bare bones of the relationship, they have a unique opportunity to throw a monkey wrench into things.

Hey, providers, it's your business model and your future. Take back some of your power while it's obvious that it's been taken away from you, before the status quo comes back and everyone pretends you're exaggerating. - Anne