Will Carolinas HealthCare, UNC Health deal raise insurance costs for patients?

The CEO of Carolinas HealthCare System said Tuesday that a deal with UNC Health Care would not lead to higher insurance premiums for patients, but industry experts say similar deals have led to higher costs.

The two hospital systems have not discussed leveraging their joint operating agreement to increase their power over insurance companies, said Gene Woods, CEO and president of Carolinas HealthCare.

“That’s never been a part of the conversation,” Woods told the system’s board of commissioners, adding, “We’re talking about improving health, improving affordability and improving quality.”

But health care officials say that similar agreements between hospitals have given the medical providers bargaining power with insurance companies, resulting in higher insurance premiums to cover increased costs for medical services.

The deal between the two hospital systems, announced last month, is being worked out as Carolinas HealthCare is seeing increased revenues and treating more patients.

The hospital system saw about 1,200 more patients per day during the first six months of 2017 compared with a year prior.

Carolinas HealthCare’s operating revenues increased by $251 million for the same time period, up to nearly $5 billion from $4.7 billion for the first half of 2016.

Still, Carolinas HealthCare reported an operating income of $141 million, which is a decrease of $47 million compared to the first six months last year.

That decrease is due to pressure of lower reimbursement rates, including Medicaid and Medicare, and cost inflation, the company said.

Carolinas HealthCare and UNC Health’s deal could make more money for the hospital systems, said Kevin Schulman, a professor of business and medicine at Duke University.

Across the country there’s evidence that provider consolidation has resulted in increased prices for patients, he said, adding patients would face higher costs indefinitely until a new business model is implemented.

Mergers and partnerships between health care providers are an effort to drive up the provider’s bargaining power, said Richard Bankowitz, the chief medical officer for America’s Health Insurance Plans, a national association representing health insurance providers.

Medical providers typically negotiate with insurers and employers and agree to what prices they are going to receive in order to provide services to the patient, Bankowitz said.

Depending on the outcome of those negotiations, insurance plans will price their products accordingly. “The biggest driver of premiums is the underlying cost of care,” Bankowitz said.

But Carolinas HealthCare CEO Woods emphasized potential cost savings in the deal.

“Where you do increase buying power is on supplies,” Woods said. “And so we think we can save millions and millions and millions of dollars buying supplies together versus separately and that’s better for our patients because, ultimately, those savings get passed on to our patients.”

This story was originally published September 12, 2017 at 4:06 PM with the headline "Will Carolinas HealthCare, UNC Health deal raise insurance costs for patients?."