'The house always wins': Insurers' record profits clash with hospitals' hardship

With most healthcare organizations having now released their third quarter earnings, the gap between provider and payer profits continues to widen.

The nation's largest insurers, UnitedHealth Group and Elevance Health, reported profits that were 28 percent and 7 percent higher than the same period last year, respectively. UnitedHealth raked in $5.3 billion, while Elevance took in $1.6 billion.

In contrast, some of the nation's largest health systems, HCA and Tenet, saw their profits fall dramatically compared to the third quarter of 2021. HCA reported $1.13 billion in profits, a decrease of 50 percent. Tenet took in $131 million, which is down 70 percent since last year.

"When I see Humana report another great quarter of profits and CVS Health/Aetna have a great quarter, and at the same time huge health systems report huge billion dollar plus losses, I'm reminded of the old adage — The house always wins," Scott Becker, publisher of Becker's Healthcare and partner with McGuireWoods, wrote Nov. 2 on LinkedIn

Third-quarter payer profits:

Third-quarter provider profits:

With the evidence piling up, health economists have classified 2022 as the worst financial year for hospitals in decades — so what happens next?

Payment rates will eventually rise to meet costs, but that process will be slow and uneven across systems. Annually adjusted Medicare rates will continue to undercut hospital costs, and the gap between costs and payments will therefore worsen — leaving commercial payers to make up the difference. 

In the meantime, the negotiations to make up those differences aren't going well. An AHA survey published Nov. 2 found that among 772 hospitals, over 75 percent are seeing their relationships with payers get worse. In addition, 84 percent are spending more to comply with new insurance policies and 95 percent are dedicating more staff resources to prior authorization requests. 

On the ground, the deteriorating relationships couldn't be more clear. Since April 1, the largest payer and the largest hospital in Mississippi, BCBS and University of Mississippi Medical Center, have been out of network because of a disagreement over reimbursement rates. Jackson-based UMMC is the state's only children's hospital, organ transplant center and singular provider of many other services. In total, 750,000 people in the nation's poorest state have little to no access to covered healthcare.

Around the country, it's a similar story: Centene will be out of network with Tenet by the new year without a new contract, leaving 3 million without coverage. In Illinois, Springfield Clinic and BCBS have had no contract since late 2021, leaving up to 110,000 patients out of network. Most recently, a standoff between CareFirst BCBS and Johns Hopkins Medicine in Baltimore was resolved after Gov. Larry Hogan and several state lawmakers became involved with negotiations.

But a resolution is never guaranteed, and it's likely that only the largest systems with the biggest market share will see speedy and adequate negotiations with payers moving forward, leaving smaller hospitals at a disadvantage. And even then, BCBS Mississippi has made no indication it will budge with the state's largest provider anytime soon.

"It’s good to be the house," Mr. Becker said.


Copyright © 2022 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.

 

Featured Webinars

Featured Whitepapers

Featured Podcast

Top 40 articles from the past 6 months