Large-market insurers negotiate lower prices for doctor-office visits than small-market insurers, says a study by researchers at Harvard Medical School published in Health Affairs. For example, "Insurers with market shares of 15 percent or more negotiated prices for office visits that were 21 percent lower than prices negotiated by insurers with shares of less than 5 percent." Small-market insurers are more likely to be in rural areas.
Analyzing 15.3 million claims in 2014, researchers found that for a routine visit to a smaller provider, insurers with less than 5 percent of the market share negotiated an average price of $88. The average price for insurers with 5 to 14 percent of the market share was $72, and for insurers with 15 or more percent of market share, the average cost was $70. For large providers, costs for insurers with less than 5 percent of the market was $97, it was $86 for insurers with 5 to 14 percent of the market share and $76 for insurers with 15 or more percent of market shares. (Harvard graphic: Average negotiated prices for insurers with different market shares billing the same providers for office visits)
Researchers suggest mergers as a way to give providers the wiggle room to negotiate lower prices, Max Ehrenfreund reports for The Washington Post. "Since doctor's offices often agree to calculate all their prices using a single formula, these figures suggest that a group of doctors working in an independent office could increase their revenue by nearly 20 percent if they sold out to a larger partnership."
One problem with the study is that the data from 2014 could be outdated, Ehrenfreund writes. "The numbers reveal little about how recent mergers might have affected the strategic situation for participants in this market or about how future mergers might affect premiums for ordinary people." Diana Moss, an economist and the president of the American Antitrust Institute, said "one possibility is that mergers among insurers will induce doctors and hospitals to conglomerate as well, which in turn will encourage greater consolidation in the insurance sector."
Analyzing 15.3 million claims in 2014, researchers found that for a routine visit to a smaller provider, insurers with less than 5 percent of the market share negotiated an average price of $88. The average price for insurers with 5 to 14 percent of the market share was $72, and for insurers with 15 or more percent of market share, the average cost was $70. For large providers, costs for insurers with less than 5 percent of the market was $97, it was $86 for insurers with 5 to 14 percent of the market share and $76 for insurers with 15 or more percent of market shares. (Harvard graphic: Average negotiated prices for insurers with different market shares billing the same providers for office visits)
One problem with the study is that the data from 2014 could be outdated, Ehrenfreund writes. "The numbers reveal little about how recent mergers might have affected the strategic situation for participants in this market or about how future mergers might affect premiums for ordinary people." Diana Moss, an economist and the president of the American Antitrust Institute, said "one possibility is that mergers among insurers will induce doctors and hospitals to conglomerate as well, which in turn will encourage greater consolidation in the insurance sector."
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