Health Care Insurers Cut Costs by Excluding Top Hospitals

People buying insurance plans under "Obamacare" will have limited access to some of the leading U.S. hospitals, including two renowned cancer centers, as insurers try to cut costs.

Source: Financial Times

People buying insurance plans under “Obamacare” will have limited access to some of the leading U.S. hospitals, including two renowned cancer centers, as insurers try to cut costs.

Most plans sold on the online health care exchanges in New York, Texas and California, for example, will not cover treatment at Memorial Sloan Kettering in Manhattan or MD Anderson Cancer Center in Houston, two leading cancer centers, or Cedars-Sinai in Los Angeles, one of the best research and teaching hospitals.

Experts say the decision by insurers to limit consumers’ choices and steer them away from hospitals considered too expensive, or even “inefficient,” reflects the competitive landscape in the industry since the passage of the Affordable Care Act, Barack Obama’s 2010 health care law.

It could become another source of political controversy for the Obama administration next year, when the plans take effect. Frustrated consumers could then begin to realize what is not always evident when buying a product as complicated as health care insurance: that their plans do not cover many facilities or doctors “in network.”

Under some plans, consumers can elect to visit medical centers that are “out of network,” but would probably incur high extra costs and may need referrals to prove that such care is medically necessary.

The development is worrying some hospital administrators who see the change as an unintended consequence of the law.

“We’re very concerned,” said Thomas Priselac, president and chief executive of Cedars-Sinai Health System in Los Angeles. “[Insurers] know patients that are sick come to places like ours. What this is trying to do is redirect those patients elsewhere, but there is a reason why they come here. These patients need what it is that we are capable of providing.”

One of the goals of the ACA was to make health care affordable, while ensuring that benefits such as maternity care were covered and people with previously-diagnosed medical conditions could not be denied access.

Faced with these restrictions, says Tim Jost, a health policy expert, insurance companies have had to come up with ways to cut the cost of their products. Limiting the availability of hospitals seen as too expensive — because they may attract the sickest patients or offer cutting-edge care — is seen as the best way to control costs.

“It’s like buying a Mercedes-Benz or a Chevy. You have to decide whether you want to pay for the highest product out there, which is probably pretty good quality, or the less expensive product,” Jost said. “Everyone is in favor of competition until they see what it looks like. Then they think, maybe it’s better for someone else just to pay for the whole thing.”

Kathleen Harrington, who heads government relations for the Mayo Clinic in Minnesota, said access to the clinic was initially limited in the Rochester, Minn., area until officials at the state health care exchange board encouraged insurers to expand network options.

Harrington said the concern was that a focus on bringing down costs would hurt “centers of excellence” like Mayo.

“You don’t come here for primary care. We do treat the sickest of the sick. We do experimental treatment. This is where you come for innovative treatments for life-threatening illnesses,” she said.

“If health care, the full spectrum from primary to top specialty care, becomes commoditized, it becomes a concern for the American health care system,” Harrington added.

When the Obama administration was asked whether the health care exchanges were offering adequate network options, the Department of Health and Human Services said they would “vastly increase” access to medical providers for millions of uninsured people.

“Decisions about which private health insurance plans cover which doctors is a decision currently made by insurers and providers and will continue that way,” it said.

The lobby group for U.S. health insurers, America’s Health Insurance Plans, said ACA brought “new costs” to the industry and selecting hospitals and physicians that met “quality standards” was one way of making health plans more affordable for consumers.

However, Priselac at Cedars-Sinai said narrowing of provider networks is being driven by price, not by quality. He said the hospitals excluded were leaders in innovation, which saved billions of dollars for the health care system in the long run.

“There is confusion between price and efficiency,” he said. “The major teaching and research hospitals are more expensive not because they are inefficient but because of what they do.”

(c) 2013 The Financial Times Limited