Health insurance companies and hospitals are two of the most integral players in the healthcare system.

Their relationship, which involves complex negotiations and contracts, can significantly influence the quality, cost, and accessibility of healthcare for patients. However, these contracts are not without problems, and the challenges they present often lead to increased healthcare costs, reduced access to care, and sometimes, confusion for patients.

The Basics of Insurance-Hospital Contracts

Health insurance companies and hospitals (including hospital owned medical groups) typically enter into contracts to define how much the insurer will reimburse the hospital for services provided to insured patients. These contracts set rates for various medical services, procedures, and treatments, as well as guidelines for billing, claims processing, and patient responsibilities (like copayments or deductibles). The arrangement benefits both parties:

• Hospitals: Secure a steady stream of patients who are covered by insurance and guaranteed payment for services rendered (though not necessarily at full cost).

• Health Insurance Companies: Gain access to a network of healthcare providers that offer a variety of services to their policyholders, ideally at negotiated, lower rates than if the insurer had to reimburse for out-of-network care.

However, as insurance companies strive to manage costs and maximize profits, they often push for lower reimbursement rates to hospitals, leading to tension in negotiations. Hospitals, particularly small or rural ones, find themselves at a disadvantage because they rely on insurance agreements to stay financially afloat. When reimbursement rates don’t cover the cost of care, it becomes challenging for hospitals to maintain their services and keep up with the increasing costs of medical supplies, technology, and labor.

The agreements between the two entities are critical to ensuring that insured patients receive care within their network, which typically involves lower out-of-pocket costs compared to out-of-network care. The terms of these contracts can have wide-ranging implications for both healthcare providers and patients.

Contract Expirations, Renewals, and Renegotiation

One of the most contentious aspects of these contracts is the reimbursement rates agreed upon between insurers and hospitals. Hospitals often argue that insurance companies do not reimburse them adequately for the services they provide, especially for complex or emergency care. As the cost of delivering healthcare rises, hospitals claim that these rates often fail to keep pace with inflation or the increasing cost of medical supplies, labor, and technology. This is typically the cause of delays in contract renewals.

The result if an agreeable contract is not renegotiated is a financial squeeze on hospitals, particularly smaller or rural ones, which may already be operating on thin margins. These hospitals, which already operate on tight margins, may lack the negotiating power or resources to secure better reimbursement rates from large insurers. This often leads to hard decisions about cutting services, laying off staff, or closing departments, which can have severe consequences for local communities, particularly vulnerable populations that rely on these healthcare facilities.

The Role of the Patient

Patients play a pivotal role in navigating the complexities of health insurance and hospital contracts. During contract negotiations, it's important for patients to contact their insurance company directly, not their healthcare provider. Providers (your healthcare practitioner/doctor) typically do not play a role in these negotiations. 

Here are some key actions patients can take during these challenging times:

• Advocate: Patients should thoroughly understand their insurance policies and actively question any prolonged negotiation periods. This proactive approach can influence how insurance companies manage contracts and pricing.

• Provide Feedback: Participating in feedback and surveys can help insurance companies assess and improve their contracts. This input is valuable for enhancing service delivery and contract terms.
• Communicate Concerns: Contact the Insurance Company: During contract negotiations, it's crucial for patients to contact their insurance providers and express their concerns and dissatisfaction with the ongoing negotiations. This can help ensure your needs and expectations are considered.
  

By taking these steps, patients can better navigate the healthcare system and advocate for improved care and coverage.

Effects on Patients

Patients frequently find themselves caught in the middle of contract disputes or facing bills that are hard to understand. They may not be aware that a specific provider involved in their treatment is out-of-network or that the terms of their insurance plan have changed due to new contract negotiations. This is why hospitals are transparent and send out notifications to patients when they enter into a contract negotiation. Typically, the letter outlines the date that the contract will end and provides an out-of-network care solution.

In most cases, it is the hospital which is attempting to negotiate improved reimbursement rates and the health insurer offering decreased reimbursement rates for services. Financial uncertainty anticipated (and/or actual) disruptions to care, and the inability to afford necessary treatment can contribute to increased stress, anxiety, and depression for many patients, especially those with chronic conditions or serious health concerns. The mental health burden of navigating these disruptions is an often-overlooked aspect that healthcare providers should consider when managing contract negotiations. The stress, confusion, and uncertainty caused by insurance contract disputes can exacerbate mental health issues, leading to increased anxiety, depression, and a general decline in well-being for patients anticipating and/or facing these disruptions.

And, for this Holy Cross Health empathizes with you. Our healthcare providers, associates, and leadership are also stressed knowing that full patient populations and their healthcare are at risk. Committed to our mission to be a compassionate and transforming healing presence within our communities, we cannot compromise our ability to provide you with the best healthcare and improving the health of our communities. Towards this end, we enter into negotiations with the health insurance companies and pledge to do so with reverence and integrity while ensuring good stewardship and justice for the best intentions and outcomes possible.