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Getting Along or Going Along? Health Plan-Provider Contract Showdowns Subside

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Publication Date: January 2004

Publisher(s): Center for Studying Health System Change

Author(s): Justin White; Robert E. Hurley; Bradley C. Strunk

Series: Issue Brief No. 74

Topic: Health (Health care financing)

Type: Brief

Abstract:

Although contract negotiations between health plans and providers have remained tense during the past two years, overt impasses have declined, according to findings from the Center for Studying Health System Change's (HSC) 2002-03 site visits to 12 nationally representative communities. The balance of power stabilized during the period, with providers, particularly hospitals, solidifying their dominant negotiating positions and securing concessions from plans in the form of significant payment rate increases and more favorable contract terms.Many plans have recognized and accepted their weaker position relative to providers, suggesting the recent lull indicates plans have found it in their interests to accommodate provider demands for higher payments, rather than resist them and possibly trigger a contract showdown. Though no immediate change is likely in this environment, there are emerging forces that could swing the power pendulum back toward plans.