HealthChangers Podcast: Provider contracting and health care affordability

By Regence
February 27, 2024
Zak Ramadan-Jradi

Main image: Dr. Zak Ramadan-Jradi, vice president of network management

Hospitals are vocal about the financial challenges they say they’re facing since the pandemic. At the same time, the contract negotiations that insurance carriers like Regence undertake with hospitals on the reimbursement rate for health care have grown increasingly contentious.

On this episode of the HealthChangers podcast, we spoke with Dr. Zak Ramadan-Jradi, vice president of network management at Regence, who leads our network strategy across our four states. He works closely with providers to ensure doctors and nurses are fairly compensated for the care they give our members, while balancing the need for our health plans to stay affordable for local businesses and independent consumers.

Dr. Ramadan-Jradi spoke with podcast host Ashley Bach about provider negotiations and the critical role Regence plays in keeping health care affordable for our members.

Insurance premiums are based on what we pay providers for care. Regence serves more than 3.4 million people through our nonprofit health plans in Idaho, Oregon, Utah and Washington, and our top priority is to ensure you have high-quality, affordable health care.

Listen to the full podcast episode on the player above. Below are some highlights, which have been edited for length and clarity.

AB: How do insurance companies and hospitals negotiate the cost of care?

ZR: Health plans work with hospitals and providers through a contractual relationship to ensure that what we reimburse for the care is commensurate with the value being provided to our members. Any increases that go in the contract, they're going to be reflected in a member’s out-of-pocket cost because there's a coinsurance and copay. So any increase that Regence pays, it will have member impact. With that in mind, it is really frankly our obligation to ensure that the cost of health care is in check. Because at the end of the day, any penny that goes into the hospital coffer is going to be cascaded down to our members.

AB: How are these contract negotiations being impacted by hospitals?

ZR: We should look at it from a couple of points of view. One is the tactics. Normally, a hospital and insurance company negotiate and if they don’t reach an agreement, then either side can give notice of a contract termination. The unfortunate part is, lately some hospitals in our footprint have been sending us a termination prior to even starting the negotiations. We get the termination without any terms or conditions. “Why are you're terminating?” we ask. They say, “I will let you know in a week or two.”

That’s very difficult, and it has a member impact. We are obligated by law as an insurance company. We are heavily regulated at the state level and federal level. So when we get the termination, we have to invoke a process of notification to the members, and any time a member has been notified that there could be a disruption in care, it’s going to create unnecessary anxiety.

And then you add in the economics. As long as I've been in health care, and it’s been almost 30 years now, providers usually request a single digit increase in the cost of care. I now have demands from hospitals, when you put it into a two- or three-year contract, that are exceeding 50 percent or 75 percent. That’s frankly outrageous, right? There is no money there. And I’ve tried to communicate to the CFOs of the health systems that there are only 100 cents in a dollar. You cannot go more than that. You cannot simply create money out of thin air.

So with these negotiations, the demands from providers have been really unrealistic and unsustainable. I believe, as a steward of our members’ premium dollars, we need to take a stand to ensure that we are doing the right thing for our members, and for the industry overall.

AB: The cost of health care continues to go up. What role do hospitals play in this rising cost of health care?

ZR: Hospitals are one of the largest drivers in the total cost of care. And when you look at it, we are seeing hospitals getting reimbursed at times twice, if not triple, what Medicare will reimburse the hospital for the same procedures. So we as a payer, we are shouldering a lot of these expenses. And the challenge here is that this money is not really going to enhance the quality of care, and really ensure that the member has better access. We're not seeing that. All we are seeing is a pure rise in the cost. And the way the economics are structured within the hospitals have not been really conducive to drive efficiency on their operations. When hospitals got out of the pandemic, it did expose the expensive overhead that had been pushing down to the payers and members.

AB: Besides advocating for our members in provider negotiations, what are some other examples of how Regence works to keep health care affordable?

ZR: We continue to look at what we call the site of care, where care is more affordable at say, an ambulatory surgery center versus a hospital for procedures. What it means for affordability to have the care at home versus in the hospital setting. And in addition, how our members use digital tools to navigate that care.

Another element is how we can keep patients out of the hospital through preventive care. We work very closely with the members and to engage really trusted providers on how we can bring in the members to have their annual physical exam, have their blood tested for diabetes, check their blood pressure and screen for other ailments. This is really important when you put these together to impact the total cost of care.