10/01/2013 19:21:00

Hospital Owner Tenet Seeks Commercial Rates for Exchange Patients

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By Jon Kamp

SAN FRANCISCO--Hospital operator Tenet Healthcare Corp. (THC) expects payment rates for the patients who get coverage next year under new state-based exchanges to mirror those from commercial insurance plans--and not lower rates like those from government-based plans, company officials said Thursday.

The company's stance suggests hospitals and health insurers could clash as they negotiate over rates for millions of Americans set to gain coverage under the health-care overhaul law. Speaking earlier this week at the J.P. Morgan health-care conference, officials at insurer WellPoint Inc. (WLP) said they aim to pay hospitals lower rates for exchange patients.

"We believe we should receive commercial pricing levels commensurate with our current levels," Tenet Chief Financial Officer Daniel Cancelmi said at the same event. "We'll certainly be negotiating that, that's certainly our starting point in terms of what we believe we should be reimbursed for that incremental volume."

Hospitals get the best rates for commercially insured patients, while Medicaid, the government program for the poor, typically pays the least. Medicare, the plan for the elderly and disabled, pays somewhere between the two. Hospitals frequently lose money on Medicaid patients, try to break even on Medicare and make their margins on commercial insurance, although experiences vary throughout the industry.

The state-based exchanges in question will be new marketplaces created under the health overhaul law that gives Americans a new way to seek coverage, sometimes with subsidies. Insurers at this week's conference talked about their interest in offering products through these markets, but they're moving cautiously as rules evolve.

Insurers also have been fielding questions about how much they might reimburse hospitals for patients who get coverage through exchanges. Speaking at the same conference Tuesday, WellPoint interim Chief Executive John Cannon said the health insurer is seeking rates on exchange-base products "somewhere between Medicaid and Medicare, but closer to Medicare."

But Trevor Fetter, Tenet's Chief Executive, suggested insurers may have weak leverage when pushing for low rates. Hospitals might be willing to bargain when they have guarantees about incoming patient volumes, but the exchanges are expected to be very fluid markets where patients can easily shift plans year to year, or float between exchange-based plans and Medicaid.

"I don't think you're going to see a lot of hospitals rushing to discount their pricing in order to participate in these products," Mr. Fetter said on the sidelines of the conference.

He also noted Tenet has some leverage because it has the top position in about half its markets. "It's very hard to create an attractive product without our hospitals in the network," he said.

While health providers and payers are staking out positions, Mr. Fetter noted that the vast majority of hospitals are nonprofit, and that many insurers are as well. Rhetoric may be more heated in investor conferences "than in actual negotiations between insurers and hospitals," he said.

Write to Jon Kamp at jon.kamp@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

January 10, 2013 14:21 ET (19:21 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.

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