Tuesday, January 23, 2007

We Need Aurora More Than It Needs Any of Us

The profile of outgoing Aurora Health Care chief Ed Howe in Sunday's Journal Sentinel contained this interesting section (emphasis mine):

But even critics would have to acknowledge that many of the small hospitals that became part of the Aurora system are stronger today than they would have been as independent hospitals.

The benefits and economies of scale that come with being part of a large health care system range from additional leverage when negotiating contracts with health plans to being able to hire experts in health care quality.
What this means, of course, is that Aurora has been able to push its weight around not only with its competitors, but also its patients -- that is, the people who are a part of those health plans.

This all harks back to a line spoken by an Aurora representative to the insurance group WPS last year. As the Aurora rep told WPS: "You need us more than we need you."

Aurora has an all-or-nothing approach to negotiations with health plans. In other words, the health insurer either includes all Aurora hospitals and clinics in its plan, or it gets none of them.

And since Aurora is the largest health provider in the state, it's nearly impossible for many health plans to choose nothing. This, in turn, drives health care costs up.

Of course, this is just the free market at work. Assuming it can weather the anti-trust lawsuit WPS recently filed against it, Aurora will continue to be free to negotiate as it sees fit.

And here's the real kicker: Aurora's right, we do need them more than they need any of us.

At least, that is, as long as we're disbursed in fragmented health plans while Aurora continues to gobble up more of the health care provider space in the market. But Aurora would quickly find itself on an even playing field with us in negotiations if we were all pooled into fewer or, better yet, a single health plan. Then they would need us at least as much as we need them.

But that doesn't seem likely to happen, at least anytime soon. That's also just the free market at work -- it's just not working for me and you.


Blogger Dad29 said...

You'll be pleased to know that I have always considered Ed Howe to be the J D Rockefeller/A Carnegie of health-care.

Monopolistic and predatory trade practices--but smelling better because it's "Health Care" (for old folks and children, of course...)

January 23, 2007  

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