Radiology and Carve Out Contracting

Bill M., the CEO of UnitedHealth, has proven that the healthcare marketplace has 'excess' money pored into the provider-based organizations. Not only is a smaller proportion of the insurance premium being paid to cover medical losses (e.g. money to doctors, hospitals and others)but the take home pay of top CEO's like Bill are nothing less than phenomenal. How does this happen? Can we really be that inefficient or has the competitive world become so intense and our fear of losing market position so gripping that we've abandoned any effective negotiating for the premium dollar?

It started (years ago) when insurers pitting one hospital against another to extract lower reimbursement with the promise of improved steerage of patient volume (with savings, theoretically, passed on to the employer/payer). In practice the lower payments happened, but the steerage never materialized as much as was promised.

From there, we've seen physicians and groups willingly enter the game by negotiating insurance steerage products with much the same results. We've even gone so far as to have service line 'carve out' products that promoted negotiated rate differentials for 'singularly unique' high quality clinical service lines. And, now comes the ultimate carve out plan.

Prior authorization of imaging services is step one in the new battle to reduce medical loss payments. In this latest twist in the market, a specific imaging modality and imaging center will be able to negotiate a financial carve out insurance contract in return for more volume.

When the dust settles in this latest divide and conquer game, the discounts will come, but the volume will be just around the corner. And, in the end, the insurance carriers have further fragmented care systems and networks.

Clearly, we're entering the 'mature life cycle' of a commodity market -- suggestive of the inability for healthcare providers and networks to convincingly communicate a 'value' message to the payers of the service that distinguishes the service to the marketplace.

Bill McGuire will be able to double his take home pay next year.