Listen to article \u2022\u00a00:00 min<\/p>\n
Federal antitrust regulators tried six years ago to block Jefferson\u2019s acquisition of Einstein Healthcare Network, arguing that a colossus regional health system would have too much market power and lead to higher healthcare prices.<\/p>\n
A federal judge in Philadelphia didn\u2019t buy the government\u2019s argument that Jefferson would gain enough leverage to \u201csqueeze insurers.\u201d<\/a> He viewed the University of Pennsylvania<\/a> Health System as a competitive restraint that would keep a Jefferson demand for higher prices in check.<\/p>\n That conviction is being tested now as Jefferson, a nonprofit that kept growing to become the region\u2019s largest health system, and Independence Blue Cross, long the area\u2019s largest health insurer, trade jabs over contract talks.<\/p>\n Both sides have provided early warnings to patients that Jefferson may no longer be in Independence\u2019s network after Dec. 31, when their current contract expires. Experts say they expect a last-minute deal, as happened over the summer with Main Line Health and UnitedHealthcare<\/a>. <\/p>\n Neither side will say how many people \u2014 with insurance through their employer, individual Affordable Care Act plans, or Medicare Advantage \u2014 would be affected by disrupted care or higher prices. Years of research suggest that hospital consolidation leads to higher prices<\/a> without noticeable improvements in quality, according to the KFF, a nonprofit that researches health policy.<\/p>\n Jefferson argues that all healthcare providers in Southeastern Pennsylvania are significantly underpaid by private insurers, compared to national averages. Jefferson says it needs higher rates to keep up with inflation and sustain care in the communities it serves.<\/p>\n Independence says it already pays Jefferson competitive rates and has offered a significant increase. The rates demanded by Jefferson would force people to pay more for services at Jefferson than at other health systems providing the same care, says Independence, often called IBC or IBX.<\/p>\n The dispute comes as employers and consumers increasingly worry about healthcare affordability. Employers have seen healthcare costs grow even faster than forecast<\/a> in recent years, and healthcare is a top affordability concern<\/a> for voters, according to a new KFF survey.<\/p>\n The backdrop: Jefferson\u2019s growth and financial difficulties<\/p>\n Former Jefferson CEO Stephen K. Klasko built the system from three hospitals to 18, envisioning a behemoth that every insurer in the Philadelphia market would have to deal with.<\/p>\n \u201cNobody can enter Philadelphia without going through us,\u201d Klasko said in a January 2018 interview, following the acquisition of a Magee Rehabilitation Hospital in Center City<\/a>. <\/p>\n A government attorney later quoted a Klasko email<\/a> from 2018 on Einstein\u2019s strategic importance: <\/p>\n \u201cAs to IBC, if we complete the Einstein transaction and actually do the things we need to do around cost, access, patient experience, and quality, we will beat those [expletive].\u201d<\/p>\n Yet during the 2020 trial, Klasko downplayed the significance of the Einstein acquisition, which added three hospitals and Moss Rehab. He departed as CEO at the end of 2021. He declined to comment through a spokesman, who said Klasko does not comment on previous employers.<\/p>\n Now the biggest local health system with 33 hospitals from South Jersey to Scranton, Jefferson is increasingly playing hardball with Independence.<\/p>\n Earlier this year, Jefferson sued over changes in payment polices imposed by the insurer, which is also now a direct competitor. Jefferson expanded into the insurance business when it acquired Health Partners Plans five years ago.<\/p>\n Historically, local healthcare executives have criticized Independence for offering take-it-or-leave deals.<\/p>\n \u201cThe reality is that Jefferson was unable historically to negotiate more favorable contracts with IBC,\u201d said Dan Grauman, who recently retired after a 40-year career in healthcare consulting.<\/p>\n Given Jefferson\u2019s recent financial losses, it\u2019s important for the system to get better rates from Independence, Grauman said. <\/p>\n The private insurance business at the core of the contract talks with Independence accounts for as much as 30% of Jefferson\u2019s business, according to an Inquirer analysis of hospital admissions and billing data.<\/p>\n The health system has posted operating losses for seven straight years, excluding investment income that other health systems don\u2019t include in revenue. <\/p>\n Those losses in the last two years alone topped $900 million, a third of it from its insurance subsidiary, Jefferson Health<\/a> Plans. Most of that business involves Medicaid patients.<\/p>\n Are national averages relevant?<\/p>\n In advertisements and communication with patients, Jefferson has claimed that health systems in Southeastern Pennsylvania receive dramatically lower private insurance rates than the national average. <\/p>\n The dispute isn\u2019t about Jefferson getting significantly less than the University of Pennsylvania Health System or other competitors, according to those communications.<\/p>\n \u201cHospitals in southeastern Pennsylvania are reimbursed at nearly 40% below the national average, and IBX pays Jefferson roughly 40% less than that benchmark,\u201d Michael Harrington, Jefferson\u2019s chief financial officer, said in an email. <\/p>\n \u201cThat funding gap makes it increasingly difficult to keep pace with inflation and sustain the care our communities depend on. We\u2019re simply asking IBX to prioritize patient care through fairer reimbursement rates,\u201d he said.<\/p>\n Other analyses have reached different conclusions on prices in the Philadelphia region.<\/p>\n \u201cThere is nothing out of the ordinary about the Philadelphia metro area vis-a-vis costs or spending,\u201d said Katie Martin, CEO of the Health Care Cost Institute, a Washington nonprofit that researches healthcare spending based on claims for millions of people who get insurance through their employer.<\/p>\n Martin and other experts said the biggest factor in healthcare price levels is the balance of power between a region\u2019s hospitals and insurers. <\/p>\n