Big Healthcare Players Duke It Out, Using Patients As Pawns

Last Updated May 25, 2010 8:00 AM EDT

Aetna (AET) and Novant Health, one of the largest healthcare systems in the Southeast, are engaged in a battle to influence public opinion as they negotiate a new contract. Aetna is threatening to throw Novant out of its network in Charlotte and Winston-Salem, North Carolina, on July 1 unless the provider alters its demands. Novant, a not-for-profit system, is pleading poverty while accusing Aetna of wallowing in profits. But it's not clear that Novant is any purer than Aetna.

As usual, big healthcare players are using physicians and patients as bargaining chips. If Aetna follows through on its threat, its members will lose access to some of the biggest and most advanced hospitals in the state unless they want to pay extra for out-of-network coverage.

According to Aetna, which has about 125,000 members in Charlotte and another 20,000 in the Winston-Salem area, Novant's North Carolina hospitals received a 7.7 percent raise in January and seek an additional 12 percent hike on July 1. Novant didn't deny these figures when questioned by BNET, but it sent us a press release alleging that Aetna had released information that was "inaccurate, misleading and part of an effort to increase the insurance company's profits at the expense of hospitals, patients and Aetna's own insurance subscribers." The company also claimed that Aetna is demanding a 5 percent reduction in reimbursement.

Aetna spokesman Walt Cherniak told me that Novant's costs are 51 percent higher than the national average and 30 percent higher than the North Carolina average for hospitals. Novant disputes those claims. "We monitor cost of care very closely through independent collection sources and know that our commercial prices are below market averages," Bob Seehausen, senior vice president of Novant, said in the press release.

Novant is trying to position itself as a small player that is barely surviving. While Aetna, a national insurance carrier, made $2.6 billion in profits in the last two years, the press release said, Novant had $10 million in net income during that period and dispensed charity care worth $222 million.

However, Novant is not doing so badly. A three-state organization with a dozen hospitals, nursing homes, and many other facilities, Novant earned $197 million on $3.34 billion in operating revenue in fiscal 2009. Although $123 million of that was from investment income, Novant more than doubled its operating income to $74 million from 2008 to 2009. Its claim that it netted only $10 million over the past two years apparently is related to a big investment loss in 2008.

Seehausen points out that Aetna spent only 81 cents of every premium dollar on patient care in the first quarter of 2010. He speculates that because the Affordable Care Act requires insurers to spend 85 percent of premiums on healthcare, Aetna is trying to "squeeze hospitals and clinics that are already operating on very slim margins." Methinks he protests too much.

Image supplied courtesy of jacreative at Flickr.

  • Ken Terry

    Ken Terry, a former senior editor at Medical Economics Magazine, is the author of the book Rx For Health Care Reform.