DOES PHYSICIAN QUALITY
AFFECT BARGAINING POWER
OVER PRICE IN THIRD PARTY
CONTRACTS?
Donald G. Klepser, Ph.D.1
William R. Doucette, Ph.D.2
John M. Brooks, Ph.D.2
1University
of Nebraska Medical Center, College of Pharmacy,
Omaha, Nebraska
2University
of Iowa, College of Pharmacy, Iowa City, Iowa
Background
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There is a great deal of pressure to improve
the value of healthcare
“Pay-for-performance” is one approach
suggested for improving value by rewarding
higher quality care
If insurers and their beneficiaries value
quality, prices bargained through selective
contracting should reward quality
Background
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Providers attempt to differentiate themselves
Bargained prices vary within markets
(Dyckman and Hess, 2003)
Hypothesis: Physician group bargaining
power of price is affected by physician group
quality.
Dyckman, Z. and P. Hess (2003). “Survey of health plans concerning physician fees
and payment methodologies.” Medicare Payment Advisory Commission Report.
2003.
3
Background
A bargaining power model can be used to
test this hypothesis
How could quality affect physician group
bargaining power?
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Increase profit for insurer
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Lower overall cost to insurer
Increase demand for insurer’s product
Methods:
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Retrospective observational study
1997-98 Medstat MarketScan, Centers for
Medicare and Medicaid Services, and Area
Resource File data
Population limited to non-capitated providers
in MarketScan data
Units of observation: the cardiology groupinsurance plan dyads
Methods
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Dependent variable was cardiology group bargaining
power over price for a bundle of five common
cardiology procedures (Brooks et al., 1997)
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Five Procedures
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BP= (PN-PL)/(PH-PL)
PN = group’s negotiated price for each procedure (Medstat)
PL = lowest price received in market (CMS claims)
PH = highest price received in market (CMS claims)
Stress test, Doppler Echocardiogram, Office Visit
Echocardiogram, ECG
Brooks, J. M., A. Dor, et al. (1997). "Hospital-insurer bargaining. An empirical
investigation of appendectomy pricing." J Health Econ. 1997;16:417-434.
Methods:
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Quality measures:
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Post-acute myocardial infarction (AMI) -blocker
prescribing rates
Post-AMI cholesterol screening rates
Post-AMI 28 day readmission rates
Post-AMI average non-physician patient cost
Market and insurer factors (i.e. # of
cardiologists, HMO penetration) were used
as control variables
Methods
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Ordinary least squares regression was
performed to identify significant predictors of
group bargaining power
BP = α + β(Quality, Market Factors, Insurer
Factors)
Results
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Bargaining power measures were estimated
for 452 distinct cardiology group-insurer
dyads.
Insufficient data for some quality measures
restricted the analysis to 128 observations.
Regression Results
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Number of observations = 128
Adj R2 0.63
Significant (p > 0.05) factors that affected
physician bargaining power.
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Post-AMI 28 day readmission rates (negatively
related)
Post-AMI average non-physician patient cost
(positively related)
Various market factors
Summary
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It is possible to estimate and model provider
level bargaining power
It appears as though providers may be able
to influence the prices they receive based on
their performance
It is difficult to accurately measure quality
using claims data for providers with few
claims
Policy Implications
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The results of this study suggest that past
provider quality affected provider bargaining
power over price with insurers.
Study highlighted the difficulty in constructing
provider-specific measures of quality from
claims data.
Data problems question the feasibility of
maintaining a “pay-for-performance” system
between insurers and providers.