Medicaid and CHIP Risk-Based Managed Care in 20 States. Experiences Over the Past Decade and Lessons for the Future.. Plan and Provider Negotiations.


In establishing their networks, plans interact with potential providers in a health care marketplace that typically serves both public and commercial enrollees. Each MCO and each provider faces a different dynamic in such negotiations, which can vary a great deal by type of provider or region of the state.

The number of MCOs in a region is important, because when there are several MCOs establishing networks in areas where providers of certain types are scarce (for example, specialists or hospitals) the providers have more bargaining power than in an area where the provider supply is greater or where Medicaid is the dominant payer.

For example, there may be only a single group of a certain type of specialist or a single hospital. When these entities negotiate with the various plans, they may hold out their agreement to participate in the plan’s network for higher payments or other benefits. Indeed, as mentioned earlier, an unintended consequence of the requirement for a choice of plans in the BBA and CHIPRA is to exacerbate this situation in certain circumstances.

If a hospital or hospital system is essentially a monopoly in an area, they can demand largely whatever rate increases that they want to demand. (State Official)

We heard that establishing an adequate network of specialists is particularly difficult, especially when all the specialists of a particular type practice and negotiate as a group.

They may have to pay the specialty pediatric cardiologist at 150% of the [Medicaid fee-for-service] rate, and they might have to pay a dermatology provider much more, because there’s a lack of that specialty. (State Official)

Larger provider groups (for example, a multi-specialty clinic) or networks have greater bargaining power. For example, the Provider Service Networks in Florida are groups of providers that contract with the state (on either a risk or fee-for-service basis) to provide all care to a group of beneficiaries.

There are legal limits on the size and structure of such provider networks for negotiating with plans.

When negotiating, I negotiate independently for each provider in our system. They do not get the same rates across the board. So even though there is one system, the Federal Trade Commission prohibits that kind of bulk contracting. (Provider Representative)

Physicians have taken steps to enhance their negotiating power, which happens more often in areas that are dominated by Medicaid patients or when there are excess numbers of providers of different types. Such providers may want to participate but may be excluded completely from Medicaid if they are not included in one of the MCO networks, especially when risk-based managed care is mandatory. This situation could be one underlying reason that some of the provider representatives felt that MCO networks should be larger.

A lot of the pediatricians, they kind of have to participate in Medicaid, because so many kids are on Medicaid. (State Official)

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