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Negotiating Power Shifts As Florida Hospitals Consolidate

A new analysis of Florida’s health care markets finds that as the state’s hospitals consolidate and expand, new business models are shifting the negotiating power.“You have at least three major hospital systems in the state moving in the direction of becoming statewide hospital systems,” says Allan Baumgarten, the health care finance analyst behind the latest Florida Health Market Review

According toBaumgarten — whose report analyzes everything from HMO market shares to hospital profit margins — the Affordable Care Act has put pressure on hospitals to expand and find new patient populations. And the bigger the pool of insured patients, the more leverage a hospital system has to negotiate better rates with insurers. 

“I think that’s a challenge to the health insurance companies, who are used to negotiating with provider systems at the local level — and I think this gives provider systems additional market clout in those negotiations,” he says.

Some of the other findings:

  • Florida hospitals have, in general, increased profits. “For example, based on financial and utilization data from the state’s annual survey of hospitals, hospitals in South Florida reported net income of $827.2 million, or 6.8% of $12.247 billion in net patient revenues.”  The net income was $590.3 million the year before.
  • Florida hospitals have adopted a strategy of adding inpatient facilities, but at the same time “the number of inpatient days has decreased or been flat since 2007.”
  • Three insurance companies have more than half the state market share and “the proposed acquisition of Humana by Aetna would give the company about 31.5% of the health insurance market.”

Three insurers have more than half the market share in Florida.
Credit Allan Baumgarten / Florida Health Market Review 2015
Three insurers have more than half the market share in Florida.

These changes, saysBaumgarten, mean even safety net hospitals feel the pressure to find more insured patients — which literally means moving into richer ZIP codes.“I can’t help but thinking it distracts them from their mission in terms of serving the underserved, serving the low-income community,” he says.

Even with increased insurance coverage and changing business strategies, Baumgarten thinks the high rate of Floridians without health insurance is the No. 1 problem for the state’s health care marketplace. 

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