Fragmented Los Angeles Hospital Market Provides Health Systems with Little Leverage to Negotiate Higher Reimbursement

NASHVILLE, Tenn., July 14 /PRNewswire/ -- HealthLeaders-InterStudy, a leading provider of healthcare market intelligence, reports that more than 40 percent of the hospitals in the Los Angeles market are losing money and there's a widening gulf between systems doing relatively well financially and those that are barely staying afloat. According to the newly released Los Angeles Market Overview report, these financial problems are compounded because the hospital market is highly fragmented, meaning systems have little leverage with health plans to negotiate higher reimbursement rates.

"There's an unhealthy imbalance of power between hospitals and health plans in the region," said Dave Raiford, HealthLeaders-InterStudy market analyst and author of the report. "As operating costs continue to climb, margins will narrow and the answer won't be found in higher reimbursements from insurers."

Excluding Kaiser Permanente's hospitals (individual hospital financials are unavailable), 44 percent of the 91 hospitals reporting individual facility financials were operating in the red. The market comprises a host of stand-alone hospitals (57 of the hospitals in the market) and a handful of health systems. The sum of that equation is a fragmented hospital market, which lies at the root of the problems the sprawling Los Angeles market faces in terms of failing hospitals and declining access to care.

With no health system covering more than 10 percent of the market in terms of acute-care beds, providers are at a distinct disadvantage when it comes to negotiating more favorable reimbursement rates from insurers. Excluding Kaiser hospitals and health plan, there are few health systems with any real leverage contending with Anthem Blue Cross of California (owned by WellPoint Inc.), UnitedHealth Group and Health Net. Hospitals may be forced to move toward integrated health systems by expanding their outpatient surgery capacity, medical office space and increase efforts to partner with physician groups.

About Market Overviews

Market Overviews provide a detailed analysis of local healthcare markets, allowing healthcare businesses to plan their local strategies. In addition to the 75 metropolitan statistical areas covered in our individual market reports, HealthLeaders-InterStudy will be producing the following NEW Market Overview reports in 2008:

About HealthLeaders-InterStudy

HealthLeaders-InterStudy is the authoritative source for managed care data, analysis, and news. For more information, please visit http://www.HealthLeaders-InterStudy.com.

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SOURCE HealthLeaders-InterStudy

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