Should payers renegotiate provider contracts annually?

Tennessee's General Assembly is considering a Republican-sponsored bill requiring health insurers to renegotiate contracts with participating doctors and hospitals every year, according to The Tennessean. The bill would make Tennessee the only U.S. state requiring health insurers to revisit provider contracts annually. If passed, the legislation will take effect in October.

Passage of the proposed Health Care Provider Stability Act would prevent health insurers from changing claims adjudication rules affecting reimbursement in the middle of multi-year provider contracts. Current contracts allow this practice, which supporters of the bill say prevents providers from predicting their revenues.

For example, insurers that once allowed separate payments for an office visit and a vaccination might decide to combine these costs, resulting in lower per-claim allowances.

Tennessee payers don't need the consent of contracted physicians to make such changes, The Tennessean noted. Proponents of the bill want changes to be mutually-agreed upon at the beginning of a new contract instead of unilaterally imposed in the middle of an existing one. However, the bill would allow payers to adjust reimbursement rates in mid-contract due to state or federal budget changes.

The Tennessee Medical Association--which represents more than 8,000 physicians--supports the bill, while Blue Cross Blue Shield of Tennessee--the state's largest insurer--does not.

BCBST said the bill's passage will hurt the quality of care customers receive and drive up costs. "We believe this bill actually attempts to legislate a business relationship between two private parties," BCBST spokesman Roy Vaughn told The Tennessean, "and so we think there are other ways to achieve that."

Other aspects of payers' financial relationships with providers have been making news. The American College of Physicians called on state and federal officials to impose tighter restrictions on narrow provider networks, as FierceHealthPayer reported. And Connecticut physicians filed a lawsuit against UnitedHealthcare for dropping 19 percent of its Medicare Advantage network.

For more:
- see The Tennessean article
- read the proposed bill (.pdf)