On Pissing Contests

I'm a Time Warner subscriber and it seems like every few weeks they run a commercial (or, occasionally, send an email) exhorting me to lend my voice and help them stand up to some particular channel offerer. At the moment, it seems they're having trouble with at least two companies that offer some particular set of channels and, if an arrangement can't be worked out, subscribers (like me!) face a blackout of those channels. Here's part of their explanation about what's happening with one of those companies right now:

We are currently negotiating with the parent company of those channels, ______. And if we don’t reach a new agreement before December 15, ______ is threatening to stop allowing Time Warner Cable to continue carrying its stations. We’re working hard to reach an agreement that will prevent any interruptions in these channels, and are optimistic that we can do so. [...]

We’re talking about it because the single largest expense we have in delivering you video service is the price we must pay to the companies that own the programming. And customers have told us they don’t understand why the price they pay each month continues to rise. We want to give you the information that helps you make informed decisions about programming. Time Warner Cable buys programming from hundreds of different companies that run TV stations and cable networks. The contracts to buy that programming come up for renewal from time to time, with dozens up for renegotiation every year. Most are negotiated in private between the companies, without event. But sometimes some of those negotiations become public.

So I pay a monthly fee to this particular company (Time Warner), which then has to negotiate contracts with various companies that are actually providing the thing I want: TV channels. This sounds just like something else... (he said thoughtfully, stroking his beard and staring off into the distance).

Indeed, the superficial similarity I'm noting is to the dance that your health insurance company does with health care providers. And just as, sometimes, Time Warner's negotiations with the companies offering TV content spill into the public sphere, sometimes the negotiations between health insurers and health care providers become ugly public pissing matches. There was a story out of North Texas just last week about Blue Cross Blue Shield and a provider network called Texas Health Resources airing their dirty laundry in public. It seems if Texas Health Resources doesn't get the contract it wants from Blue Cross, its hospitals will charge patients/Blue Cross the much higher out-of-network fees (blackout!) and the hapless doctors caught in the crossfire "have sent letters to their patients encouraging them to contact Blue Cross" ("If you think it’s unfair for your local stations to black out your programs from Time Warner Cable customers while demanding significant increases that will eventually impact the price you pay for cable, let them know!" says Time Warner).

Instead of cooperating, the region's largest insurer and hospital system are taking jabs at each other.

Blue Cross says Texas Health is demanding an additional $120 million over three years to cover cost increases. The insurer has declined to say how much it is currently paying Texas Health.

The insurer says it contributes $178 million to Texas Health's annual profits. It also says the hospital system makes a 30 percent profit margin from Blue Cross members.

"This kind of runaway spending on medical care is one of the main causes of higher health insurance premiums for our members," Blue Cross said in a recent letter to members.

For its part, Texas Health says Blue Cross wants to pay its millions upfront in a lump sum. Instead, Texas Health wants its money reimbursed traditionally, after a claim is filed. The hospital system also points to the insurer's accumulated wealth.

"Blue Cross Blue Shield of Texas is sitting with about $7 billion in reserves. And they don't provide any patient care," said Wendell Watson, spokesman for Texas Health. "In fact for many of their customers – the self-insured ones – they don't do much more than manage the paperwork on claims."

Both are nonprofit companies. Texas Health had $2 billion in assets at the end of 2008, according to its latest financial reports.

The power struggle between insurers and hospitals has intensified in recent years as hospital consolidations created mega-health systems. These companies, emboldened with leverage, began going head-to-head with insurance companies for better rates.

"As we've grown we've gained a larger network of providers that provide care in a variety of settings," said Barclay Berdan, Texas Health's vice president for system alignment. "We get some economies of scale because of that."

Blue Cross' vice president for network management, Shannon Stansbury, said the company negotiates with smaller health providers across the state every day. Blue Cross has contracts with more than 400 hospitals in the state. [...]

Same shit, different channel.