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in an area can dictate costs. 65 In response to higher rate demands without negotiating power, an insurer is forced to either pay higher prices or attempt to cut a provider from its network. 66 Insurers are now looking to consolidation as a way to combat what they see as disproportionate price increases: “Unless companies in both sectors grow in size, they will not be in a position to meet each other on equal terms when they enter into negotiations on contracts.” 67 Beth Leonard, executive vice president of public affairs for America’s Health Insurance Plans (AHIP), the national association of health insurance providers, stated that health plans work to provide better value for patients, but that value “is being undercut by years of anticompetitive hospital consolidation that have forced patients to pay higher healthcare costs, increased premiums, and limited their healthcare choices.” 68 Massachusetts offers a startling example of how provider consolidation in a geographic area can quash an insurer’s ability to negotiate reasonable rates. In 1994, Massachusetts allowed the state’s two largest hospitals to merge into a single system, enabling the system’s leverage to drive up costs in the local market. 69 The system demanded higher reimbursements unrelated to the quality or complexity of care. 70 The hospital’s merger intended to decrease insurers’ ability to demand lower prices from one hospital by threatening to send patients to the other. 71 In reality, the newly-merged entity demanded unjustifiable price increases, and when insurers pushed back, the new system simply announced they would no longer accept those insurers. 72 This caused
sequence of services at least as likely to produce equivalent therapeutic or diagnostic results as to the diagnosis or treatment of that patient’s illness, injury or disease. Medical Necessity for Physicians, CIGNA, http://www.cigna.com/healthcare-professionals/ resources-for-health-care-professionals/clinical-payment-and-reimbursement- policies/medical-necessity-definitions (last visited Apr. 10, 2016). 65. See Amy Yurkanin, Alabama Anti-trust Case Against Blue Cross Will Move Ahead, Judge Rules, AL.COM (Nov. 15, 2015), http://www.al.com/news/index.ssf/2015/11/ alabama_anti-trust_case_agains.html (noting a recent nationwide study by American Medical Association finding Alabama as the least competitive commercial market in the U.S. with 93 percent of privately insured individuals in the state covered by Blue Cross); see Editorial, The Risk of Hospital Mergers, N. Y. TIMES (July 6, 2014), http://www.nytimes.com/2014/ 07/07/opinion/ the-risks-of-hospital-mergers.html?_r=0 (noting that if adequate provide competition is unavailable, hospital mergers can have a dominating impact on insurance markets forcing set pricing for insurers). 66. Pope, supra note 30. 67. Gupta, supra note 7. 68. Lisa Schencker, Hospitals Take Aim at Big Insurance Mergers, MODERN HEALTHCARE (Aug. 7, 2015), http://www.modernhealthcare.com/article/20150807/NEWS/ 150809897. 69. Editorial, supra note 65. 70. Id. 71. Id. 72. Id.