Hospitals' Negotiating Leverage with Health Plans: How and Why Has It Changed?

Findings suggest that many hospitals' negotiating leverage significantly increased after years of decline. Today, many hospitals are viewed as having the greatest leverage in local markets. Changes in three areas—the policy and purchasing context, managed care plan market, and hospital market—appear to explain why hospitals' leverage increased, particularly over the last two years (2000-2001). Hospitals' increased negotiating leverage contributed to higher payment rates, which in turn are likely to increase managed care plan premiums. This trend raises challenging issues for policymakers, purchasers, plans, and consumers.