Monday, January 1, 2007

Are health middlemen still prospering?

The three largest pharmaceutical benefit managers had net income of $1.9 billion in 2006. But increasingly big companies in the U.S. are "self-insured," meaning they pay employees' medical bills directly. These companies typically hire a health insurer to administer the health benefit -- negotiating rates with doctors and hospitals and deciding what care is covered.

A good example of the squeeze that is likely to impact "middlemen" is Perdue Farms, the Salisbury, Maryland poultry leader, which contracts with doctors and hospitals directly. The company has 22,000 employees in small towns in the eastern U.S., which gives Roger Merrill, an internist who is their chief medical officer, a big stick when it comes to negotiating. In exchange for favorable prices, Perdue pays bills within eight days, much quicker than the 65-day norm in health care.



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