At the eleventh hour, BlueCross BlueShield of Arizona and Carondelet Health Network have signed a four-year contract, putting to rest fears that customers of the state’s largest insurer could lose in-network access to Carondelet doctors and facilities.
“I’m sure this was difficult for employers, brokers and members alike,” Jeff Stelnik, BlueCross senior vice president of strategy, sales and marketing, said in an interview Wednesday. “We’re happy that this outcome continues to give our members the choice of going to the Carondelet hospital system, while doing it at reimbursement rates that our customers can afford.”
The parties announced the end to their contract dispute Wednesday, just one day before the Dec. 31 deadline to finalize a contract that begins Jan. 1. The agreement includes all Carondelet hospitals, employed physicians, ambulatory surgery centers, urgent-care centers and other outpatient facilities, according to a statement from Carondelet Health Network.
“We’re pleased BCBSAZ recognized the value of having Carondelet in its network and we look forward to continuing to serve its members’ health-care needs,” Amy Beiter, CEO of Carondelet’s St. Mary’s Hospital, said in the statement.
For-profit Tenet Healthcare Corp. of Texas acquired a majority stake in the formerly nonprofit Catholic health system in September. Carondelet officials were not available for an interview Wednesday.
GOING PUBLIC
Earlier this month, the contract appeared headed toward termination.
BlueCross and Carondelet representatives went public with their contract stalemate, both claiming the other party was making unreasonable demands and putting patients’ access to care at risk. BlueCross said Carondelet was demanding 40 percent increases in their reimbursement rates, which Stelnik said would have forced BlueCross to charge its customers higher monthly premiums.
Carondelet executives countered that BlueCross had long reimbursed the hospital less than other Tucson hospitals, contributing to years of operating losses for Carondelet.
In the end, both sides moved to reach a compromise, Stelnik said. He wouldn’t provide specifics on the rate increase Carondelet received, but he said the parties did not “split the difference” in their demands.
How much hospitals charge insurance companies is a closely held secret, so contract negotiations are done out of the public eye, said Keith Joiner, professor of medicine and economics at the University of Arizona’s Eller College of Management. That can lead to both parties seeking to gain leverage in the public eye by accusing the other of being unreasonable, he said.
“It facilitates and perpetuates this war of words,” he said. “Without price transparency, it makes it a lot easier for these entities to go to the brink without sort of having to reveal any of the specifics.”
RELIEF
The contract agreement is a big relief to Ed Sicurello, executive director of the Mariposa Community Health Center in Nogales. The nonprofit health center was braced for an influx of BlueCross patients who, if the contract ended, would have been unable to get affordable care at Carondelet’s Holy Cross Hospital, the only hospital in Santa Cruz County.
“We would have seen as many of those patients as we could accommodate, but we can’t provide hospital services and we’re not an emergency room,” he said.
The contract delays caused a lot of uncertainty, he said.
“It was very frustrating,” said Sicurello, who learned Wednesday about the contract agreement. “We’re basically a day away from the last day (before the contract expired). It was hard not to be able to give any concrete information to our employees and our patients.”
Workers at the health center would have been affected personally, too. They are all insured by BlueCross and would have had to travel out of the county for hospital or specialty services like obstetrics, he said.
When told about the agreement on Wednesday, Tucson insurance broker Denise Early could hardly wait to call two of her elderly clients enrolled in BlueCross’ Medicare Advantage plan. Despite the uncertainty due to the contract dispute, the two women had decided to stick with BlueCross because of its low co-pays, she said. But that meant they risked losing access to their primary care doctors if BlueCross didn’t come to an agreement with Carondelet. Now, they can stay with their doctors.
But many other clients have already opted switch to another health insurer for 2016, she said.
“A lot of people will have already made the change,” Early said. “If people took their chances and didn’t change (insurance carriers), they’re going to be very happy.”
CONSOLIDATION
Consolidation in the health-care industry — among insurers and medical providers — is one reason for growing tension in contract negotiations, Joiner said.
“When you have both sides consolidating to try to gain leverage against one another … that’s one of the things that drives this brinksmanship,” he said.
Tenet also owns the Abrazo Community Health Network in Phoenix and so executives had insight into reimbursement rates there, which are higher than rates paid in Tucson, Stelnik said.
Tenet’s acquisition added challenges to the negotiations, Stelnik said.
“We’ve had a great relationship with Carondelet over the years. This was different in that we’re dealing with the corporate entity, instead of dealing with local Tucson-based leadership,” he said.
Evolving payment methods are another factor, as insurers move away from a simple fee-for-service payment system and instead pay for entire episodes of care, or pay based on quality-of-care data, Joiner said.
For example, a hospital might receive one payment for all care related to a joint replacement, including pre- and postoperative care, lab work and imaging.
Instead of paying hospitals for each service rendered, bundled payments are intended to give hospitals incentives to avoid unnecessary services and improve quality of care to maximize returns, he said.
This market-based approach will help control rising health-care costs, Joiner said, but it adds complexity to contract negotiations.
And insurers are being squeezed by the Affordable Care Act, which requires them to cover all preventive care and offer insurance to even the sickest patients, including those with pre-existing conditions who previously may have been priced out of the health insurance market.
That means health plans are having to spend more to care for sick people who can now afford insurance, leading to higher monthly premiums and more aggressive contract negotiations, Joiner said.
“All these factors that are occurring at once — it’s so hard to put one’s finger on what’s driving what,” he said.
