Arizonans insured by BlueCross BlueShield of Arizona could soon be facing steep, and in some cases prohibitive, charges if they visit Carondelet Health Network hospitals or doctors.
The hospital system, which recently went from a nonprofit to a for-profit company, will terminate its contract with the state’s largest health insurer unless the two parties can agree on reimbursement rates by the end of the year.
Negotiations to determine how much the private insurer will pay the hospital system for providing care to its members have stalled.
The contract dispute could potentially lead to a “crisis in access to care,” said Mark Benz, CEO of Carondelet’s St. Joseph’s Hospital in Tucson. It will limit health care choices for those insured by BlueCross in Southern Arizona, and especially those in Santa Cruz County, where Carondelet’s Holy Cross Hospital is the only hospital.
“BlueCross continues to undervalue the care we provide to its members,” Benz said. “Their refusal to negotiate fair and sustainable payments is hurting our network and jeopardizing its members’ health choices.”
Carondelet executives say BlueCross pays the Catholic hospital chain less than other private insurers pay, and they also claim BlueCross pays Carondelet less than it pays other Tucson hospitals for providing care. The assertion is based on a third-party analysis of how the hospital’s rates stack up in the Tucson market, but Carondelet officials said the report and its source are confidential and they would not share specifics with the Star.
BLUECROSS RESPONSE
BlueCross senior vice president of strategy, sales and marketing Jeff Stelnik said Carondelet’s reimbursements are “comparable” to those paid to other Tucson hospitals. He accuses Carondelet — and its new, for-profit parent company, Tenet Healthcare Corp. of Texas — of demanding an “unreasonable” rate increase of more than 40 percent. Such an increase would drive up health care costs and hurt consumers, who would ultimately see higher monthly premiums from BlueCross, Stelnik said.
“Our main goal is to make sure our members have rates that can be affordable and part of that is making sure we’re paying hospitals systems like Carondelet appropriately,” he said.
The dispute comes as Carondelet announced the layoffs of 100 staff members last week and continues to operate in the red. Carondelet facilities have experienced net losses of more than $200 million since 2009, including a loss of $100 million in 2012 alone, according to reports filed with the state health department. In fiscal year 2014, the most recent year reported, Carondelet lost about $10 million.
Stelnik of BlueCross said the hospital is seeking to balance its budget by aggressively pursuing higher payments.
“I think the quick-fix idea on their end is to increase reimbursement, despite the fact that they’re already being competitively paid,” he said.
Dr. Amy Beiter, CEO of Carondelet’s St. Mary’s Hospital, said persistent low reimbursements from BlueCross have contributed to Carondelet’s financial woes.
“There’s no amount of cost-cutting or efficiency that we can put in place to fully address financial challenges, unless our payers actually do their part in paying us fairly for the care we provide,” she said. “The time is absolutely now for BlueCross BlueShield to come to the table and negotiate with us.”
Beiter said the contract dispute is a long-simmering “local issue” unrelated to Tenet’s recent acquisition of the heath system.
Tenet Healthcare Corp. of Texas acquired a majority stake in Carondelet Health Network in September. Tenet now manages operations of Carondelet’s three hospitals, two physician groups and outpatient and ambulatory services. Minority owners are Dignity Health of California and Ascension of Missouri.
‘GAME OF CHICKEN’
Conflicts like this between insurers and health care providers often involve hard-line “posturing” but typically, the insurer and hospital will reach an agreement at the last minute, said Steve Bush, senior vice president and chief financial officer at Tucson Medical Center.
“It’s a game of chicken sometimes,” he said. “Neither party wants to lose the other party. For Carondelet, it’s important because they’ll lose (patient) volume if they don’t sign a contract. For BlueCross, it’s important because now they won’t have as attractive a network” without Carondelet.
Negotiations between hospitals and insurers take place under a veil of secrecy, since insurers don’t reveal what they pay to other hospitals, and hospitals can’t share those figures with one another. But each side is vying for leverage in the negotiation, as the resulting multi-year payment agreement has long-lasting consequences, said Nate Kaufman, a San Diego-based consultant who has helped negotiate managed care contracts, usually on behalf of hospitals, for decades.
Taking the behind-the-scenes fight to the media is one way to pressure the other party to cave in, he said.
“You get into this PR battle,” he said.
In negotiating payment rates with commercial insurers, hospitals strive to recoup some of their losses from treating uninsured patients and those covered by government payers Medicare and Medicaid, Kaufman said.
Medicare payments usually cover only 85 percent of what hospitals spend providing care. Medicaid — known in Arizona as the Arizona Health Care Cost Containment System, or AHCCCS — pays about 70 percent, he said.
Hospitals don’t have to go to the negotiating table completely blind. Like Carondelet, TMC has commissioned third-party analyses to see how its reimbursements compare to its competitors’, Bush said. Those reports compare aggregate reimbursement levels, as opposed to payments to particular providers. And they can’t account for the differences in the level of services hospitals provide. For instance, Banner-University Medical Center Tucson is a teaching hospital that provides advanced-level care and would be reimbursed at higher rates, he said.
While hospitals can’t share reimbursement rates with one another, Carondelet’s new parent company Tenet runs health care facilities in Phoenix, so its leaders know how those hospitals are reimbursed, Bush said. But Tucson is a different market than Phoenix, and payments are lower here, he said.
PATIENT IMPACT
Aggressive negotiating tactics can cause upheaval for patients caught in the middle. If an 11th-hour agreement doesn’t happen, it can take time for another contract to come together. In the meantime, affected patients have to change providers or face higher costs.
This summer, UnitedHealthcare and Obstetrix Medical Group of Arizona terminated their contract, affecting 220 providers in the state who provide critical care services in maternal-fetal medicine, pregnancy care and neonatal care. The move meant that 6,000 Arizona patients lost in-network access to their specialists, according to a news release from Obstetrix.
“Obstetrix physicians have continued to provide fundamental access to care to pregnant women and/or their babies facing complicated health conditions without certainty of reimbursement by UnitedHealthcare,” Dr. Gina Connelly, medical director of Obstetrix Medical Group of Arizona, said in a statement.
UHC’s Kristen Hellmer said Obstetrix wouldn’t accept lower payment rates for their commercially insured patients, although UHC — the state’s insurance provider for low-income and disabled AHCCCS members — offered to continue paying more than the state’s fee schedule for treating AHCCCS patients.
Some BlueCross plans include an out-of-network benefit option, which would still allow customers to go to Carondelet providers and face higher deductibles and coinsurance. But the insurer’s Medicare Advantage plan and plans purchased on the individual market won’t include any out-of-network coverage in 2016, said Raymond Magnuson, a Tucson insurance broker.
Patients would be billed as if they were uninsured if they sought care at a Carondelet facility, which would be cost-prohibitive for most people, he said.
“I really don’t think it’s being expressed quite strongly enough the impact this is going to have on BlueCross individual plans, as well as the Medicare Advantage plans,” he said.
BlueCross spokeswoman Anne Christenson said Medicare Advantage and individual plans can provide out-of-network coverage in emergency situations.
Tucson insurance agent Denise Early has been scrambling to help her elderly clients with BlueCross’ Medicare Advantage plan.
Those clients must decide by Monday, when Medicare’s open enrollment period ends, whether to risk losing in-network access to Carondelet doctors, or choose another Medicare plan, she said.
”It’s so mysterious how they make these arrangements for paying the doctors and hospitals. Who is at fault here? Who is the greedy one?” Early said. “I just feel bad I’m forced to say to people, ‘Decide between your health plan and your doctors, and decide now.’ ”
