Anthem Blue Cross dropped MemorialCare Health System after the two sides couldn't come to a new contract agreement by the Aug. 15 deadline.
Southern California-based MemorialCare said it has been diligent in an attempt to reach "reasonable terms” with the payer for many months, but was unable to “reach a fair and reasonable agreement.” In response, Anthem said it was “disappointed that MemorialCare chose to terminate their contract with Anthem to demand an excessive increase in reimbursement rate.”
Anthem sent a letter to affected patients referring them to nearby medical facilities that are covered in-network by Anthem. There are reportedly 39 nearby hospitals that are covered under Anthem.
MemorialCare and Anthem both said they are interested in working on a new contract, but for now Anthem will consider patients at Long Beach Memorial, Miller Children’s Hospital, Community Hospital, Orange Coast Memorial Medical Center and Saddleback Memorial Medical Center out of network.
Often in payer contract disputes, the two sides agree at the last minute or shortly after a health system loses in-network coverage. It doesn't help either organization to have MemorialCare patients not considered in-network. But this type of dispute isn't particularly rare.
Back in July, Blue Cross and Blue Shield of Minnesota and Children’s Hospitals and Clinics of Minnesota were in a similar standoff. The two sides missed a July 5 deadline, which resulted in Children’s Hospitals and Clinics of Minnesota losing in-network coverage. However, the two sides agreed to a new contract a few days later.
It usually takes the heat associated with losing insurance to re-spark negotiations between the two sides and a resolution. The MemorialCare/Anthem dispute isn’t the only one ongoing.
Mission Health and Blue Cross and Blue Shield of North Carolina (BCBSNC) are also at a contract impasse. Mission Health, a western North Carolina health system, is terminating its contract with BCBSNC on Oct. 5 because officials said the payer's latest contract proposal isn’t enough to keep up with rising healthcare costs. The contract proposal ties payments to quality and health outcomes. Mission Health would be the only system in the state outside of the BCBSNC network if the contract is terminated on Oct. 5.
Meanwhile, for Anthem, the contract dispute in California is the latest piece of news from a payer that's been in the spotlight a lot over the past few months. It’s pulling out of some states in the Affordable Care Act exchanges, and healthcare leaders are questioning its policy to not cover emergency department services that it deems unnecessary in Missouri. The insurer already has similar policies in Kentucky and Georgia and may expand it to more states.
Anthem has seen positive financial results lately, though. Anthem’s second-quarter earnings beat Wall Street’s target. Anthem is raising its third-quarter dividend by 5 cents to 70 cents a share and its fiscal year 2017 adjusted earnings to $11.70 a share. Anthem saw a 4.3% increase in operating revenue in the second quarter, which officials said was connected to premium rate increases and higher enrollments in local group insured, self-funded businesses, Medicaid and Medicare.
These disputes can usually be avoided with provider-sponsored health plans, a growing trend that is in its infancy but showing promise. Providers can seek value-based payment models that give opportunities for themselves and for providers. Dr. Tom Valdivia, co-founder of health insurance startup Bright Health, recently told Healthcare Dive these contracts "are not negotiations, they are partnership discussions."