AAMC Reporter: August 2005
Academic Medical Centers Clash with Insurance Providers
BJC/UHC Battle the Latest in Contract Disputes
- Whitney L.J. Howell, whowell@aamc.org
Nationwide, contracts between academic medical centers and insurance providers reach their termination dates each year, and most are renewed without incident. But the past year has seen a small spate of disputed contracts, and not all have been resolved harmoniously.
Although the players involved are all in different states, the contract discussions do have similarities. In each case, the hospital systems questioned how the insurance companies categorized physicians or how much reimbursement the companies paid for services rendered.
In June, BJC Healthcare, affiliated with Washington University School of Medicine (WUSOM), and UnitedHealthcare Corp. (UHC) in St. Louis resolved their differences over UHC's pilot Performance program, an initiative that scored physicians based on their procedure complication rate, adherence to best practices, and cost control. Physicians scoring well in these areas received stars, and UHC encouraged patients to see these doctors by offering smaller out-of-pocket expenses as incentives.
Initially, only 18 percent of BJC physicians with admitting privileges received a star. BJC disagreed with how UHC analyzed its doctors and issued a notice of contract termination in March. An end to the contract would have removed BJC from UHC's coverage network, forcing thousands of patients to pay higher co-pays for seeing out-of-network physicians at the teaching hospital.
After months of negotiations, however, UHC agreed to discontinue the Performance program in Missouri as of Jan. 31, 2006, and consult with BJC before implementing any similar program in the future, said James Crane, M.D., associate vice chancellor for clinical affairs at WUSOM.
"In the future, any physician measurement of quality or efficiency will be jointly determined," Crane said. "We will both make sure any method of analysis is sound."
Working with UHC on future endeavors will ensure that the academic and indigent-care missions inherent to teaching hospitals are considered when studying physician performance, he said. In addition, future discussions will help doctors and patients sidestep any disruptions to their relationships that contract disputes might cause.
Prior to the BJC/UHC clash, in the final weeks of 2004, the University of Iowa (UI) Hospitals and Clinics, affiliated with the University of Iowa Roy J. and Lucille A. Carver College of Medicine (UICM), gave Wellmark Blue Cross Blue Shield of Iowa an intent to terminate effective January 1, 2006. Unlike the BJC case, however, UI hospital administrators believed Wellmark did not offer enough reimbursement for services rendered to the 900,000 patients seen annually in university hospitals and did not agree on the terms of the contract.
The partnership between the UICM and UI Hospitals and Clinics provides the only academic medicine facilities in the state, as well as the only tertiary care center with a premier neonatal unit and trauma center.
According to local news reports, the UI institutions said rising health care costs created a multi-million-dollar gulf between Wellmark reimbursements and actual charges. Originally, university hospital administrators requested the opportunity to give Wellmark more detailed information about the facility's yearly costs incurred from providing specialized services in order to receive higher reimbursement payments.
While Wellmark representatives initially resisted the request, claiming that the UI system already received more reimbursement than other member hospitals, they ultimately sat down for some frank discussions with hospital administrators. According to Steve Parrott, director of university relations at UI, the talks led to a contract that better reflects the medical care patients receive at the UI Hospitals and Clinics.
"The old contract allowed Wellmark alone to determine our reimbursement levels," Parrott said. "We negotiated with them to better explain that we provide some specialties that are not offered elsewhere in Iowa and to make sure we receive the reimbursement needed to continue providing those services."
In June, Wellmark officials agreed to pay UI Hospitals and Clinics approximately $8.6 million in incremental reimbursements as part of its annual payment update factor for fiscal year 2005-2006. The additional payments will allow doctors, university hospitals and associated clinics to continue providing quality care, Parrott said.
These negotiations marked the first time UI Hospitals and Clinics threatened termination, and Parrott said, "It is symptomatic of how the health care environment is changing as labor costs continue to rise and there is a sustained demand of the latest medicines and techniques."
North Carolina Baptist Hospital, affiliated with Wake Forest University School of Medicine, and Blue Cross Blue Shield of North Carolina (BCBSNC) were involved in a similar dispute but were unable to reach a consensus, resulting in a contract termination.
Citing a confidentiality agreement with BCBSNC, officials with North Carolina Baptist Hospital were unable to comment on the conflict, but according to local news reports, the dispute with BCBSNC developed because of dissatisfaction over reimbursement rates.
Originally, the hospital tried to negotiate a new contract with BCBSNC in early 2004 for a 23 percent increase in reimbursement payments. Efforts were unsuccessful, but the hospital continued the relationship in the next fiscal year, starting July 1, 2004, losing money for each BCBSNC patient treated through December 2004.
In January, the hospital asked for a 36 percent increase through July 1, 2005, to make up its losses before dropping to the 23 percent increase for the remainder of the year. BCBSNC said it already gives North Carolina Baptist 10 percent more than it pays similar teaching hospitals. The contract expired on June 4, but at press time, both parties were discussing the potential for a new contract.
While BCBSNC spokesman Mark Stinneford could not comment on the potential for future contract negotiations, he said the termination is atypical.
"Public contract disputes are not a frequent occurrence; they maybe come up every year to 18 months," Stinneford said. "And it's really rare to have a cancellation." |
