North County Times (San Diego, CA)
State records show that Blue Cross of California has been involved in broken contract negotiations — talks that ended in failure to renew services for its customers — at seven San Diego County hospitals in the last four years, including the most recent termination at Oceanside’s Tri-City Medical Center.
That’s more terminated contracts than a dozen other health insurers operating in San Diego County. But it’s far fewer than the 25 that Blue Shield of California — a separate company — has been involved in over the same time period, according to filings with the California Department of Managed Health Care.
Discrepancies in the numbers of failed contract talks could suggest that some health insurance companies, or hospitals, are “harder to deal with” than others — a charge that Blue Cross critics have repeatedly stated — and that they routinely lowball their partners in “take-it-or-leave-it” contract negotiations.
At the same time, state records also show that Tri-City has let contracts with other health insurers expire while negotiating new deals in recent years.
However, state officials said people should not use their records of failed contract talks to try to assign blame for who the “bad guy” is between Blue Cross and Tri-City.
Lynne Randolph, spokeswoman for the California Department of Managed Health Care, said the agency does not track all contract lapses between insurers and hospitals.
Because of that, she said, the state’s statistics do not provide a complete picture of failed negotiations and lapsed contracts.
Meanwhile, as the stalemate between Oceanside’s Tri-City Medical Center and Blue Cross drags into its 10th week, a health care consumer advocate and a professor who specializes in health care disagreed on which side may be to blame for the contract termination — a falling out that has sent thousands of North County residents looking for new hospitals.
Jerry Flanagan, health care policy director with the Foundation for Taxpayer and Consumer Rights, blamed “greedy” Blue Cross, saying the company has a history of hiding rapidly increasing profits as unneeded reserves and spending a smaller percentage of the health insurance premiums it collects on treating patients and health care than other insurers.
But professor Glen Melnick, director for Health Policy and Management at the University of Southern California, pointed the finger at “poker-playing” by Tri-City, saying that hospitals in general have purposely pushed contract negotiations with insurers in recent years to the termination point to force insurers to offer them more money.
Still talking, not saying much
Oceanside’s 397-bed Tri-City Medical Center, which serves Oceanside, Vista and Carlsbad, let its contract with Blue Cross expire Jan. 1 when the two sides could not agree on financial terms after six months of negotiations.
The two sides resumed talks Jan. 23 under public pressure to do so, but have not reached a new deal. And they have refused to comment in any detail about their negotiations. The two sides have also been far enough apart in their negotiations to forego extending the old contract until a new one could be reached.
With the contract failure, an estimated 27,000 Blue Cross members living within 15 miles of Tri-City Hospital, including North County Times employees, have been forced to try to find a new hospital covered by Blue Cross, or pay the full cost of their all non-emergency treatment at Tri-City.
It is not unusual for hospitals or doctor groups to break ties with Blue Cross, or other health insurers.
Sharp Healthcare, and its four San Diego County hospitals, terminated its contract with Blue Cross last July, but reached a new deal in August. La Jolla-based ScrippsHealth, and its five hospitals, terminated its contract with Blue Cross last September, but reached a new deal shortly thereafter.
Palomar Pomerado Health, which operates Escondido’s Palomar Medical Center and Poway’s Pomerado Hospital — and whose own Blue Cross contract can expire in July — terminated its contract with Aetna in 2004, and UCSD Health Plan in 2003.
Children’s Hospital, meanwhile, terminated contracts with Blue Shield in 2003 and Blue Cross in 2005.
Who’s driving the dispute?
During their current contract negotiation drama, neither Blue Cross nor Tri-City officials have talked much about their negotiations.
The lone exceptions have been mutterings from Tri-City board members that Blue Cross was offering it so little cash that the hospital would have to “close its doors” — and comments from Blue Cross spokeswoman Leslie Porras that the health-insurance giant believed that hospitals should “earn a profit” but not one that would force Blue Cross to increase its premium costs.
But others have commented.
Flanagan said Blue Cross has a reputation for earning high profits and spending as little as possible on medical treatment for its customers.
He said he could envision Blue Cross trying to force Tri-City to accept far less reimbursement for its patients than the hospital could accept.
Flanagan said health insurers in general hide profits they earn from selling premiums in overstuffed, unregulated reserve accounts.
Financial documents filed with the California Department of Managed Health Care stated that Blue Cross had $1.6 billion in net reserves in December — money Flanagan said was paid by premium payers for medical treatment.
At the same time, an annual report released last year by the California Medical Association stated that Blue Cross spent the second-lowest percentage of its earnings on actual medical treatment — 79.9 percent.
The report crunched used financial information sent by insurers to the state, and reported on percentages spent in 2003-04.
Of 10 large insurers, only SmartCare Health Plan spent a smaller percentage than Blue Cross‘ 79.9 percent. Aetna, Blue Shield of California, PacifiCare of California, Health Net of California and CIGNA HealthCare of California all spent larger percentages.
Flanagan said the five largest health insurers in California — one of which is Blue Cross — insure 80 percent of all Californians. He said the insurers have become all-powerful monopolies that government should regulate like electricity providers.
“We used to regulate energy, and as soon as we stopped, we had Enron,” Flanagan said, referring to the 2000 energy crisis in California. “That’s what’s happening in health care.”
Hospitals
But Melnick completely disagreed with Flanagan.
He said hospitals are now pushing around health insurers, and that Tri-City could be to blame for the contract termination.
Melnick said that a few years ago, insurers had the upper hand in contract negotiations. He said hospitals believed they had to take contracts offering less-than-ideal reimbursement for medical treatment because of the patients that insurers bring in.
But he said that in the late 1990s, hospitals “figured out” that insurers such as Blue Cross didn’t like the bad publicity that came when contracts were terminated.
He said that since then, hospitals have purposely pushed negotiations to the breaking point — letting contracts expire and figuring the publicity would drive insurers back to the negotiating table with bigger offers.
“It’s a big poker game,” he said. “It’s Texas hold ’em. The big story is, for the first time in 15 or 20 years, the hospitals have the health plans on the run in California.”
Melnick said people could tell a lot by looking at the hospital’s financial bottom line. If a hospital’s profits were up, that could be because it was forcing better deals out of insurers.
In 2004, Tri-City lost $2.4 million. But that turned into a $3.5 million profit in 2005.
Meanwhile, state records show that Tri-City let its contract with Blue Shield of California expire in 2003 during negotiations — before reaching a new deal. And it let its Blue Shield contract expire again in 2005 — before reaching a new deal.
Ethel Kremer, one unhappy Blue Cross and Tri-City customer, blamed Blue Cross for the current termination.
Kremer said she and her husband are now left to find a new hospital. Unfortunately, she said, the doctors she and her husband use do not have privileges at Scripps Memorial Hospital, Encinitas, the next-closest Blue Cross hospital.
“My doctors don’t go to these hospitals,” she said.
“They’ve got us up a tree,” she said of Blue Cross. “I’m 72 and I’m still paying $500 a month for Blue Cross. It’s just so easy for Blue Cross to just brush it off.”
