Business & Real Estate

Sutter Health-Blue Shield dispute leaves at least 280,000 patients in limbo

A public battle between Sacramento’s Sutter Health and insurer Blue Shield of California has left more than a quarter-million patients wondering whether they’ll have to switch to another medical provider midyear.

The disagreement arose when Sutter and Blue Shield were working out their contract terms for the coming year. Health care providers and insurance companies do this every fall, around the same time that consumers are picking their health plans through open enrollment.

It’s not unusual for disputes to arise, but this one has been particularly long and nasty. The previous contract between the two health care giants expired Dec. 31. In dueling letters to patients, each side has blamed the other.

The standoff has left patients angry and frustrated.

“This is unacceptable,” said Lisa Johnson, a Sutter patient who recently got letters from both companies telling her she might have to change to a different health care system by July.

Johnson, 49, of Elk Grove underwent emergency surgery last year for a life-threatening condition and doesn’t want to leave her Sutter doctor of 20 years or deal with the headaches of transferring her records. The companies should resolve their differences for the sake of patients, she said.

“They need to come to grips,” she said.

Blue Shield and Sutter both say they are continuing to negotiate in hopes of a speedy resolution. Saturday is the deadline set by state regulators for Blue Shield to send out notices to 57,000 Sutter HMO patients that they’ll be reassigned to a new health system April 1.

Without a contract, an additional 240,000 Sutter PPO patients would be reassigned July 1, Sutter officials said. (Sutter says a total of 297,000 patients could be affected. Blue Shield puts the total number at 280,000.)

“We understand the frustration our patients are feeling,” Karen Garner, Sutter’s public relations director, wrote in an email. “They want the provider network that Blue Shield sold to them during open enrollment.”

Johnson and other patients said that when picking Blue Shield, they weren’t warned they might be bumped from Sutter if talks broke down.

The companies continue to bicker.

Blue Shield says Sutter’s rates are too high and contends that the health care conglomerate, which operates 24 hospitals in Northern California, has used its market clout to force insurers to accept its terms.

“Sutter is pressuring Blue Shield to accept new and unprecedented contractual provisions that are the very essence of the antitrust concerns already alleged against them,” Blue Shield says on a website it created to criticize Sutter in an unusually public manner.

The state attorney general’s office launched an antitrust investigation in 2012 into some of the state’s top hospital chains and their affiliated physicians’ groups, including Sutter, to see if a wave of industry consolidation was leading to inordinately higher prices.

Since 1999, Sutter has acquired two hospitals, 17 outpatient surgical centers and three medical groups, amassing 50 percent to 100 percent of market share in half the counties where it operates in Northern California, Blue Shield claims.

The insurer sent a letter from its San Francisco headquarters to Sutter patients on Jan. 16 arguing its side.

“We understand that the uncertainty of not knowing what’s happening with Sutter Health is causing concern,” the letter said. “But agreeing to Sutter’s higher prices and passing these costs on to you in the form of higher premiums is not something we are prepared to do.”

In contrast, Sutter says Blue Shield is demanding price cuts that would erode its quality of care. Sutter has reduced costs by about $300 million in the last few years, and its proposal to Blue Shield reflects those savings, said Bill Gleeson, Sutter’s vice president for communications.

“We made a fair and reasonable offer to Blue Shield of less than a 1 percent increase in rates … for what Blue Shield reimburses us to take care of its patients,” Gleeson said. “They demanded substantial cuts in reimbursement that would have a devastating impact on Sutter Health’s ability to meet our patients’ needs.”

The insurer has upped its premiums by as much as 23 percent this year, Sutter officials noted.

“For Blue Shield to claim we have negotiating leverage over them is ridiculous,” he added. “Blue Shield is an $11 billion company that along with three other plans controls 90 percent of California’s (health insurance) market.”

A transition period built into the prior contract gives Sutter PPO patients covered by Blue Shield until the end of June to stay with their current doctors. Sutter HMO patients might have only until March 31. Earlier this month, Sutter proposed extending the transition period until the end of the year.

“Unfortunately, Blue Shield has not accepted our offer,” Sutter wrote in its own letter to patients. The company posted the letter on its website, along with other critiques of Blue Shield.

Blue Shield said the offer wasn’t workable.

“It’s beneficial to Sutter to extend the transition period to Dec. 31; however, it provided no long-term solution. The contract is still expired,” said Blue Shield spokesman Steve Shivinsky.

Instead Blue Shield suggested renewing its contract with Sutter for two more years under most of the same terms as the prior contract. Sutter rejected that offer, saying it would only be in Blue Shield’s interest to keep its costs the same while raising premiums.

Amid all the public-relations banter, patients say they just want to know if they’ll be able to stay with their current doctors.

“They’re both trying to use patients as leverage. We’re stuck in the middle,” said David Darnell, 37, of Aptos. He and his wife and their two young children all go to the same Sutter-affiliated doctor in Watsonville. The doctor delivered both of the couple’s children, he said.

“It’s our family doctor we’re being torn from,” Darnell said. “We’re attached to these doctors who know our medical histories and who know us.”

Call The Bee’s Hudson Sangree, (916) 321-1191.

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