By Ken Alltucker
USA TODAY, October 27, 2023
One large health system with hospitals in Virginia and Ohio this year cut off in-network access to consumers enrolled in some Anthem Blue Cross Blue Shield Medicare and Medicaid health insurance plans.
Two doctors groups with Scripps Health in San Diego are terminating contracts with private Medicare plans over concerns about payments and routine denials.
For years, hospitals, doctors and health insurance companies have squared off over how much to pay for medical services. Insurers negotiate contracts with hospitals and doctors so their customers can get lower, in-network rates at those facilities. These negotiations, usually hammered out behind the scenes, are becoming increasingly tense and public as hospitals seek adequate payments and health insurance companies attempt to check spiraling medical bills.
Experts say these disputes could be an early warning sign of more contract terminations ahead as hospitals and large doctor groups seek lucrative payments to offset inflation, healthcare workers’ double-digit raises and escalating prices for medical supplies.
But for patients caught in the middle of these disputes, the results can be devastating. Some need to switch doctors or insurance plans or potentially pay higher, out-of-network rates at a time when half of Americans are struggling to afford the rising cost of medical care.
Scripps Health ended the 2024 Medicare Advantage plan contracts with two medical units, called Scripps Clinic and Scripps Coastal. The decision will affect about 32,000 patients who will either need to switch Medicare plans or find new doctors.
“We’re unfortunately on the vanguard of what I think is going to be a very ugly few years between hospitals and commercial insurance companies,” said Chris Van Gorder, President and CEO, Scripps Health.
Hospitals target private Medicare plans
Many contract terminations involve hospitals rejecting terms for private Medicare insurance plans, known as Medicare Advantage plans. While traditional, government-run Medicare allows enrollees to choose from a wide variety of doctors and hospitals, private Medicare plans restrict access through networks and impose some cost-sharing requirements such as copayments or deductibles.
Hospitals that are rejecting private Medicare plans say they don’t reimburse at the same levels as traditional Medicare, delay or deny care through prior authorizations or impose other limitations.
Van Gorder said Scripps’ Medicare Advantage exit was a “very difficult decision” but one he had to make due to more than $75 million in annual losses. He tried to negotiate more lucrative reimbursement rates, but those talks fizzled.
While private Medicare plans are funded by government-run Medicare, they’re also profitable because insurers keep a portion of those payments before paying for care, he said.
Van Gorder described private Medicare offerings as “delay, deny or don’t pay” plans. “They’re in the business of making money,” he said.
Hospitals cut off insurers that ‘don’t reimburse us adequately’
Doctors groups and hospitals are more willing to air frustrations over private Medicare plans after think tanks and government watchdog agencies have issued critical reports about these insurers’ profits and practices, said David Lipschutz, associate director and senior policy attorney for the Center for Medicare Advocacy.
In 2022, a government watchdog report said private Medicare plans routinely rejected claims that should have been paid and denied services found to be medically necessary. These private plans rejected nearly one in five claims allowed under Medicare coverage rules and denied 13% of authorizations for medical services that government-run Medicare would have allowed, the U.S. Department of Health and Human Services inspector general investigators found.
Doctors and hospitals “are more willing to publicly express their frustration,” Lipschutz said, because these private Medicare plans get what “many people would characterize as overpayments.”
More than a half dozen other hospital systems from Bend, Oregon to Nashville, Tennessee have announced private Medicare contract terminations or lapses.
St. Charles Health System in Bend said it will end Medicare contracts next year with Humana, HealthNet and WellCare.
Mark Hallett, St. Charles’ chief clinical officer, said sticking with those private Medicare plans would “result in restrictions to patient care, longer hospital stays and administrative burdens” for doctors.