Patients suffer when large firms quarrel over contracts

Disputes force higher prices for health care not covered in plan.

David Lerman, a Berkeley, Calif., lawyer, changed health plans this year only to learn that his new insurer has no contract with the dominant medical provider in his community.

Anthem Blue Cross of California, one of the state’s largest health insurers, is battling with Sutter Health over how much it should pay to care for tens of thousands of its enrollees in Northern California. Sutter operates 24 hospitals in the region and lists about 5,000 doctors in its network.

“It’s not the peace of mind I thought I was buying to have the entire Sutter network - which is the biggest game in Northern California - be out-of-network,” said Lerman, whose family is insured through his wife’s job as a California State University professor.

Lerman and his family, who are enrolled in an Anthem Blue Cross PPO, can continue to visit Sutter facilities until midyear even if a new contract does not materialize before then. Fortunately, he said, nobody in his family suffers from a chronic illness. But not knowing which providers ultimately will be in his health plan’s network is aggravating, he said.

Contract disputes between insurers and medical providers have been a regular feature of the national health industry for a long time, but the stakes have risen as big players on both sides have expanded to gain market share - and leverage in network negotiations.

Most negotiations are completed before the old contract expires, and consumers usually don’t hear about behind-thescenes disagreements. But when insurers and providers fail to reach an agreement on time, it can force patients to pay higher prices for care that is no longer covered by their health plans. At the least, it can cause considerable anxiety.

“It is a game of chicken, and at the end of the day somebody blinks and they come to an agreement,” said Wendell Potter, a former senior executive at health insurance giant Cigna who became a critic of the industry and a strong proponent of sweeping health care reform. “The big losers in this are patients, because there’s a period of uncertainty and angst and a real possibility that the physicians and hospitals you want to go to are no longer in-network.”

Amy Thoma Tan, a Sutter spokeswoman, said in an emailed statement, “We are in active negotiations with Anthem Blue Cross and recognize that a timely agreement - one that protects access and choice - is in the best interest of our patients, employers, hospitals and clinicians.”

A statement by Eric Lail, an Anthem Blue Cross spokesman, was even less enlightening: “As we negotiate with providers, we try to strike a balance between protecting affordability and providing a broad network of providers to create choices, which can take time.”

Sutter, under fire for high prices, has been accused of using its regional market share for financial advantage. As large hospital systems merge with competitors and snap up medical practices, “it’s much more difficult for insurers to say, ‘OK, we’re letting you go,’” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms.

Corlette said both sides should have a greater incentive these days to come to an agreement. “When you have a big behemoth health care system and a big behemoth payer with tens of thousands of enrolled lives, the incentives to work something out privately become much stronger,” she said. “The PR risks are so high for both parties.”