CHI St. Luke’s, Blue Cross at a crossroads
Common Spirit Health, the parent organization of several Texasbased health care providers including CHI St. Luke’s, said it will terminate its contract with Blue Cross Blue Shield of Texas in a dispute over pricing.
Thousands of patients would be unable to see Common Spirit Health providers at in-network rates if anagreement to extend the contract is not in place by Dec. 16. Brazosport Regional Health System in Lake Jackson and CHI St. Joseph’s Health in Bryan are also part of the Common Spirit Health system.
Common Spirit Health first notified Blue Cross Blue Shield it would terminate its contract with the insurer in June, said Shara McClure, senior vicepresident of Texas health care delivery for Blue Cross Blue Shield of Texas. The two have been in negotiations since then to try to reach an agreement to renew the contract.
Under the Affordable Care Act, health insurers must provide 60 days’ notice before making major changes to health plans. The announcement of the contract termination comes less than two weeks before open enrollment on the Affordable Care Act marketplace exchange begins on Nov. 1.
Shara McClure, senior vice president of Texas health care de-
livery for Blue Cross Blue Shield of Texas, said the conflict stemmed from CHI St. Luke’s asking for “egregious” price increases on its services.
“They would like to significantly increase the revenue that they receive from Blue Cross Blue Shield of Texas,” McClure said. “We believe they’re kind of looking for a bailout on the backs of our customers.”
The termination affects all Blue Cross Blue Shield of Texas plans except for MyBlue Health, a plan that launched this year and whose contract with Common Spirit doesn’t expire until 2021.Sixteen hospitals in Houston and East Texas would be out-of-network due to the split.
A spokesperson for CHI St. Luke’s said that more than 10,000 of its hospitalizations in 2019 across all 16 Texas hospitals were Blue Cross Blue Shield patients. Blue Cross Blue Shield members also had150,000 outpatient visits and procedures. such as knee replacements and cataract surgeries that year.
“It is unfortunate that Blue Cross Blue Shield of Texas has not been more willing to reimburse at levels that enable us to provide es-
sential services,” Doug Lawson, CEO of CHI St. Luke’s Health, said in a statement.
Health care costs have been rising nationwide since 2013, and recent data shows that private insurance pays far more for medical care and hospitalization than federal insurance such as Medicare, the program for the elderly and disabled, and Medicaid, the program for the poor.
Houston-area hospitals on average charge 232 percent of the Medicare rate for the same medical treatments, according to RAND Corp., a think tank in Santa Monica, Calif.
Unless a new contract is finalized, patients covered by Blue Cross Blue Shield must seek care outside of the CHI St. Luke’s system if they wish pay lower in-network rates.
It’s the first major split between insurers and providers during the COVID-19 pandemic, and one of several that have shaken the Houston health insurance market in recent years.
Last October, Healthcare announced it planned to terminate its contract with Houston Methodist, possibly leaving 100,000 members without in-network care at one of the city’s largest hospital systems. The contract was extended several times going into the COVID-19 pandemic, and ultimately did not end because
the two announced a new multi-year contract in May.
Cigna and Memorial Hermann also announced in 2019 that they would terminate their agreement, which could have affected 178,000 customers. A new contract went into effect in July, seven months after both sides announced the split.
Insurers and hospitals might just be using the threat of contract terminations as negotiation tactisc, said Vivian Ho, a health economist at Rice University’s Baker Institute for Public Policy. It’s rare, if ever, that an insurer and hospital break apart permanently.
Hospitals are trying to predict whether patients will return in high numbers next year for care delayed during the pandemic and allow health care providers to benefit froma surge in insurance payments. Insurers likely feel that they havemore bargaining power given the economy, Ho said.
Both health systems and insurers are under pressure to hold down medical costs as hundreds of thousands of Texans lose health insurance in recession-induced layoffs.
“If CHI St. Luke’s wants to raise rates,” Ho said, “they’re extremely high quality but they have a lot of competition.”