ELLSWORTH, Maine — A stalemate in negotiations between Maine Coast Memorial Hospital and Anthem Blue Cross Blue Shield could result in the hospital being removed from the company’s provider network and in costs increasing for the approximately 6,000 Maine Coast patients covered by the insurer.
Hospital officials said Monday they would continue to negotiate with Anthem, but stressed that the hospital could not afford to meet Anthem’s contract demands. The insurance company wants the hospital to triple the discount it offers to Anthem, a move which would cost the hospital an estimated $2.6 million.
The current contract between Maine Coast Memorial and Anthem will expire Sept. 30. Anthem officials confirmed Monday they are in the process of notifying its customers who are affected by the expiration of the contract that the hospital will no longer be a part of the Anthem network. Letters to that effect are expected to be sent to members this week, according to Anthem spokesman Mark Ishkanian.
The three-year contract expired on June 30, 2007, and was extended twice, according to Ishkanian, first until June 30, 2008, and then to Sept. 30. Although the contract expires on Sept. 30, state regulations require a 60-day notification period, which begins when members receive their letters.
The dispute revolves around the issue of the discount the hospital provides to the insurance company. Generally when a hospital provides medical services, a patient covered by insurance pays a portion of the bill and the insurer pays its portion. According to hospital Chief Financial Officer Kevin Sedgwick, the insurance company negotiates with the hospital to determine how much the company will actually pay for its share of the bill.
Maine Coast CEO Douglas Jones said Anthem wants the hospital to triple the discount the company receives on the payments it makes to the hospital for medical services.
“They surprised us by making the unprecedented request that we triple the discount they receive,” Jones said.
He noted that Anthem is one of about a dozen insurance carriers with whom the hospital has contracts and that it has worked closely with Anthem for a number of years.
Providing the increased discount to Anthem would cost the hospital $2.6 million, according to Sedgwick. That would have a harmful financial impact on the hospital, he said.
“Maine Coast would have to raise the cost it charges to patients who do not have insurance and to those who are covered by other insurance companies,” Sedgwick said. “Obviously, that’s not something we want to do.”
Jones declined to discuss the amount of the current discount to Anthem, noting that the hospital is bound by state anti-competition regulations.
“We’re tightly controlled by the state about what we can say,” he said.
Sedgwick, however, noted that Anthem currently has the most favorable discount rate of all the insurers who deal with the hospital.
“They’ve got the best deal in town,” he said.
Anthem payments account for more than 20 percent of the hospital’s net revenues, according to Sedgwick. The hospital’s annual net revenue is around $90 million, he said, and Anthem accounts for about $20 million of that income.
In a printed statement, Anthem officials said they would not negotiate the contract through the media and declined to comment on specifics of the contract.
They said the company negotiates on behalf of its members who are struggling with the increasing costs of health services and health insurance and expect the company to negotiate cost-competitive contracts.
“We believe the cost of hospital services at Maine Coast for Anthem members is too high compared to other, similarly-sized Maine hospitals,” Anthem’s statement said. “We have not been able to reach an agreement on a new contract. As a result, the current contract between Anthem and Maine Coast will expire and the hospital will no longer be participating in the Anthem network as of midnight Sept. 30.”
In anticipation of the contract expiration, Anthem has notified the hospital that it will reduce regular payments to the hospital by about $300,000. These payments are made regularly in anticipation of actual hospital billing, Ishkanian said, and are based on the past year’s medical claims.
“We believe we’ve overpaid them,” he said, noting that it was not unusual for there to be this type of “settling up” at the end of a fiscal year. Because of the contract expiration, the end of the year comes on Oct. 1, he said.
At the press conference, Jones disputed the company’s findings from Anthem’s comparison of Maine Coast with other hospitals.
“They’re not comparing apples to apples, and we don’t think we’ve been evaluated fairly,” he said. “At Maine Coast Memorial Hospital, we employ most of our doctors and nurse anesthetists, and the cost of those services are included in our bills. Many other hospitals have private practices that bill for these services separately.”
The impact on patients will differ, depending on what type of coverage they have, Ishkanian said. Once the 60-day grace period expires, those fully insured by Anthem will likely see additional out-of-pocket and co-insurance costs that are higher than if they go to a hospital that is in the network.
Some patients, such as pregnant women, will continue to be covered at the in-network rates throughout the course of their treatment, Ishkanian said.
Patients who have Anthem insurance supplemental to Medicare will not be affected by the changes, Sedgwick said.
The 60-day notification period provides time for continued negotiations. Jones said the hospital was committed to resolving the issue before there is any impact on its patients.
“We will do all we can to continue good faith negotiations to ensure that our patients are taken care of,” he said.
Ishkanian also said there is always the opportunity to resolve the issues and noted that Anthem made an offer last week to extend the contract to July 1, 2009. The hospital did not respond to that offer, he said.
“Maine Coast is a valuable member of our provider network, and we remain open to continuing negotiations,” the statement said.
Officials from Maine Coast and Anthem are scheduled to meet this week to continue contract discussions.