Blue Shield Of California And Providence At Stalemate Over Contract Negotiations

Blue Shield of California and Providence are the latest payer and provider to square off publicly over the cost of providing healthcare.

The insurer and the Renton, Washington-based health system have been embroiled in contract negotiations for months, according to statements from both parties. However, negotiations have recently stalled. If the parties remain at an impasse, Blue Shield will go out of network with more than 110,000 patients at Providence effective June 1, according to the health system.

Both parties maintain they’re seeking a deal that’s both affordable and patient-centric.

Providence says it’s seeking a contract that both reflects “the last three years of inflation” and will guarantee “timely payment” from the insurer. 

The health system alleges Blue Shield increased claim denials by an “alarming rate” from 2019 to 2023, while denials have shot up by 11.7% this year. Providence says it’s left to foot the bill for necessary care, according to the health system. In other instances, Providence says Blue Shield has delayed care approvals. 

The health system posted a net loss of nearly $600 million during its 2023 fiscal year, and said delayed reimbursements from payers reimbursements were a significant headwind. 

Blue Shield says Providence’s contract conditions are untenable.

“We recognize the challenges of the rising cost of health care, and we negotiate on behalf of our members and clients to achieve our mutual goal of reasonably priced health coverage,” the insurer told Healthcare Dive in a statement. “Unfortunately, Providence’s position does not allow us to maintain affordability for our members and customers.”

The payer has also reported losses recently, posting a net loss of $910 million in 2022, the most recent year financial data is available. Blue Shield said it puts patients ahead of profits by voluntarily capping its net income at 2% in order to offer “reasonably priced health coverage.”

While payers and providers often negotiate contract terms fiercely, deals have historically been inked in private. In recent years, this has begun to change, with disagreements spilling out of boardrooms and into the public.

Last year, Bon Secours Mercy Health and Anthem Blue Cross Blue Shield’s multi-year contract negotiation played out in the courts. Bon Secours sued Anthem for $93 million in unpaid claims and the insurer’s Medicare Advantage plans briefly went out-of-network with the health system. 

Data suggests this could be a trend. Media reports of payer-provider contract disputes rose by 69% last year compared to 2022, according to FTI Consulting. 

Some of the most fraught contract negotiations center on MA plans, where the government contracts with private insurers to manage the healthcare of seniors. The plans have been an increasingly popular option for patients, however, they’ve recently been less profitable recently for payers. 

FTI found 59% of reported disputes last year involved rates for MA plans. Twelve disputes focused exclusively on MA plans, the consultancy said. 

Last month, Moody’s Ratings noted a rise in souring payer-provider relations regarding their MA plans.

The credit ratings agency noted Pennsylvania-based WellSpan Health and North Carolina-based WakeMed severed ties with Humana, while Ohio-based Genesis Healthcare System went out of network with Elevance and Humana after the insurers upped their MA claims denials. 

Public disputes have risen as tensions have escalated between parties, according to analysts. 

The healthcare industry has grappled with record-high inflation since 2022. As of last winter, providers and payers were “wildly apart” on their hopes for possible rate increases, according to Kevin Holloran, senior director of U.S. Public Finance at Fitch Ratings.

Payers and providers might hope that alerting patients to stalled contract negotiations would increase their leverage toward finalizing a deal. However, FTI found that 44% of public payer-provider disputes in 2023 ended without a new contract. 

The No Surprises Act is further raising the stakes of contract negotiations this year, according to executives at some of the nation’s largest for-profit health systems. The law, enacted in January 2022, prevents patients who unknowingly receive out-of-network care at an in-network facility from being stuck with unexpected bills.

However, payers and providers are left to determine who pays for the care in a third-party arbitration process. The independent dispute resolution process has been criticized by providers for having delays due to significant backlogs.