Moab residents and visitors who carry Regence Blue Cross / Blue Shield health insurance may soon find themselves out of network at Moab Regional Hospital (MRH) if the two are unable to reach a contract agreement by Nov. 15. The current contract will expire on Dec. 31.
MRH Community Relations Director Jennifer Sadoff said the hospital received a letter from Blue Cross in early July notifying it of changes to the current contract. Sadoff said that the changes were “really drastic” and would result in a net loss of 40 percent, or $2.6 million, in reimbursement to the hospital.
“It made it really easy for us to say, ‘no, we can’t do this,’” Sadoff said. “There was absolutely no way we could accept that contract and have it be sustainable for the hospital.”
Under the new proposed contract, Blue Cross wants to reimburse MRH on a fixed-fee-for-services basis, as opposed to the current operating model where the hospital is reimbursed on a percentage of costs.
Sadoff said that the per-diem, or fixed-fee model, works in urban areas that provide a high volume of services, but that for small, rural critical access hospitals, a fixed fee reimbursement is unsustainable given the small margins under which these hospitals operate.
“We are a not-for-profit hospital,” she said. “Whatever margin we have goes back into providing equipment and services for our community.”
The hospital told Blue Cross in August that as a result of the new conditions, it would terminate the contract. The parties have been negotiating, but on Oct. 30, the hospital board voted to end negotiations on Nov. 15. Sadoff said that this was in order to give local residents and employers time to find new, in-network health care coverage by the end of the year.
Sadoff said that 18 percent of MRH’s patients, including approximately 100 hospital employees, are covered by Blue Cross. She said the hospital is making plans for its employees should negotiations fail.
“It is important to MRH that our employees have access to local health care,” she said. “We worked with our broker and were pleased to find options that were more affordable than our current plan with Blue Cross.”
Employees of the city of Moab are also covered by Blue Cross. Moab City Manager Donna Metzler said the city will have an alternate provider in place by Jan. 1, 2015.
Lou Riepl, strategic communications manager for Blue Cross, said that moving hospital reimbursement to a fixed-fee basis is in keeping with standard reimbursement practices originally implemented by Medicare.
“(It) is subsequently embraced by the broader health care industry,” Riepl said.
MRH CEO Robb Austin said that a Medicare fixed-fee payment system is not what the federal government uses to reimburse critical access hospitals (CAHs), and that MRH will be the first rural hospital in Utah to be treated by Blue Cross in this manner.
“Their statement that it is “standard reimbursement practices” is simply wrong,” Austin said. “Medicare reimburses CAHs on a cost plus system ― not on a fixed-rate plan as proposed by Blue Cross.”
Critical access hospitals are rural hospitals that meet certain “Medicare Conditions of Participation.” They must be located at least 35 miles from any other hospital, provide 24-hour, seven-day-a-week emergency care, and have a focus on providing services for common conditions and outpatient care.
According to MRH Chief Financial Officer Craig Daniels, fixed-fee payment is not common in rural health care.
“Regence proposed a fixed-fee payment method that is widely used in larger urban markets,” Daniels said. “Medicare fixed-fee payment is not standard for smaller hospitals where there is a critical health care need. Rural providers have challenges where they offer high quality healthcare 24/7 with significantly lower volumes than large systems and hospitals.”
Riepl said that MRH raised its fees in 2012, and that the increases put it up in the top tier of all the other hospitals in the state. He said that as a nonprofit health insurer, its first priority is to be accountable to its members.
“Inflated costs are not fair or affordable for our members, and the cost increases we’ve seen the last couple of years from Moab Regional Hospital are certainly not sustainable,” he said.
Austin acknowledged that MRH raised its rates in 2012, but said that Blue Cross affirmed the need for the increase, and that it brought the hospital close to, but not over, other hospital charges in the state. He said that there is data available to Blue Cross and the general public that show MRH’s costs are still 44 percent below the statewide average.
Riepl said that it was the goal of Blue Cross to reach an agreement.
“We’ve not had any other rural hospital in the state terminate their provider agreement with us ― and we see no reason why Moab Regional Hospital would want to be the first,” he said.
Austin also said he hoped that an agreement could be reached, but that if it accepted the current proposal, the hospital would have to close its doors. That, he said, would not be in the best interest of serving the community and its 2.5 million annual visitors.
“Our commitment is to our community and providing high quality health care to our patients, not to make Regence Blue Cross more profitable at our expense,” he said.
Both sides hope to reach agreement, but time is limited
Our commitment is to our community and providing high quality health care to our patients, not to make Regence Blue Cross more profitable at our expense.
We’ve not had any other rural hospital in the state terminate their provider agreement with us — and we see no reason why Moab Regional Hospital would want to be the first.