Prime Healthcare’s New Jersey hospitals announced this week they would terminate their contracts with major insurer UnitedHealthcare, citing significant underpayment compared to the rates of neighboring facilities, and lower reimbursement rates than those offered by Medicaid.
The decision impacts Saint Clare’s Health in Denville, Dover and Boonton, Saint Michael’s Medical Center in Newark, and Saint Mary’s General Hospital in Passaic.
Dr. Sonia Mehta, regional CEO and chief medical officer of Prime Healthcare New Jersey, said in a statement that the hospitals have been underpaid for years, including some rates well below that of Medicaid, and added that UnitedHealthcare’s contract proposal jeopardizes the organization’s ability to deliver quality care.
WHAT’S THE IMPACT?
Due to new disclosure requirements by the Centers for Medicare and Medicaid Services, all hospitals must now disclose their contracted rates. Prime Healthcare said it learned it had been underpaid compared to what United has been paying neighboring hospitals.
The New Jersey Hospital Association reported that Prime Healthcare hospitals provide quality healthcare services and that its cost of care is among the lowest in the State of New Jersey.
“We are patient-focused and are committed to delivering the most compassionate care by exceptional physicians using state-of-the-art technology,” said Mehta. “Undercutting our payments is unacceptable, and so we are taking the necessary step of providing notice of our intent to provide care out-of-network. We realize it is a bold move, but a necessary one to separate our hospitals from organizations that work contrary to our mission and commitment to our patients.”
Prime’s New Jersey hospitals will continue to honor the rates and services in the agreements until the end of the cooling off period, which is December 16 for the Medicaid product and December 31 for the commercial and Medicare products.
All patients can continue to use Prime’s emergency services at its New Jersey hospitals, regardless of insurance, and the hospitals are willing to negotiate single patient agreements for elective services. The hospitals will also honor all continuity of care services for United members.
UnitedHealthcare told Healthcare Finance News that Prime’s demands are unreasonable.
“Prime is demanding a 14% price hike in just one year for our employer-sponsored and individual plans, which is unsustainable and would increase healthcare costs for New Jersey residents and employers,” said spokesperson Cole Manbeck. “We hope Prime will work with us to ensure the people we serve have continued access to Prime’s hospitals at an affordable cost.
“While we have agreement on rates for our Medicare Advantage and Medicaid plans and proposed to Prime that we finalize the contract for these plans, Prime refused unless we accepted its 14% price hike demands for our employer-sponsored and individual plans,” he said.
“This unnecessarily puts thousands of New Jersey residents in the middle of our negotiation, presumably because Prime hopes the potential disruption in care for our most vulnerable members would pressure us to give in to its price hike demands.”
THE LARGER TREND
Prime Healthcare New Jersey is part of Prime Healthcare, a health system operating 45 hospitals and more than 300 outpatient locations in 14 states. In 2020, Prime successfully completed its acquisition of St. Francis Medical Center, a 384-bed Los Angeles County medical facility that had previously been owned by Verity Health.
Prime acquired St. Francis for a net of more than $350 million, including a $200 million base cash price and $60 million for accounts receivable.
Just last week, CMS blocked four Medicare Advantage plans from enrolling new members in 2022 because they didn’t spend the minimum threshold on medical benefits, with three UnitedHealthcare plans and one Anthem plan failing to hit the required 85% mark three years in a row. Medicare Advantage plans are required to spend a minimum of 85% of premium dollars on medical expenses; failure to do so for three consecutive years triggers the sanctions.
In June, UnitedHealthcare backtracked on a proposed policy retroactively rejecting emergency department claims. The policy, which was slated to take effect on July 1, meant UHC would evaluate ED claims to determine if the visits were truly necessary for commercially insured members. Claims deemed non-emergent would have been subject to “no coverage or limited coverage,” according to the insurer.
UHC rolled back the policy – for now. The insurer told The New York Times that the policy would be stalled until the end of the ongoing COVID-19 pandemic, whenever that might be.