Patients Caught In Crossfire Between Giant Hospital Chain, Large Insurer

Patients Caught In Crossfire Between Giant Hospital Chain, Large Insurer

After Zoe Friedland became pregnant with her first child, she was picky about choosing a doctor to guide her through delivery.

“With so many unpredictable things that can happen with a pregnancy, I wanted someone I could trust,” Friedland said. That person also had to be in the health insurance network of Cigna, the insurer that covers Friedland through her husband’s employer.

Friedland found an OB-GYN she liked, who told her that she delivered only at Sequoia Hospital in Redwood City, California, a part of San Francisco-based Dignity Health. Friedland and her husband, Bert Kaufman, live in Menlo Park, about 5 miles from the hospital, so that was not a problem for them — until Dec. 12.

That’s the day Friedland and Kaufman received a letter from Cigna informing them their care at Sequoia might not be covered after Jan. 1. The insurance company had not signed a contract for 2020 with the hospital operator, which meant Sequoia and many other Dignity medical facilities around the state would no longer be in Cigna’s network in the new year.

Suddenly, it looked as if having their first baby at Sequoia could cost Friedland and Kaufman tens of thousands of dollars.

“I was honestly shocked that this could even happen because it hadn’t entered my mind as a possibility,” Friedland said.

She and her husband are among an estimated 16,600 people caught in a financial dispute between two gigantic health care companies. Cigna is one of the largest health insurance companies in the nation, and Dignity Health has 31 hospitals in California, as well as seven in Arizona and three in Nevada. The contract fight affects Dignity’s California and Nevada hospitals, but not the ones in Arizona.

“The problem is price,” Cigna said in a statement just before the old contract expired on Dec. 31. “Dignity thinks that Cigna customers should pay substantially more than what is normal in the region, and we think that’s just wrong.”

Tammy Wilcox, a senior vice president at Dignity, said, “At a time when many nonprofit community hospitals are struggling, Cigna is making billions of dollars in profits each year. Yet Cigna is demanding that it pay local hospitals even less.”

In 2018, the most recent full year for which earnings data is available, Cigna generated operating income of $3.6 billion on revenue of approximately $48 billion. Dignity Health reported operating income of $529 million on revenue of $14.2 billion in its 2018 fiscal year.

It’s possible Cigna and Dignity can still reach an agreement. Both sides said they will keep trying, though no talks are scheduled.

Disagreements between insurers and health systems that leave patients stranded are a perennial problem in U.S. health care. Glenn Melnick, a professor of health economics at the University of Southern California, said such disputes, which are disruptive to consumers, are often settled.

Melnick believes Dignity is using an “all or nothing” strategy in contract negotiations, meaning either all its facilities are in the insurer’s network or none are.

“This allows them to increase their market power to get higher prices, which is not necessarily good for consumers,” Melnick said.

Dignity replied in an emailed statement: “We do not require payers to contract with all or none of Dignity Health’s providers. We do try to make sure patients have access to the full range of Dignity Health services and facilities in each of our communities.”

Dignity faces a number of legal and financial challenges while it works to implement a February 2019 merger with Englewood, Colorado-based Catholic Health Initiatives that created one of the nation’s largest Catholic hospital systems — known as CommonSpirit Health.

California Attorney General Xavier Becerra approved the deal with conditions, including that Dignity’s California hospitals spend $10 million in the first three years on services for people experiencing homelessness and offer free care to more low-income patients.

The requirement to treat more poor patients at no charge followed a period, from 2011 to 2016, in which Dignity’s charity care declined about 35% while its net income was $3.2 billion.

Last October, CommonSpirit announced an operating loss of $582 million on revenue of nearly $29 billion for the 2019 fiscal year, its first annual financial statement after the merger took effect. Much of the loss was due to merger-related costs and special charges.

The same month, Dignity completed a five-year “corporate integrity agreement” with the U.S. Office of the Inspector General following an investigation into how it billed the government for hospital inpatient stays. Dignity said it “fully complied” with the agreement.

Dignity is also defending itself in a class-action lawsuit alleging that it bills uninsured patients at grossly inflated rates even though it claims to provide “affordable” care at “the lowest possible cost.”

More recently, an appeals court judge ruled Dignity could not charge higher prices — often a lot higher than state-set rates — for treating enrollees of L.A. Care’s Medi-Cal health plan at its Northridge Hospital Medical Center.

Dignity disagreed with the court’s ruling in that case, saying that although the Northridge facility did not have a contract with L.A. Care, many of the health plan’s enrollees who initially sought emergency treatment there stayed in the hospital for additional care after they had been stabilized. The hospital “seeks appropriate reimbursement for providing this care,” Dignity said.

If Dignity does not reach an agreement with Cigna, its hospitals, outpatient surgery centers and medical groups in most of California will soon be out-of-network for many Cigna enrollees. In-network coverage for Open Access (OAP) and Preferred Provider (PPO) ended Feb. 1, and for HMO patients it is set to end April 1.

Peter Welch, president and general manager for Cigna in Northern California and the Pacific Northwest, said Cigna can provide “adequate access” to other hospitals and doctors.

Certain Cigna enrollees can apply to continue visiting Dignity facilities and doctors under California’s Continuity of Care law, enacted in 2014. Eligible enrollees include patients with chronic conditions, those already scheduled for pre-authorized services, people in need of emergency care and pregnant women in their third trimester.

Friedland and Kaufman applied, hoping she would be able to continue seeing her Dignity-affiliated OB-GYN at in-network rates.

On Jan. 22, less than a month from Friedland’s Feb. 15 due date, they received written confirmation that their request had been approved. They wouldn’t have to shop for a new doctor or face stiff medical bills after all.

Early Tuesday evening, Friedland gave birth to a baby girl, Eliza, who entered the world 11 days earlier than expected, weighing in at 7 pounds, 3 ounces.

“While the ordeal was stressful, and the communication fraught, we were happy to receive confirmation of continuity of care and that it ended in the best possible way — with the birth of our healthy baby daughter with the provider where we established care,” Kaufman said. “For the sake of those caught in the middle and now having to start relationships with new health care providers, we hope the two sides can come to an agreement.”




Feds owe health insurers $1.6 billion in unpaid subsidies, judge rules

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A federal judge this week ordered HHS to pay about 100 health insurance plans a total of $1.6 billion in unpaid subsidies.

While the federal government will likely appeal the case, the judgment illustrates the sheer magnitude of the funds the Trump administration could be forced to pay.

The insurers are part of a class action brought by Wisconsin-based Common Ground Healthcare Cooperative, which challenged the federal government’s failure to pay cost-sharing reduction subsidies that were intended to lower healthcare costs for certain people who bought coverage on the Affordable Care Act exchanges.

The amounts owed to each insurer range from tens of thousands to hundreds of millions of dollars. Kaiser Foundation Health Plan is owed the largest amount—$220.3 million for 2017 and 2018 across its plans in several states, according to Modern Healthcare’s analysis of damages outlined in the order.

The federal government owes $159 million to Blue Shield of California and $132.1 million to Blue Cross and Blue Shield of South Carolina to make up for the unpaid cost-sharing reduction subsidies. Utah-based SelectHealth, Dayton, Ohio-based CareSource and Oscar Health, headquartered in New York, are also owed some of the largest amounts.

Judge Margaret Sweeney in the U.S. Court of Federal Claims in February 2019 ruled in favor of Common Ground and other insurers that brought similar lawsuits, finding that the government violated its obligation to pay the cost-sharing reduction subsidies when the Trump administration abruptly cut them off at the end of 2017. The government argued that Congress never appropriated the payments.

Insurers responded by hiking premiums to make up for the absence of those subsidies. Because of the way ACA premium tax credits are structured, the federal government ended up paying higher premium tax credits as a result.

But Sweeney said the lack of an appropriation and the insurers’ strategy for mitigating the loss of the cost-sharing reduction subsidies by hiking premiums doesn’t get rid of the government’s liability. Sweeney ordered the insurers to file a report indicating the amounts they each were owed for 2017 and 2018 and entered judgment on the claims on Tuesday.

Katie Keith, a health law professor at Georgetown University and ACA expert, said the judgment, while big, is less than the $2.4 billion that insurers initially estimated they were owed.

Nicholas Bagley, law professor at the University of Michigan Law School, said the government will likely appeal now that a judgment has been entered; the merits of that appeal will likely be resolved by some consolidated cases related to the cost-sharing reduction payments already pending in the U.S. Court of Appeals for the Federal Circuit, which has not yet set a date for oral arguments.



Sutter Health faces class-action lawsuit over pricing: 4 things to know

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A class-action lawsuit alleging Sutter Health violated California’s antitrust laws by using its market power to overcharge patients is slated to open Sept. 23, according to the Los Angeles Times.

Four things to know:

1. The lawsuit dates back to 2014. Self-funded employers and union trusts initially filed the case, which was later joined with a lawsuit brought in 2018 by California’s attorney general.

2. In March, California Attorney General Xavier Becerra said a six-year investigation revealed Sutter restricted health insurers from providing consumers with more low-cost health plan options, and the health system set excessively high out-of-network prices. Sutter also allegedly restricted publication of provider cost information, which impeded transparency.

3. Sutter could be liable for as much as $2.7 billion. The plaintiffs are seeking up to $900 million in damages, and that amount can be tripled under California’s antitrust law, according to the Los Angeles Times.

4. Sutter denies the allegations. Regarding the lawsuit, a health system spokesperson released the following statement to the Los Angeles Times:

“This lawsuit irresponsibly targets Sutter’s integrated system of hospitals, clinics, urgent care centers and affiliated doctors serving millions of patients throughout Northern California. While insurance companies want to sell narrow networks to employers, integrated networks like Sutter’s benefit patient care and experience, which leads to greater patient choice and reduces surprise out-of-network bills to our patients.”

Access the full Los Angeles Times article here.