Prime Healthcare hospitals cut ties with UnitedHealthcare, citing low reimbursement

Unitedhealth group Stock Photos & Royalty-Free Images | Depositphotos

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.


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.”


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.

Hospitals projected to lose $54 billion in net income this year

Hospitals and Health Systems Projected to Lose About $54B in Net Income in  2021 | HealthLeaders Media

Higher expenses for labor, drugs and supplies as well as a continuation of delayed care during the ongoing COVID-19 pandemic is projected to cost hospitals an estimated $54 billion in net income over the course of this year, according to a new Kaufman Hall analysis released by the American Hospital Association.

Hospitals and health systems are seeing sicker patients, the report said. This includes COVID-19 patients and patients who put off care during the pandemic. They are requiring longer lengths of stay and more services than prior to the pandemic in 2019, the report said.

The seven-day average of new hospital admissions of patients with COVID-19 has increased 488%, from 1,900 on June 19 to 11,168 on September 14, the report said, citing recent data from the Centers for Disease Control and Prevention.

Many hospitals are also reportedly spending a lot more on staffing, paying for contract or travel nurses due to shortages.


The report projects hospitals nationwide will lose an estimated $54 billion in net income over the course of the year, even after taking into account federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding from last year

If there were no relief funds from the federal government, losses in net income would be as high as $92 billion. 

However, the AHA said, the uncertain trajectory of the Delta and Mu variants in the U.S. this fall could result in even greater financial uncertainty for hospitals.

Despite the recent announcement of additional provider relief funds, none have yet to be allocated or distributed, the AHA said. 


This latest analysis incorporates actual hospital performance data in the first and second quarters of this year, from before the latest surge. Projections were then made for the remainder of 2021 based on this data.

Based on the analysis, median hospital margins are projected to be 11% below pre-pandemic levels by year’s end. More than a third of hospitals are expected to end 2021 with negative margins.

Many hospitals were financially challenged and already operating in the red heading into the COVID-19 pandemic, the AHA said last year.

CARES Act funding helped hospitals and health systems, but covered only a portion of the more than $323 billion in losses hospitals were expected to have in 2020. 

The government allocated a total of $175 billion in relief funds to providers.


“America’s hospitals and health systems continue to face significant, ongoing instability and strain as the COVID-19 pandemic endures and spreads,” said AHA President and CEO Rick Pollack. “With cases and hospitalizations at elevated levels again due to the rapid spread of the Delta variant, physicians, nurses and other hospital caregivers and personnel are working tirelessly to care for COVID-19 patients and all others who need care. At the same time, hospitals are experiencing profound headwinds that will continue throughout the rest of 2021.”

CommonSpirit’s net income jumps to $5.5B in 2021, reversing major COVID-19 loss

Dive Brief:

  • Nonprofit hospital giant CommonSpirit Health reported a better operating performance in its 2021 fiscal year than in 2020, but said in financial results released Friday it expects COVID-19 to continue to pressure its operations in the coming year.
  • The Chicago-based Catholic system reported operating income of $998 million for its fiscal year ended June 30, compared to an operating loss of $550 million the year prior.
  • However, excluding federal relief funds from the Coronavirus Aid, Relief, and Economic Security Act passed last March and a sale of part of its stake in an unnamed joint venture, the system would be posting an operating loss of $215 million.

Dive Insight:

It’s CommonSpirit’s second full fiscal year as a a combined organization after the merger of Dignity Health and CHI was completed in February 2019. The marriage resulted in the largest nonprofit system in the U.S., with 140 hospitals and roughly 1,500 sites across 21 states.

However, that scale didn’t protect CommonSpirit from being slammed by the pandemic’s financial effects in 2020, as lower admissions, badly performing investments and higher charity and uncompensated care expenses severely depressed its bottom line.

Though many COVID-19 headwinds continued into its 2021 fiscal year, returning patients, stronger investment performance and cost reduction initiatives helped CommonSpirit to net income of $5.5 billion for the year, compared to its steep loss of $524 million in 2020.

CommonSpirit’s revenues rose more than 12% compared to the 2020 fiscal year, mostly due to recovering patient volume and the addition of new care sites, including Virginia Mason Health System in the Pacific Northwest and Yavapai Regional Medical Center in Arizona, and expanded ambulatory surgical center relationships in several states.

Expenses were also up by 7% year over year mostly due to “significant” pandemic-related expenses, CommonSpirit said in its release on the results.

However, the higher costs were offset by cost management, including more than $400 million in cost reductions in the fiscal year. And, due to stronger financial markets, the system’s balance sheet was also boosted by $3.4 billion in investment income.

But despite the turnaround, CommonSpirit management warned COVID-19 is still likely to dog the system’s performance as it enters its third fiscal year as a combined entity.

The recent surge in patients due to the rise of the highly infectious delta variant caused the system’s COVID-19 inpatient census to jump to almost 2,900 in early September. That’s up from a low of 340 in June, though still significantly lower than CommonSpirit’s previous peak of more than 4,100 COVID-19 inpatients recorded in early January.

Amid the rising cases, the system said it’s emphasizing employee retention as staffing shortages, especially acute among nurses, continue to stress providers nationwide.

CommonSpirit noted it doesn’t expect personal protective equipment or ventilator availability to be a problem, despite increasingly taxed capacity and rising need in the U.S.

Like other providers, the nonprofit operator reported it saw patients begin to return for preventative and delayed care throughout the fiscal year, though that return decelerated in tandem with escalating COVID-19 cases.

Same-facility adjusted admissions dropped 2.7% year over year, while outpatient visits rose 5.1% overall.

Additionally, demand for virtual visits has remained strong even as in-office volumes have recovered. Telehealth use has stabilized at roughly 13% of overall volumes, CommonSpirit said, though that’s down from a high of more than 37% notched in April of last year.

Net patient and premium revenues jumped more than 10% year over year due to higher patient acuity, the YRMC and VMHS affliliations and stable payer mix, CommonSpirit said. Those tailwinds were partly offset by volume shortfalls due to the pandemic.

CommonSpirit, which said it was still on track to achieve the cost-savings goals outlined in CHI and Dignity’s 2019 merger plans, expects to release a new five-year strategic roadmap in the fall.

Kaiser Permanente union in California nearing strike

Dive Brief:

  • A union representing 24,000 Kaiser Permanente clinicians in California has put a pause on its 24-year partnership with management, the group said Friday.
  • Leadership of the union voted last week to move forward with a membership vote that would authorize the bargaining team to call a strike.
  • The United Nurses Associations of California/Union of Health Care Professionals said in a press release Kaiser Permanente is planning “hefty cuts” to nurse wages and benefits despite the ongoing COVID-19 pandemic and high levels of burnout among nurses.

Dive Insight:

Union activity at hospitals has been ramping up since the onset of the pandemic, as front-line healthcare workers have been stretched to the brink with full ICUs, worries of infection and sick coworkers.

Now, Kaiser Permanente nurses in California are saying they’re not being appreciated for their efforts.

“How do you tell caregivers in one breath you’re our heroes, we’re invested in you, I want to protect you, but in the next say I want to take away your wages and benefits? Even say you’re a drag on our bottom line,” Charmaine Morales, executive vice president of the union, said in a press release. “For the first time in 26 years, we could be facing a strike.”

The most recent bargaining session between the health system and the union was Sept. 10. Another one hasn’t been scheduled, despite most contracts being set to expire at the end of the month, the union said.

The labor management partnership started in the 1990s as an attempt for the union and management to share information and decision-making, the union said.

But they also said company leaders have not been invested in the agreement recently.

“Kaiser Permanente has stepped back from the principles of partnership for some time now, and they have violated the letter of our partnership agreement in the lead up to our present negotiations,” union president Denise Duncan said in the press release. “Despite that, we are here and ready to collaborate again if KP leaders find their way back to the path — where patient care is the true north in our value compass, and everything else falls in line behind that principle. Patient care is Kaiser Permanente’s core business, or at least we thought so.”

The press release cites Kaiser’s profitability, as the system’s net income was nearly $3 billion in the second quarter of this year. However, that was a decrease of more than a third from the prior-year period.

It also noted multiple lawsuits alleging Kaiser tried to game the Medicare Advantage program by submitting inaccurate diagnosis codes. The Department of Justice has joined six of those lawsuits.

Kaiser Permanente did not respond to a request for comment by time of publication.

Labor Shortage extends beyond Nursing, beyond Hospitals

How Could You Be Affected by the Healthcare Labor Shortage? - Right Way  Medical

The typical media coverage of the healthcare workforce crisis often focuses on the acute shortage of hospital-based nurses. For instance, the hospital forced to close a unit as nurses, burned out after 18 months of extra shifts taking care of COVID patients, leave for lower-stress, more predictable jobs in outpatient facilities or doctors’ offices.

But we’re hearing about a reverse trend in recent conversations with health system leaders. Instead of outpatient settings benefiting from an influx of nursing talent, ambulatory leaders report that nurses are now leaving for hospital or travel nursing positions that offer higher salaries and large sign-on bonuses. That’s forcing non-hospital settings to reduce operating room and endoscopy capacity.

Nor are shortages just in the nursing workforce. One system executive lamented that they had to cancel several non-emergent cardiac surgeries, not due to nurse staffing challenges; rather, they were short on surgical technicians. “Surgical techs aren’t leaving because of COVID,” the executive shared, “they’re leaving because the labor market is so strong, and they can make the same money doing something entirely different.” 

For lower-wage workers in particular, the old value proposition of working for a health system, centered around good benefits, continuing education, and a long-term career path, isn’t providing the boost it used to. Workers are willing to trade those for improved work-life balance, predictability, and the perception of a “safer” workplace.

Stabilizing the healthcare workforce will ultimately require providers to rethink job design, the allocation of talent across settings of care, and the integration of technology in workflow. And it will require re-anchoring the work in the mission of serving the community.

But in the short term, many health systems will find themselves having to pay more to retain key workers, including but not limited to hospital nurses, to maintain patient access to care. 

A bidding war for critical nursing talent

As the pandemic rages on, hospitals across the country are experiencing significant labor shortages for critical clinical roles. In the graphic above, we highlight the shortage of nursing talent, perhaps the most sought-after role for which health systems are struggling to hire.

Even before the current COVID surge, many nurses reported feeling dissatisfied or feeling burned out. In a May 2021 survey, more than one in five nurses said they were considering leaving their current jobs, citing insufficient staffing, workload, and the emotional toll of the work. Many health systems are offering lucrative incentives, such as five-figure signing bonuses, to fill immediate critical care needs, and to address the growing backlog of patients returning for delayed care.

As more nurses quit or retire from their permanent positions, health systems are being forced to fill workforce gaps by luring temporary talent at much higher costs (now cresting $8K a week to fund a single travel nurse in some parts of the country). Travel nurse demand reached an all-time high in August, up almost 40 percent from the previous peak in December 2020. As they struggle to fill essential openings, hospital leaders must also focus on keeping the current nursing staff engaged—a challenge that only gets harder as staff nurses compare their salaries to those paid to the temporary colleagues working alongside them.

Industry pushes for more time before surprise billing ban enforced

As the healthcare industry gears up to fall under the requirements of the No Surprises Act that bans balance billing, hospitals and insurers said they need more time and information to abide by the requirements.

Payers are asking for a safe harbor until 2023 calling the Jan. 1 start day is too soon for plans to determine payment amounts to out-of-network providers and as it seeks clarification on the resolution process.

Safety net hospitals represented by America’s Essential Hospitals want implementation to be delayed until six months after the public health emergency for COVID-19 ends, saying staff and resources are spread too thin dealing with the pandemic and especially the spread of the delta variant.

HHS released the first interim final rule to implement the No Surprises Act in June — one of multiple expected to be released this year — including those from the Departments of Treasury and Labor.

A major and much-debated aspect of the law is how qualifying payment amounts — the amount paid to providers who are not in network but are providing care at an in-network facility — are calculated.

Later rules are expected to provide more detail on the key issue of how the independent dispute resolution process will be conducted.

Payers and providers both argued in their comments that without more information on that process, it is hard to prepare. 

The ERISA Industry Committee, which lobbies for large employers, said that as the resolution process is developed, deviation from QPAs “should be limited to extenuating circumstances.” That’s in direct contrast to the American Hospital Association, which requested the department not overly weigh the QPA as a factor in consideration.

When Congress debated a ban on surprise billing, whether a dispute resolution process would be used or whether rates for out-of-network providers would be based on a set rate was perhaps the most hotly contested aspect. In the end, providers got the win with the arbitration clause.

In comments on the rule, both AHA and payer lobby AHIP called for a multi-stakeholder group to advise on issues such as what provisions fall under state and federal jurisdiction and other operational challenges.

The hospital lobby requested clarification on a number of aspects of the rule, such as how good faith estimates of costs should be calculated on consent forms patients may sign to waive balance billing protections and when a provider can bill a patient if their claim is denied by the plan.

In multiple instances, the group asked the department to confirm that the initial payment should not be the QPA unless both the plan and provider agree to that circumstance.

The country’s largest hospital lobby is also concerned that the act won’t do enough to ensure network adequacy from insurers and will not institute enough oversight on plans’ compliance.

AHA said it is “deeply concerned that the existing oversight mechanisms are insufficient to monitor plan and issuer behavior and a more robust structure is needed to enforce the QPA requirements.”

The Federation of American Hospitals expressed similar concerns, particular regarding “abusive plan practices” like inappropriate claims denials and downcoding. The group urged the departments “to expand their oversight of plans and issuers to prevent and address unlawful and abusive plan practices.”

AEH, meanwhile, asked for assurances that administrative burdens like the notice and consent documentation would be fairly split with insurers.

Under the rule, the QPA is to be decided by a plan’s median in-network contracted rate for a geographic area. It must have a minimum of three contracted rates to use this method. If that is not available, the payer can use an independent claims database.

FAH, in particular, asked that the rule strengthen conflict of interest regulations for these databases and have their eligibility determined by the departments instead of the insurers themselves.

AHIP’s most immediate concern is the timeline for implementation. It asked for the good faith safe harbor request to develop QPA methodologies, create the infrastructure to transmit notice and consent forms with providers and for it to receive the forthcoming information on the arbitration process.

“Health plans and issuers have responsibility for developing work streams; updating information technology; creating forms, notices, and other communications; training employees; and other operational measures necessary to effectuate obligations” in the rule, the group wrote.

The 7 Stages of Severe Covid-19

67 financial benchmarks for health system executives

35 financial benchmarks for healthcare executives | HENRY KOTULA

Health system leaders use benchmarking as a way to determine how their organizations stack up against both local and regional peers.

Below are 67 financial benchmarks, including key ratios for health systems, as well as revenue and margin metrics, broken down by rating category.

Key balance sheet metrics, ratios:

Source: Fitch Ratings’ “2021 Median Ratios: Not-for-Profit Hospitals and Healthcare Systems” report. It was released Aug. 3. 

1. Cash on hand: 255 days

2. Accounts receivable: 44.6 days

3. Cushion ratio: 29x

4. Current liabilities: 95 days

5. Cash to debt: 169.9 percent

6. Cash to adjusted debt: 161.1 percent

7. Operating margin: 1.3 percent

8. Operating EBITDA margin: 6.7 percent

9. Excess margin: 3.1 percent

10. EBITDA margin: 8.5 percent

11. Net adjusted debt to adjusted EBITDA: -2.6 percent

12. Personnel costs as percent of total operating revenue: 55 percent

13. EBITDA debt service coverage: 3.9x

14. Operating EBITDA debt service coverage: 3.2x

15. Maximum annual debt service as percent of revenues: 2.2 percent

16. Debt to EBITDA ratio: 4.4x

17. Debt to capitalization: 35.2 percent

18. Average age of plant: 11.4 years

19. Capital expenditures as percent of depreciation expense: 110.1 percent

Margins, revenue financial benchmarks broken down by rating category: 

Source: S&P Global Ratings “U.S. Not-For-Profit Health Care System Median Financial Ratios — 2019 vs. 2021″ report.” The report was released Aug. 30.

“AA+” rating

20. Net patient service revenue: $4.16 billion

21. Total operating revenue: $4.43 billion

22. Operating margin: 4.5 percent

23. Operating EBIDA margin: 11.3 percent

24. Excess margin: 5.5 percent

25. EBIDA margin: 12.2 percent

“AA” rating

26. Net patient service revenue: $3.98 billion

27. Total operating revenue: $4.95 billion

28. Operating margin: 3.2 percent

29. Operating EBIDA margin: 8.3 percent

30. Excess margin: 5.8 percent

31. EBIDA margin: 10.7 percent

“AA-” rating

32. Net patient service revenue: $3.08 billion

33. Total operating revenue: $3.41 billion

34. Operating margin: 1.9 percent

35. Operating EBIDA margin: 7.1 percent

36. Excess margin: 4.1 percent

37. EBIDA margin: 9.2 percent

“A+” rating

38. Net patient service revenue: $2.26 billion

39. Total operating revenue: $2.55 billion

40. Operating margin: 3 percent

41. Operating EBIDA margin: 7.1 percent

42. Excess margin: 5.5 percent

43. EBIDA margin: 10.9 percent

“A” rating

44. Net patient service revenue: $2.69 billion

45. Total operating revenue: $3.07 billion

46. Operating margin: 0.7 percent

47. Operating EBIDA margin: 6.6 percent

48. Excess margin: 5.5 percent

49. EBIDA margin: 2.3 percent

“A-” rating

50. Net patient service revenue: $2.08 billion

51. Total operating revenue: $2.69 billion

52. Operating margin: 0.6 percent

53. Operating EBIDA margin: 6.7 percent

54. Excess margin: 2.4 percent

55. EBIDA margin: 8 percent

“BBB+” rating

56. Net patient service revenue: $1.85 billion

57. Total operating revenue: $2.27 billion

58. Operating margin: -0.2 percent

59. Operating EBIDA margin: 5 percent

60. Excess margin: 0.5 percent

61. EBIDA margin: 6 percent

“BBB” rating

62. Net patient service revenue: $2.96 billion

63. Total operating revenue: $4.11 billion

64. Operating margin: -3.2 percent

65. Operating EBIDA margin: 1.6 percent

66. Excess margin: -2 percent

67. EBIDA margin: 2.8 percent