02/04/14 — Deal: Hospital, BCBS now have an agreement

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Deal: Hospital, BCBS now have an agreement

By Matthew Whittle
Published in News on February 4, 2014 1:46 PM

News-Argus file photo

Wayne Memorial Hospital

After more than 18 months of active negotiations and nearly two months with no contract, officials with Wayne Memorial Hospital and Blue Cross and Blue Shield of North Carolina finally reached an agreement on a new, three-year contract.

The contract, which was signed Monday night, will allow Blue Cross customers to immediately resume receiving in-network care at the hospital.

"What we're all about here is trying to provide quality care to the people of Wayne County, and this allows us to put our full focus and attention back on that," WMH CEO Bill Paugh said this morning. "It was a long and arduous process, and I don't think each side ended up with everything they wanted when we started negotiations, but that's how negotiations work."

The negotiations, which were acrimonious at times and included a complaint filed by the hospital with the state Department of Insurance that ultimately was dismissed, focused on Blue Cross' allowable rates.

The insurance carrier, which was primarily concerned with out-patient procedures, accused the hospital of having allowable rates many times higher than its peer institutions. Blue Cross also was concerned about language in its original contract with Wayne Memorial -- which had been in effect since 1995 -- that set those allowable rates as a fixed percentage of the total charge, which meant that as the hospital's board of directors adjusted its fee schedule, those allowable rates also would increase.

To protect itself -- and its customers -- from what it called unilateral increases, the insurance carrier then sought a new contract that would fix its allowable rates over a certain amount of time, regardless of whether the base charges increased or not.

The hospital, however, said such a contract would threaten its long-term ability to expand and improve its facilities and services -- hurting its ability to provide quality care to county residents.

During the course of the negotiations, the two sides moved closer together, coming up with a blended rate schedule that would include both in-patient and out-patient procedures, rather than treating them separately -- one reason hospital officials said the two sides had ultimately found themselves at odds.

The primary sticking point, though, for the last two months -- and what had ultimately led Blue Cross to cancel the contract and to push Wayne Memorial out of network on Dec. 5 -- was how much revenue reduction the hospital should accept. According to hospital officials, they were willing to give up about $1 million a year over the three-year contract, while Blue Cross was looking for something closer to $3 million a year.

Today, though, neither side would discuss the details of the contract.

"It reflects our best and final offer," BCBS spokesman Lew Borman said this morning.

What both sides did say, though, was that the three-year length, which Borman said is standard for such contracts, should provide some stability for all parties -- the hospital, the insurer and the patients.

"We appreciate the community's patience while we worked to gain agreement on a new contract. These efforts reflect BCBSNC's commitment to keep health care as affordable as it can be for our customers, while working to support independent community hospitals," BCBSNC CEO Brad Wilson said.

Most important for the hospital, Paugh said, is that while this new contract does require some revenue reduction, it also includes some protections against health care cost inflation.

"It allows us to stay on the leading edge of health care and to be able to have the money available to do the things we need to do," he said. "This allows us to move forward."

Paugh also said that he does not believe that Wayne Memorial and Blue Cross will reach this point again at the end of this new contract.

"I certainly would hope we would not be in this situation again. We'll be sharing information with Blue Cross about our plans, and getting information from them about what they want," he said. "But this isn't really just between Wayne Memorial and Blue Cross. It's about planning for the future. It's about working with all our third-party payers, the large employers and the community.

"Health care is changing from the fee-for-service model to managing population health. That's a whole new game."

In the meantime, though, Paugh also noted that for those people who received out-of-network care at the hospital during December and January, the hospital would be working with Blue Cross to make dealing with those bills as easy as possible. Already, the hospital had pledged to treat those patients and their costs as if they were in-network, but now Paugh said they are working to make the paperwork as simple as possible.