Blue Shield, Sutter Health dispute doesn’t immediately affect plan members

For the next few months, health plan members affected by a contract dispute may continue to see their Sutter Gould doctors while Blue Shield of California and Sacramento-based Sutter Health battle over reimbursements.

A previous contract expired Dec. 31 after Blue Shield and Sutter did not agree to terms of a new pact. Blue Shield is sending letters to 280,000 members in the Northern San Joaquin Valley, Sacramento region and Bay Area, explaining that the cancellation does not immediately affect them.

Families and individuals with Blue Shield HMO coverage may continue to use Sutter-affiliated clinics and hospitals in Stanislaus, San Joaquin and Merced counties until March 31. The insurer said health maintenance organization members will be assigned to new providers April 1 if there still is no agreement between Blue Shield and Sutter, which continue to negotiate.

A six-month transition period allows people with PPO plans, including the Blue Shield products through Covered California, to access care from Sutter facilities until June 30. Blue Shield suggested that Sutter will charge higher rates during that period because of the cancellation, which will increase out-of-pocket expenses.

Members with preferred provider organization coverage using Sutter facilities after June 30 will pay out-of-network costs if the talks do not result in a new contract. In the Northern San Joaquin Valley, Sutter facilities include Memorial Medical Center of Modesto, Sutter Gould Medical Foundation clinics, Sutter Tracy Community Hospital and Memorial Hospital Los Banos.

Blue Shield blames Sutter for the impasse, charging it has a history of driving up health care costs. According to Blue Shield, Sutter has controlled markets in Northern California by acquiring competing medical groups, hospitals and outpatient surgical centers. The average cost of hospital care at Sutter facilities increased 166 percent from 2001 to 2013, Blue Shield said.

The insurer claimed that Sutter wants a contract provision to settle disputes through arbitration, as protection against lawsuits over anti-competitive business practices.

Bill Gleeson, a Sutter spokesman in Sacramento, countered that Blue Shield is demanding significant cuts in the reimbursements paid to Sutter doctors and hospitals for patient care.

“The cuts are significant enough (that) it would have a devastating impact on Sutter Health’s ability to meet our patients’ medical needs,” Gleeson said. “This is about a very large and powerful health insurance company trying to cut back on the money it spends on actual patient care.”

The spokesman said Sutter wants to continue to be part of Blue Shield’s network of providers, and included some cost reductions in a recent proposal, but it needs a fair agreement with the insurer.

Gleeson said Blue Shield was using its network arrangements with Sutter doctors and hospitals as a selling point for its health plans on the Covered California exchange but now is telling enrollees they will have to use other providers.

The spokesman said Blue Shield’s complaint about the arbitration provision is a red herring. The previous contract called for arbitration to settle disputes, Gleeson said.

Blue Shield noted that California’s attorney general has investigated whether Sutter has inflated health care prices, but other hospital groups were included in the probe launched in late 2011.

The United Food and Commercial Workers Union, and its employers benefit trust, charged in a lawsuit last year that Sutter’s business practices violate antitrust laws and constitute unfair competition. Blue Shield claims Sutter has tried to move the San Francisco Superior Court case into private arbitration.

This story was originally published January 9, 2015 at 2:50 PM with the headline "Blue Shield, Sutter Health dispute doesn’t immediately affect plan members."