Contract standoffs between hospital systems and health insurers typically have a way of being resolved — often right before a deadline.
But high-stakes negotiations between Grady Health System and Georgia’s biggest insurer failed to produce a new contract before the midnight deadline Sunday.
That means Grady Memorial Hospital is now “out of network” for Blue Cross and Blue Shield of Georgia members. Patients with Blue Cross insurance will face higher out-of-pocket costs at the Atlanta hospital and its clinics.
Both Grady and Blue Cross expressed disappointment that a deal was not reached. Contract negotiations had been under way for a year.
Grady recently had launched a publicity campaign to call attention to low reimbursements from Blue Cross, saying those payments were lower than the insurer’s rates for other comparable hospitals in Atlanta and throughout the state.
Lindsay Caulfield, senior vice president of public affairs at Grady, said in a statement Monday that Blue Cross “pays our health system up to 70 percent less than it pays other Georgia hospitals. By paying us unfairly low rates, Blue Cross Blue Shield has long put Grady at a disadvantage and threatens our long-term sustainability.”
Grady proposed several compromise plans, Caulfield said, “but Blue Cross continually refused to move in their position in any meaningful way.”
Employer groups with Blue Cross insurance include two of Georgia’s largest county governments, DeKalb and Fulton, as well as the State Health Benefit Plan, Grady said.
Blue Cross and Blue Shield’s president, Morgan Kendrick, told GHN on Monday that the insurer had been paying Grady fairly and that “we offered substantial increases” in the negotiations.
“We put a progressive, lucrative offer on the table,’’ he said. “Our intent all along is not to underpay Grady.’’
“We’ve been fans of Grady for a long time,’’ Kendrick added. He said the health system had sought a wholesale shift in the way it was being paid, and sent a contract termination letter to Blue Cross.
Grady has said previously that it lost money when it treated most Blue Cross and Blue Shield of Georgia patients under the former contract.
What happens now?
The end of the contract affects Grady’s hospital and other facilities, but not its physicians.
Emergency room visits are always covered by insurance, though there may be some higher co-insurance costs for consumers if the hospital is out of network.
Health care consultant Dave Smith told GHN on Monday that he was surprised a deal had not been worked out. “Usually they go down to the eleventh hour and then get resolved,” said Smith, of Kearny Street Consulting.
Blue Cross has ratcheted down payments to hospitals or has not allowed rate increases, said Smith.
Meanwhile, the market dynamic currently includes hospitals expanding their facilities, and physicians and nurses looking for more compensation, Smith said. On the other side, he said, “Blue Cross is trying to keep a lid on this,’’ as employers and workers are seeing premium increases from insurers.
The lack of an agreement will affect Blue Cross in trauma services, where Grady has a strong profile, Smith said.
But he added that he believes the two sides will eventually reach a new deal. “It’s going to be very difficult for any hospital not to have the largest payer in the state,’’ he said.
The newly expired Grady contract with Blue Cross had been in place since 2012. Under it, Blue Cross was the biggest commercial insurer for Grady. Still, private insurance accounted for just 11 percent of the system’s revenue during that time.
About 75 percent of Grady’s patients enter the hospital through the emergency department. Grady CEO John Haupert told GHN recently that managed care companies sometimes have trouble understanding the fixed costs that go into treating trauma, burn and stroke patients.
“We’re pushing [Blue Cross] to make up for years of lost ground,’’ he said in the interview.