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Disputes like Integris/Blue Cross contract become 'game of chicken,' expert says

Oklahoma City — Blue Cross and Blue Shield of Oklahoma and Integris are in a deadlock over whether all BCBS's customers should have an in-network doctor — and whether BCBS can charge Integris if they don't.

The state's largest health insurer and its biggest hospital system have until Aug. 31 to reach an agreement, or the hospitals no longer will be in BCBSOK's network. If they can't agree, patients with BCBSOK insurance would have to either choose a different hospital or pay a higher rate for using an out-of-network hospital.

Integris had requested a 3 percent rate increase, which it said was necessary to keep up with the rising cost of providing care. Both Integris and BCBSOK say that the primary issue in this case wasn't rates, however, but out-of-network doctors.

Insurers set up networks of hospitals and providers who agree to accept a certain rate in exchange for the insurance company steering its customers there, said Lawton Robert Burns, a professor of health care management at the University of Pennsylvania. Providers who decide not to join a network can charge what they wish, but tend to get fewer patients from that insurer, he said.

“You're trading off volume for dollars,” he said.

Patients typically pay a higher co-pay if they see an out-of-network doctor, though some doctors will waive that fee, Burns said. Insurers almost always will pay more to an out-of-network doctor, so they look there to trim costs, he said.

In the contract with Integris, BCBSOK wanted language requiring in-network doctors to treat BCBS patients. The language was meant to protect patients from surprise medical bills, BCBSOK spokeswoman Catherine Divis said, because patients sometimes go to the emergency room of an in-network hospital and get hit with a bill for an out-of-network doctor.

“At this time, Integris is unwilling to provide our members with this protection,” a BCBSOK statement said.

Integris spokeswoman Brooke Cayot countered that BCBSOK had demanded the hospitals reimburse them for the extra charges if patients saw an out-of-network doctor, which would effectively force them to stop using doctors who don't sign with BCBSOK. It also asked for more than 100 other changes to the current contract, she said.

“Because BCBSOK has hundreds of different plans with employers, groups and individuals across the state — each plan with its own specific terms, charges and deductibles — it is impossible to calculate the additional financial burden this new language would place on hospitals,” an Integris statement said. “It would undoubtedly erode hospitals' already thin margins.”

'It's game of chicken'

Burns said he couldn't comment on the situation in Oklahoma because he hasn't studied the negotiations, but disputes over networks are common on a national level.

Insurance companies “are trying to be more efficient. That's from their point of view,” he said. “From the patient's and the doctor's point of view, they're restricting choice.”

Both Integris and BCBSOK have been operating with thin profit margins in recent years. BCBS of Oklahoma's parent company, Health Care Services Corporation, lost money in calendar years 2014 and 2015 before posting a $106.3 million profit in 2016. While that sounds substantial, it amounts to a 0.3 percent profit margin on its $34.5 billion in revenue.

HCSC's first quarter of 2017 looked better, with a $869 million profit, but that included some one-time windfalls, such as when Congress temporarily suspended a tax on health insurers.

Integris also hasn't been consistently profitable. The health system had a profit margin of -1.39 percent in fiscal year 2016, though that improved to a slightly positive margin of 0.48 percent in the first three quarters of fiscal year 2017.

While margins have been tight in recent years, insurers and hospitals have wrangled over rates and network issues since the 1990s, Burns said. Hospitals that patients prefer may be able to extract concessions from insurers, while insurers with large numbers of customers may be able to dictate terms to less prominent hospitals. It's relatively rare for a hospital and an insurer to actually part ways, he said.

“It's a game of chicken,” he said. “Who needs the other more?”

Meg Wingerter

Meg Wingerter has covered health at The Oklahoman since July 2017. Previously, she lived in Topeka, Kansas, and worked at Kansas News Service and The Topeka Capital-Journal, where she earned awards for business coverage. She graduated from... Read more ›