Blue Shield, Sutter dispute could impact thousands in Sonoma County

Blue Shield of California and Sutter Health have reached an impasse in contract negotiations, raising the specter of the two sides parting ways for good by June.

If the two health care giants are unable to reach a settlement, thousands of Blue Shield members in Sonoma County could be forced to either dump their Sutter-affiliated doctor or, if possible, switch to another health plan.

But local health insurance experts said this week that if history is any guide, Sutter and Blue Shield will ultimately reach an agreement over terms for a new contract.

“The biggest thing you need to know about this is it probably won’t happen,” said Dave Hodges, a Santa Rosa health insurance broker with Vantreo Insurance Brokerage.

Don Ransom, director of managed care and clinical integration for Sutter Pacific Medical Foundation North Division, agreed. He said he believed the two sides would resolve their differences.

“Every one of these in the past has all worked out in the 12th hour,” Ransom said.

There are about 1,300 local Blue Shield HMO members in the Sutter network, according to the foundation, a Sutter Health affiliate that contracts with Sonoma County doctors to provide medical care to health plan members. The number of members with a PPO or EPO plan is likely even larger, Ransom said. Sutter said an exact figure is difficult to calculate because it does not maintain a registry of PPO or EPO patients who are assigned to doctors.

Across the state, the split would affect 270,000 Blue Shield members, including more than 140,500 HMO members who will be receiving a notice later this month because they may be affected by a Sutter medical group or hospital termination.

Ransom called Blue Shield’s announcement a negotiation tactic that leaves Sutter doctors wondering what they will tell their patients.

“That’s what concerns me, when we think about what kind of communications to extend to our patients,” he said.

In a notice sent to insurance brokers and agents Monday, Blue Shield said its “network relationship” with Sutter was terminated as of Jan. 1, but that the insurance company “remains open” to further negotiations.

Though the previous contract has terminated, Blue Shield and Sutter have agreed to transition periods for their members with HMO, PPO and other Blue Shield health plans.

Among other things, the two sides have agreed to the following:

- Those with a Blue Shield HMO can continue to see their Sutter doctors at in-network rates until March 31. After that, members will be assigned to a new provider effective April 1. Blue Shield will send out letters later this month notifying members of this possible change.

- Those with PPO member plans, including individual plans obtained through Covered California, will be allowed to see their Sutter doctors as usual until June 30. After that date, patients will have to pay the higher out-of-network benefit level.

- Blue Shield members or their covered dependents who are currently receiving treatment for a qualifying condition may be allowed to complete their treatment with their current Sutter provider.

Blue Shield said that even though health plan members will pay in-network rates during the transition periods, Sutter’s ultimate charges will be higher and members may have to pay higher out-of-pocket expenses.

But Sutter officials rejected that claim.

“That’s inaccurate,” said Lisa Amador, a Sutter spokeswoman in Santa Rosa. “Members will not be affected. There won’t be any additional charges that will be higher.”

Blue Shield said the differences between the two parties boil down to money.

Steve Shivinsky, a spokesman for Blue Shield, said Sutter’s provider rates have been historically high and the health care system refuses to scale back its fees. Sutter’s prices are up to 30 percent higher than those of other hospitals in Northern California, Blue Shield said.

“Contract negotiations are always about rates, and we are attempting to lower the rates we pass on to our customers,” Shivinsky said.

Even if Sutter agreed to rate cuts sought by Blue Shield, Shivinsky said, Sutter’s rates would still be higher than the market average in the region.

“That’s an outrageous claim,” said Bill Gleeson, a Sutter Health spokesman at its corporate offices in Sacramento. “Their numbers are incorrect. They don’t offer any quantifiable evidence to back up their claims, which we know to be false.”

Gleeson said Sutter Health’s charges per hospital discharge are at or below those of peer hospitals. “We’re right in line with what other hospitals charge,” he said.

Gleeson said Sutter has asked for a “fair and reasonable” increase in rates, while Blue Shield has proposed an “unprecedented” reduction in rates.

“It is so substantial that it would have a huge negative impact on Sutter Health’s ability to serve our patients,” 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.”

Shivinsky also said that Sutter is trying to inject language into the contract that would block Blue Shield or health plan customers from suing Sutter in court for anti-competitive business practices.

Gleeson called that claim misleading. He said arbitration of disputes is standard practice in the health care industry and that the language already exists in the contract that just expired.

“In Blue Shield’s contract with its own members, they require arbitration of disputes,” he said.

One local insurance broker said he is telling some of his Blue Shield clients who want to keep their Sutter doctors to switch to Blue Cross, if they can do so.

Shivinsky said Blue Shield members are not going to be affected immediately. “Encouraging them to switch now is not advisable,” he said.

You can reach Staff Writer Martin Espinoza at 521-5213 or martin.espinoza@pressdemocrat.com. On Twitter @renofish.