Blue Shield Drops Three San Jose Hospitals from Network

In a contract dispute over reimbursement rates, Blue Shield of California has dropped three "prominent" San Jose hospitals from its network, a move that could increase costs and "disrupt" health care for as many as 75,000 members in Santa Clara County, the San Jose Mercury News reports. The dispute between Blue Shield and the hospitals -- San Jose Medical Center, Regional Medical Center of San Jose and Good Samaritan Hospital -- affects about 40% of the hospital beds in San Jose. The insurer has told members to use O'Connor Hospital in San Jose, Los Gatos Community Hospital and Gilroy-based St. Louise Regional Medical Center until negotiators reach an agreement. Blue Shield advised patients who are receiving ongoing medical care or who had a scheduled medical procedure after July 1, when the insurer's contracts with the three hospitals expired, to call their doctors to determine whether their care "would still be covered." The move will also force pregnant women in their first trimester to deliver their babies at a different hospital, and they may have to find new obstetricians "if [their] doctors did not have privileges" at a different facility. Blue Shield told pregnant women in their second or third trimesters to call their doctors to discuss whether they could still deliver their babies "as planned." Blue Shield spokesperson Laura Perry said, "We are genuinely sorry for the disruption it causes the members. We feel at the same time that if we give in to what we think are unreasonable reimbursement increase requests, then our members will no longer be able to afford insurance."

In addition to dropping the three hospitals from its network, Blue Shield hoped to shift about 10,000 members from the San Jose Medical Group -- "essentially forcing them to change doctors or pay higher fees" -- but the California Department of Managed Health Care blocked the move. The department has ordered the insurer to allow members to visit San Jose Medical Group doctors during contract negotiations (Feder, San Jose Mercury News, 7/19). In addition, the DMHC has asked Blue Shield to provide the agency with additional information about "why it wants to move" members out of the medical group. Perry said that Blue Shield worries that the group "is not financially capable" of managing care for members and does not have an "adequate network" of doctors. Officials with the medical group denied the charges. The Silicon Valley/San Jose Business Journal reports that the issue will determine "how the valley's health care system will deal with moving patients between providers to save money" (May, Silicon Valley/San Jose Business Journal, 7/17).