More California Health Plans Ending Contracts With Health Providers

Large health insurance plans have started canceling contracts with California hospitals at higher rates during the past few years, the Los Angeles Daily Journal reports.

Most California medical providers negotiate contracts with the state's major insurance plans, including Anthem Blue Cross, Blue Shield of California, Health Net and PacifiCare. The contracts allow the medical providers to receive "in network" classification, which can bring in more business. In return, the providers often lower their fees.

However, contract negotiations sometimes break down when medical providers argue that insurance companies provide insufficient reimbursement payments. In response, insurers sometimes contend that health care providers seek overly high fees for their services.

Canceled Contracts on the Rise

Before an insurer can cancel a health care provider's contract, it first must submit a notice to the state Department of Managed Health Care. The department then must approve any termination that would affect patient care.

According to a Daily Journal investigation, DMHC records show that the number of cancellation proceedings Anthem Blue Cross has initiated has doubled since 2005.  The investigation indicates that other health plans also are taking steps to cancel more contracts with hospitals.

Despite the apparent rise in contract cancellations, insurance company representatives claim that the figures represent normal fluctuations in hospital contract renewals.

Small Medical Groups at Disadvantage

Observers note that the contract figures might not reflect all terminations because DMHC does not maintain records of contract cancellations with smaller medical groups and physician practices.

These smaller group practices might face significant challenges in contract negotiations because they have less bargaining power than larger medical providers, observers say.

Lawsuits

Disputes over reimbursement rates and fees have led many insurance plans and medical providers to file legal action against each other.

Such lawsuits could compel courts to resolve issues about how health plans determine their pay rates.

Stakeholders also are closely following national health care reform efforts to see whether changes in the insurance industry could affect contract negotiations (George, Los Angeles Daily Journal, 8/12).