Baylor Scott & White Health to Terminate Blue Cross Blue Shield Agreements in July
Why should health insurance companies negotiate lower prices with hospitals when, thanks to the federal government mandate known as the Minimum Loss Ratio, both get paid more through higher prices? A sign of a good business deal is when both sides walk away from the table happy.
Why should a health insurance company care what hospital prices are since they pay claims with Other People’s Money through premium charges? When consumers pay more for healthcare they are charged more by insurance companies. Insurance companies don’t lose.
Yet for years we’ve seen news articles like the one below repeated over and over again resulting in the same outcome every time. It’s a repeat article with a different dateline about a health insurance company “fighting” against presumably higher prices demanded by hospitals. The ending is always the same. Both sides kiss and make up and away we go again with another round of insurance cost increases.
There must be something else we are missing here. If higher prices benefit both insurer and hospital, why are they fighting over higher prices? Could they be fighting over lower prices? Or are they fighting over a “commission split?”
In the pharmaceutical industry a “commission split” is called a “rebate.” We like the former description as it conveys the full meaning of the truth, not a politically correct word assignment.
Commission splits between hospitals and insurance companies have been exposed in lawsuit after lawsuit over the years. Weslaco ISD vs Aetna is just one example. It’s worth a read. The pleadings allege Aetna was earning +9% of the discount in addition to other fees charged to a Texas public school district. There are hundreds of other lawsuits like this alleging the same practice.
Imagine hearing the following at the negotiation table. “We demand 50% of the discount “ says the insurer. “No, that’s outrageous! We can agree to 10% of the discount” counters the hospital administrator.
Only the hospital and the carrier know the truth behind their public dispute. We can only guess through the power of deduction based on common sense, reason and logic.
Baylor Scott & White Health to Terminate Blue Cross Blue Shield Agreements in July
If the agreements aren’t modified by July 1, Blue Cross members will lose access to all of Baylor Scott & White Health’s physicians, hospitals, and facilities.
The battle of the Dallas healthcare powers began again today when Richardson-based Blue Cross Blue Shield of Texas released information to members that says Dallas-based Baylor Scott & White Health notified the insurer that it would be terminating its physician and hospital agreements on July 1 unless those agreements are modified.
BCBS of Texas says the company is working hard to reach an agreement, but if they cannot, then all BSWH physicians, hospitals, and facilities will no longer be in network. Baylor Scott & White is the largest nonprofit health system in the state, with 51 hospitals, 800 other patient care sites, and 7,300 physicians. BCBS of Texas is easily the largest health insurer in the state, with nearly a quarter of the market share, more than double the next largest health insurance company, UnitedHealthcare.
The largest regional health system and the largest health insurer are currently in a battle over reimbursement rates, but it is far from the first time this has played out. In 2022, BSBS and Southwestern Health Resources (a joint venture between UT Southwestern and Texas Health Resources) were in their own battle, with the providers asking for a $900 million increase in reimbursements in 32 months. Texas Health Resources and BCBS couldn’t agree to a contract in 2018 as well. In both cases, the two sides came to an agreement at the eleventh hour. Last year, Medical City’s contract with Blue Cross also came down to the wire before an agreement was reached.
Labor and supply costs have increased for all providers following the pandemic, with hospitals and systems struggling with their finances more frequently. Just last week, Dallas-based Steward Health Care filed for bankruptcy and is now selling all 31 of its remaining hospitals in an effort to pay back hundreds of millions in debt. Trinity Regional Medical Center in Sachse also went bankrupt last year.
Unlike other businesses that can raise prices when supply or labor costs go up, providers who are dependent on insurance payments can only increase “prices” during their contract negotiations with payers like Blue Cross Blue Shield of Texas when they settle on reimbursement rates for procedures, services, operations, and everything else covered by the insurance plan. When the two sides can’t agree on rates for care, the conflict often goes public, with each side hoping to win over the general public in about which entity is more reasonable.
“We have a long and positive relationship with BSW and hope to reach an agreement. Our goal is to protect our members’ and customers’ access to quality care at affordable rates,” a statement provided to D CEO Healthcare from BCBSTX read. “As a customer-owned health insurer founded in Texas almost 95 years ago, we are committed to serving our members by providing access to high-quality, cost-effective health care solutions to the people we serve. BCBSTX is the only health plan offering access to coverage to individuals and employers in all 254 counties.”
According to the Kaiser Health Foundation, the average annual health insurance premiums in 2023 were $8,435 for single coverage and $23,968 for family coverage. The average premiums increased by 7 percent in 2023, 22 percent since 2018, and 47 percent since 2013.
Despite the current disagreements, the two healthcare behemoths came together to invent commercial health insurance as we know it. BCBS of Texas began in 1928 when a former Dallas school superintendent took on a role with Baylor University and was in charge of the Dallas hospital units. He created a plan allowing teachers to contribute to a fund guaranteeing them up to 21 days of hospital care at Baylor in Dallas. The “Baylor Plan” was the original commercial plan, and future leaders began considering community-wide plans to fund members’ healthcare.
A statement provided to D CEO Healthcare from Baylor Scott & White Health says, “Baylor Scott & White Health is negotiating a new contract to cover care for patients with Blue Cross and Blue Shield of Texas (BCBSTX) health insurance. Currently, patients with BCBSTX plans have in-network coverage with our providers and facilities, and we are working to reach a new agreement before July 1, 2024, to keep BCBSTX plan holders in-network. Our patients are our top priority, and we are working to minimize any potential disruptions.”
The costs are likely too high for both sides to end the arrangement, as hundreds of thousands of Baylor patients with Blue Cross insurance would lose access to their physicians and hospitals. The change would be a public relations nightmare, especially considering patients undergoing ongoing care for chronic or lasting conditions, not to mention the questions for patients with emergent issues like having a baby or traumatic injury. If this round of negotiations plays out like most others, the insurer and provider will reach an agreement before the deadline.
