Dignity Health, the largest nonprofit hospital network in California, announced this month that it no longer has an agreement with Anthem Blue Cross, claiming the health insurer refuses to pay its fair share for hospital services.
The negotiations have been going on for six months, but soured on July 16 when most of Dignity Health's hospitals in California -- including Sequoia Hospital in Redwood City-- terminated their agreements with Anthem. The impasse means Anthem customers who rely on Sequoia may have to pay out-of-network costs for now, though both parties are still in "active discussions" to bring the hospitals back in network, according to Dignity.
Hospitals in the Bay Area have struggled to renew contracts with Anthem in recent years, with many dropping contracts over disputes about what the country's second-largest health insurer is willing to pay for health care services. Dignity Health is the largest Medi-Cal provider in the state and has lost money in recent years, yet Anthem has been unwilling to compensate the network of hospitals with even modest rates, said Robert Quinn, president and CEO of Dignity Health.
"Dignity Health has offered Anthem a proposal with rates that do not even cover hospital inflation costs and are below increases included in prior agreements," Quinn said.
Dignity is the latest to drop Anthem over what health care providers describe as penny-pinching tactics that go well beyond those of other health insurers. Last month, Mountain View-based El Camino Health terminated its contract with Anthem over the same concerns. Sutter Health ran into similar trouble with Anthem in 2019, followed by a clash between MarinHealth and the insurance giant last year.
Anthem has defended its approach to contract negotiations, arguing that health care costs in Northern California are inordinately high and can lead to hospitals reaping big profits. The company also claims that higher hospital prices are passed down to individual customers and employers that provide health care plans to their workers. In a statement, Anthem said it has not severed its negotiations with Dignity Health and is seeking a new contract focused on affordability.
"We continue to negotiate in good faith with Dignity in hopes of reaching a reasonable deal, one that compensates Dignity fairly and protects affordability for our members and customers," an Anthem spokesperson said Thursday.
A total of 29 hospitals and medical centers have been affected by Dignity's decision to terminate contracts with Anthem, including Sequoia Hospital and two hospitals in San Francisco -- Saint Francis Memorial Hospital and St. Mary's Medical Center. The expired contract affects members enrolled in commercial PPO, EPO, HMO, and POS benefit plans as well as some Medicaid and Medicare Advantage plans.
On its website documenting the dispute with Dignity, Anthem claims that the health system is already nearly 30% more expensive than other health systems across the state, yet it is now threatening to drop the insurer if it does not agree to "substantial" rate increases under a new contract.
"We cannot, and will not, agree to excessive rate increases that will make care at Dignity even less affordable for those we serve," Anthem said.
The American Hospital Association has criticized Anthem in recent years for adopting controversial policies designed to save money at the expense of hospitals and patients. Though not implemented in California, the health insurer rolled out a 2017 policy to deny coverage for emergency services at hospitals if it decided the symptoms and conditions didn't warrant emergency-level care, making that determination after the fact rather than based on what was observed by the patient and medical staff prior to the diagnosis.
The company also sought to no longer cover outpatient imaging services at hospitals, instead diverting patients to free-standing imaging centers for MRIs and CT scans.
While Dignity Health has been going through tough financial times in recent years, Anthem has raked in billions in profits as a powerful for-profit insurance company, Dignity Health said in a statement. Yet Anthem has refused to pay more than it does for services and accept a "reasonable" contract, and the result is that more than 1 million patients have lost in-network access to care. Dignity, for its part, is encouraging its patients to take action and urge Anthem to sign a new agreement.
With the contract expired, some patients will still have access to in-network rates, particularly those who require "continued" care for things like cancer treatment, pregnancy and serious chronic conditions. Anthem also said in a statement that it is taking steps to help members make a "seamless transition" to new health care facilities that are still in-network.