As 2017 drew to a close, some health plans and healthcare providers across the country were still busy trying to finalize contracts for in-network services for 2018 and beyond. A number of negotiations made the headlines in 2017, highlighting ongoing and emerging issues affecting network contracting.

We recap for you some such complex deals: In June, UnitedHealthcare and University of Chicago Medicine reached an agreement just a few weeks before the provider was scheduled to go out-of-network;[1] In September, CarePoint Health and Horizon Blue Cross Blue Shield of New Jersey (“Horizon”) reached an agreement to bring CarePoint in-network, putting an end to CarePoint Health’s federal lawsuit against Horizon for $76 million in unpaid out-of-network bills;[2] After months of negotiations, and a failure to meet an October 1 deadline to keep services in-network, Anthem and Hartford HealthCare reached an agreement in November to continue in-network services at Hartford’s Connecticut medical centers;[3] And, at the beginning of December, Mission Health and Blue Cross Blue Shield of North Carolina reached a new in-network agreement after a six-month long dispute.[4]

In reflecting on this latest season, some common themes arise:

  • Some plans and providers alike are using the threat of contract termination as leverage for contract renegotiations, but that strategy can have unintended consequences for plans, providers, and consumers.[5] Mission Health took this approach when it announced in August that it would terminate its contract with Blue Cross Blue Shield of North Carolina because Blue Cross was not willing to negotiate higher reimbursement rates. While Mission Health wanted to renegotiate its contract, Blue Cross did not want to begin any negotiations until Mission Health fully withdrew its notice of intent to terminate. The contract terminated on October 5, 2017, and the parties ultimately agreed to a new contract that will be effective December 15.[6] While the parties ultimately reached a new agreement, the plan, the provider, and thousands of consumers had to deal with the consequences of Mission Health falling out-of-network for about two months.
  • Plans and providers may have different motivations to establish an in-network relationship, but their motivations are not always adverse to one another. Plans often want to bring healthcare providers in-network to establish greater choice and accessibility for enrollees. This also benefits providers, because they are generally advertised as being in-network by the health plan, which may lead more consumer traffic to the providers. Further, network contracting can offer both parties a greater degree of stability. For providers, reaching a compromise on in-network rates can be appealing because it increases the likelihood that the provider will receive a steady stream of income that may not otherwise be available if the provider goes out-of-network. Accordingly, plans also benefit, because they have significant control over calculating the rates to pay to in-network providers and are able to minimize disputes over reimbursement rates. Plans and providers also share the common motivation to come to an agreement to ensure consumer welfare.
  • Consolidation—on the part of both plans and providers—raises the stakes of contract negotiations, because a single plan or provider is more likely to cover a substantial percentage of consumers in a state. For example, Blue Cross Blue Shield of North Carolina covers 72 percent of state residents[7], so bringing providers in-network, or leaving them out-of-network, could affect thousands of consumers. Similarly, Hartford HealthCare’s recent contract dispute with Anthem affected thousands of consumers, because Hartford owns, operates, or partners with several hospitals, physician groups, behavioral health providers, and home and senior services providers throughout Connecticut.[8] As consolidation continues in the sector, consumers are likely to experience more limited options, which may provide even more pressure for plans and providers to reach in-network agreements.
  • There is significant public pressure for plans and providers to reach agreement. Contract negotiations between plans and providers often draw scrutiny from local and statewide media, generally focused on the potential negative impacts to consumers. Coverage of the Anthem Blue Cross Blue Shield and Hartford HealthCare negotiations garnered enough media attention in Connecticut that the top Democrat in the state Senate announced plans to reintroduce legislation to create a binding arbitration process to settle contract disputes between insurers and hospitals if they cannot come to an agreement on their own.[9] The contract dispute was considered such a significant public issue that the Connecticut legislature called executives from Anthem and Hartford to testify at the state Capitol to explain what led to their contract dispute.[10] Plans and providers, particularly, perhaps, major industry players, will need to take into account public perception of contract negotiations if they want to avoid scrutiny by regulators or the legislature.

While status as an in-network provider is not always possible, feasible, or desirable, litigation in the California Court of Appeals this year reminds us that the delivery of services on an out-of-network basis can also be a minefield. An illustrative example this year comes from California, where a dispute over proper billing and reimbursement rates arose when an out-of-network provider charged a health plan a total of $275,383.16 for procedures that he performed on four patients, but the health plan only paid $9,660.86. At trial, the health plan introduced evidence of Medicare rates for the same procedures, but the provider claimed that the court could only consider the factors specifically established in the California Code of Regulation provisions to determine the payment of the reasonable and customary value of emergency health care services for out-of-network providers.[11] The appeals court ultimately decided in favor of the health plan, stating that courts are not constrained by the specifically enumerated factors in the Code of Regulations, and may consider a variety of factors to determine the usual and customary rates of payment.[12]

The California decision, along with the themes described above, ultimately indicate a key reason why plans and providers may prefer in-network arrangements: there is an associated level of stability and security that may not otherwise exist. In-network agreements provide plans, healthcare providers, and consumers with some certainty that covered enrollees will be able to receive medical care at a certain price. The desire for such certainty (and, maybe, a little holiday cheer), likely drove many plans and providers to reach in-network agreements before the New Year.