Sutter Health, a California not-for-profit 24-hospital system, and insurer Blue Shield of California have come to an agreement after a monthlong feud over price increases and new contract terms.
The parties signed a two-year contract, which went into effect Sunday and will expire at the end of 2016. Blue Cross officials had initially objected to what they said were unusually high charges for services and a contract that required Blue Shield and its self-insured customers to take anticompetitive complaints to an arbitrator instead of the court system.
Sutter said that its overall price increase was “less than 1%,” and argued that using arbitration to settle disputes is the “standard in the healthcare industry.” It would seem as though the company won on the latter argument. The contract calls for arbitration for all disputes, according to a Sutter news release, which had been the process between the two companies in the past, Sutter said.
Blue Shield said in a statement that the details of the contract were confidential, but a spokesman disputed Sutter’s claims that all disputes will be arbitrated under the new contract, also rejecting the claim that that was precedent.
“There is no new arbitration language in the contract, and all disputes are not arbitrated,” the spokesman said, noting that only low-level disputes on reimbursements or claims are arbitrated, but not antitrust issues.
Both apologized to their customers for any inconvenience caused. Blue Shield said that the principles it “fought for in this negotiation with Sutter have been preserved.” But Dr. Steve Lockhart, Sutter Health’s chief medical officer, said in a statement that Blue Shield agreed to terms similar to the ones it initially rejected.
“We sincerely regret the frustration our patients experienced as the negotiations took longer than necessary—especially when the final agreement is extremely close to the reasonable offer we made to Blue Shield several months ago,” Lockhart said.
Fights between large payers and health systems have become common in fee-for-service healthcare, and healthcare economists predict disagreements will likely continue, though focusing on other issues, as companies transition to value-based care. Those potential new flashpoints include lump-sum payments, quality metrics and arrangements for how shared savings should be split.
Follow Adam Rubenfire on Twitter: @arubenfire
