BusinessReport.com

As health care gets pricier and the number of dollars available to pay for it remains finite, the relationship between hospitals and insurers is bound to get testier.

An illustration of this is Baton Rouge General’s painful decision in June to cancel its contract with Humana HMO. The hospital’s patients enrolled in Humana have had to switch insurers if they wanted to keep going to the General. Those who wanted to stay with for-profit health plan Humana—unless they want to pay out-of-network prices—have no choice but to go to Our Lady of the Lake, the only other full-service hospital in Baton Rouge.

The Lake signed a contract in March to take Humana patients. Until then, the General was the only full-service hospital in the Baton Rouge market that accepted Humana patients.

More than 19,000 state employees and their families were Humana plan members; state employees comprise the largest group of Humana enrollees in the Baton Rouge market. Since the General dropped Humana, more than 1,600 state employees have switched from it to another plan.

The General, which advertised its intentions in April newspaper ads, is in contract negotiations with Humana.

“The ball is in their court,” says Terri McNorton, spokeswoman for the General.

The dispute is over reimbursement rates: how much the hospital gets from the insurer for the medical care it delivers. McNorton says the General was satisfied with the deal it was getting before the Lake signed on with Humana, since the General was the primary hospital in the HMO’s plan and enjoyed high volumes as a result. With the Lake’s entry, the General’s volume fell but with no compensation in the form of higher reimbursement.

The General wanted parity with the Lake; Humana wouldn’t budge and the General canceled its contract.

“All we ask is we be paid the same amount as everybody else,” says Rebecca Burdette, another General spokeswoman. “From our position it was a business decision. It was just a matter of wanting to be treated fairly.”

She cites a similar situation with the Lake a few years ago. Bob Davidge, CEO of the Lake says it all started when Ochsner Health Plan, then the state’s largest HMO, was sold to Humana amidst financial problems. Ochsner had owed the Lake more than $2 million.

“Our position at that time was, ‘You bought the whole thing lock stock and barrel; you need to make good on those obligations,’” Davidge says.

Humana disagreed, and the Lake decided against a contract. Humana eventually paid those claims and a back settlement, but wanted to pay the Lake low reimbursement rates in return. Again, the Lake said no. Things finally got patched up, and in March the Lake signed a contract with Humana to become one of its in-network providers.

Davidge says he wouldn’t be surprised if his hospital had been getting a better deal with Humana than the General since the Lake’s contract is newer. Davidge, who is retiring in January after nearly 30 years heading the Lake, has a front-row seat to the industry dynamics that can lead to standoffs like the one between Humana and the General—not unusual these days.

At the root is cost-shifting—the practice among hospitals of shifting the cost of charity care, bad debts and inadequate government or commercial reimbursements to full-pay patients.

Since the vast majority of insured Americans get their insurance through their employers, it’s the employers who are being cost-shifted—not that employees are immune from diminishing benefits and rising deductibles.

Employers facing higher premiums don’t just take it; they switch insurers to whichever is the least expensive at the moment. Insurers, naturally, don’t like losing their employer base. “They’ve got to have their payment from employers exceed what they’re paying or they go out of business,” Davidge says.

The result of all this is a “natural tension,” he adds, between those providing the care and those cutting the checks, be it Humana or some other company. Call it a love-hate relationship.

McNorton says the General is still talking with Humana because it’s in the best interest of the community to find a resolution. Both entities say they hope that will be the outcome. Humana spokesman Mitch Lubitz says the company hopes to reach an agreement with the General and that the dispute isn’t unusual in contract negotiations.

“The lion’s share of the individuals involved are senior citizens,” McNorton says. “So when Baton Rouge General is not an option for them, that really limits their choices and it’s confusing not to have access to the primary care physician you’ve been going to for years.”

She says the General needs a better reimbursement rate to continue adequately reinvesting in the organization, while having enough money to “flow through” to the doctors doing the care. McNorton is disappointed a resolution hasn’t been found and has no idea when it will happen, if at all.

Of course, when accounting departments go to war against each other like this, it’s the regular guy who pays.

Stephen Winham, retired state director of budget and planning, was a longtime Humana customer and patron of the General when he learned through a newspaper ad that the two were divorcing. He and his wife switched to United’s EPO—one of three plans offered by Group Benefits, which administers state employees’ health benefits—so they could keep going to their General-affiliated physician and not pay astronomical out-of-network fees.

“We didn’t want to have to go out of our network,” he says. “I’ve gone to the same doctor forever.”

Winham says he held on for as long as he could, hoping the two sides would work things out, but finally had to make a move the end of April before Group Benefits’ open enrollment window slammed shut.

Even then, the Winhams were in uninsured limbo between June 15, when the General stopped taking Humana, and July 1, when United’s coverage kicked in. United is an easy-to-use plan but substantially more expensive than Humana, Winham says. If Humana and the General do come to an agreement, he’ll probably switch back because of the cost. He calls the experience “a major headache.”

Davidge, who considers fights between providers and insurers further proof that the American health care system is “on an unsustainable course,” says there’s no guarantee a hospital isn’t shooting itself in the foot when it takes such extreme measures to leverage cooperation from its health plans. Still, there’s little choice.

“You do know that if you can’t say no to them, you can’t do business with them.”