By BRIAN KRANSKAISER HEALTH NEWS FEB.
5, 2020
Zoe Friedland is
expecting her first child — a girl — on Feb. 15, and she was picky about
choosing a doctor to guide her through delivery.
“With so many
unpredictable things that can happen with a pregnancy, I wanted someone I could
trust,” Friedland said. That person also had to be in the health insurance
network of Cigna, the insurer that covers Friedland through her husband’s
employer.
Friedland found
an OB-GYN she liked, who told her that she delivered only at Sequoia Hospital
in Redwood City, Calif., a part of San Francisco-based Dignity Health.
Friedland and her husband, Bert Kaufman, live in Menlo Park, about five miles
from the hospital, so that was not a problem for them — until Dec. 12.
That’s the day
Friedland and Kaufman received a letter from Cigna informing them their care at
Sequoia might not be covered after Jan. 1. The insurance company had not signed
a contract for 2020 with the hospital operator, which meant Sequoia and many
other Dignity medical facilities around the state would no longer be in Cigna’s
network in the new year.
Suddenly, it
looked as if having their first baby at Sequoia could cost Friedland and
Kaufman tens of thousands of dollars. “I was honestly shocked that this could
even happen because it hadn’t entered my mind as a possibility,” Friedland
said.
She and her
husband are among an estimated 16,600 people caught in a financial dispute
between two gigantic healthcare companies. Cigna is one of the largest health
insurance companies in the nation, and Dignity Health has 31 hospitals in
California, as well as seven in Arizona and three in Nevada. The contract fight
affects Dignity’s California and Nevada hospitals, but not the ones in Arizona.
Jan. 30, 2020
“The problem is
price,” Cigna said in a statement just before the old contract expired on Dec.
31. “Dignity thinks that Cigna customers should pay substantially more than
what is normal in the region, and we think that’s just wrong.”
Tammy Wilcox, a
senior vice president at Dignity, said, “At a time when many nonprofit
community hospitals are struggling, Cigna is making billions of dollars in
profits each year. Yet Cigna is demanding that it pay local hospitals even
less.”
In 2018, the
most recent full year for which earnings data is available, Cigna
generated operating income of $3.6 billion on revenue of nearly
$49 billion. Dignity Health reported operating income of $529 million on revenue of $14.2
billion in its 2018 fiscal year.
It’s possible
Cigna and Dignity can still reach an agreement. Both sides said they will keep
trying, though no talks are scheduled.
Disagreements
between insurers and health systems that leave patients stranded are a perennial problem in U.S. healthcare. Glenn
Melnick, a professor of health economics at the University of Southern
California, said such disputes, which are disruptive to consumers, are often
settled.
Melnick believes
Dignity is using an “all or nothing” strategy in contract negotiations: either
all its facilities are in the insurer’s network or none are.
“This allows
them to increase their market power to get higher prices, which is not
necessarily good for consumers,” Melnick said.
Dignity replied
in an emailed statement: “We do not require payers to contract with all or none
of Dignity Health’s providers. We do try to make sure patients have access to
the full range of Dignity Health services and facilities in each of our
communities.”
Dignity faces a
number of legal and financial challenges while it works to implement a February
2019 merger with Englewood, Colo.-based Catholic Health Initiatives that
created one of the nation’s largest Catholic hospital systems — known as CommonSpirit Health.
California Atty.
Gen. Xavier Becerra approved the deal with conditions, including that Dignity’s California hospitals
spend $10 million in the first three years on services for people experiencing
homelessness and offer free care to a larger number of low-income patients.
The requirement
to treat more poor patients for free followed a period, from 2011-2016, in
which Dignity’s charity care had declined about 35% while its net
income was $3.2 billion.
Last October,
CommonSpirit announced an operating loss of $582 million on revenue of nearly $29 billion for the
2019 fiscal year, its first annual financial statement after the merger took
effect. Much of the loss was due to merger-related costs and special charges.
The same month,
Dignity completed a five-year “corporate integrity agreement” with the U.S. Office
of the Inspector General following an investigation into how it billed the government for
hospital inpatient stays. Dignity said it “fully complied” with the agreement.
Dignity is also
defending itself in a class-action lawsuit alleging that it bills uninsured
patients at grossly inflated rates even though it claims to provide
“affordable” care at “the lowest possible cost.”
More recently,
an appeals court judge ruled
Dignity could not charge higher prices — often a lot higher than
state-set rates — for treating enrollees of L.A. Care’s Medi-Cal
health plan at its Northridge Hospital Medical Center.
Dignity
disagreed with the court’s ruling in that case, saying that although the
Northridge facility did not have a contract with L.A. Care, many of the health
plan’s enrollees who initially sought emergency treatment there stayed in the
hospital for additional care after they had been stabilized. The hospital
“seeks appropriate reimbursement for providing this care,” Dignity said.
July 5, 2019
If Dignity does
not reach an agreement with Cigna, its hospitals, outpatient surgery centers
and medical groups in most of California will soon be out-of-network for many
Cigna enrollees. In-network coverage for Open Access (OAP) and Preferred
Provider (PPO) ended on Feb. 1, and for HMO patients it is set to end April 1.
Welch said Cigna
can provide “adequate access” to other hospitals and doctors.
Certain Cigna
enrollees can apply to continue visiting Dignity facilities and doctors
under California’s Continuity of Care law, enacted in 2014.
Eligible enrollees include patients with chronic conditions, those already
scheduled for pre-authorized services, people in need of emergency care and
pregnant women in their third trimester.
Friedland and
Kaufman applied, hoping she would be able to continue seeing her
Dignity-affiliated OB-GYN at in-network rates. On Jan. 22, less than a month
from Friedland’s due date, they received written confirmation that their
request had been approved. They wouldn’t have to shop for a new doctor or face
stiff medical bills after all.
Still, being in
limbo for over a month toward the end of a pregnancy, while frantically
preparing to be first-time parents, was extremely stressful, they said.
“Zoe’s now spent
a ninth of her pregnancy with this question over her head of whether she’d be
able to deliver with the doctor that she’s built a relationship with,” Kaufman
said. “I think it’s important for people in this industry to not forget that
there are humans and patients behind their profit.”
This article was
written for Kaiser Health News,
an editorially independent publication of the Kaiser Family Foundation.
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