YOUR BUSINESS AUTHORITY
Springfield, MO
YOUR BUSINESS AUTHORITY
Springfield, MO
Mercy announced Sept. 9 that it intends to end its contract with Anthem Blue Cross Blue Shield within the state effective Jan. 1, 2025.
The health system’s announcement said Mercy had provided written notice to Anthem of its intent to sever its contracts.
“One of Mercy’s primary concerns with Anthem is the burdensome red tape that makes it increasingly difficult for patients to navigate Anthem’s system and creates a burden and barrier for patients to receive care when it’s medically necessary,” the announcement stated.
Negotiations continue, and a new agreement may yet be reached. Meanwhile, competing statements by the parties indicate they currently stand far apart.
In an email, Anthem spokesperson Emily Snooks said that over the next two years, Mercy wants to increase the prices they charge Anthem members and employers by five times the current inflation rate.
“Mercy has also demanded contract language that would keep specialty medications unnecessarily expensive when lower-cost options are available,” Snooks said “Anthem has offered reasonable payment increases in excess of the consumer price index for each of the next two years, and we continue working hard to reach an agreement.”
In an interview Sept. 12, Stephanie Vojicic, president of Anthem Blue Cross Blue Shield in Missouri, said Mercy’s announcement was unfortunate.
“Let me be clear – this is all about them asking to dramatically increase the prices that they charge our members,” Vojicic said.
She added that 80% of the employers served by Anthem pay for their own claims, while Anthem’s role is to offer a broad network to provide access to care and to negotiate rates on behalf of employers.
While Mercy is seeking to increase prices by five times the consumer price index, Vojicic said, Anthem has countered with its own offer.
“We’ve offered something over CPI – I cannot get into the specifics based on the confidential nature of the negotiation and contract,” she said. “For us, this is about maintaining affordability for our members and providing them access to high-quality care.”
Mercy disputes Anthem’s assertion
Mercy disputes the claim that they are seeking a fivefold increase in price.
“Their proposal essentially was a three-year proposal that was half the rate of inflation – half the rate of CPI,” said Dave Thompson, Mercy’s senior vice president, population health, and president, contracted revenue, in an interview Sept. 12. “We don’t know where their five to six times rate statement is coming from. We can’t validate it at any data point throughout the negotiation.”
Steve Mackin, Mercy’s president and CEO, said that the termination of Mercy’s contracts with Anthem will have a broad impact. “We are the documented and proven low-cost, high-quality provider in the Anthem network,” he said. “If we were to leave the Anthem network, the cost to employers without us being in it would rise 5% immediately.”
With Mercy in the network, Mackin said, employer costs are 5% less.
“Because we provide care at a lower price than others in the state, if we are out, it will be 5% more,” he said. “Mercy in Anthem network benefits everyone, including Anthem.”
Vojicic questioned this assertion.
“I don’t know how an outside party could make an accurate statement given that they do not have access to our contracts,” she said. “There are some transparency tools that exist, but it would be a stretch to put that type of information together. I think that I would question the accuracy and validity of that statement.”
Vojicic said in the last 12 months, some 30,000 Anthem members accessed a Mercy hospital or outpatient care center.
Cost of care
Mackin said Mercy’s total cost of care is far below the state average.
“While we might get paid 5% more for a procedure, the total cost of care – because we’re treating the patient out of the hospital, or the length of stay is shorter or we’re using less-expensive therapies that are equally effective – that total system of care is producing health care costs that are far below what they’re seeing in the state,” he said.
Anthem’s price transparency filings show that Mercy’s costs are 10%-30% lower than any other peer health system in the state, Thompson said.
“We’ve long wanted Anthem to share that savings that we’re creating not only with consumers but also back to employers,” Mackin said. “And right now we’re seeing less of that money come back to us, and employers are seeing less of that money come back to them.”
Vojicic said that negotiated prices are passed through to members and employers, and 80% of Anthem’s employers will see whatever is negotiated immediately in their costs. “That’s why it’s a delicate balance. What’s at stake here is maintaining access to care, but also at an affordable rate,” she said.
Change for Mercy employees
Mercy also has dumped Anthem for its own workforce, moving 70,000 insurance lines from its self-funded plan administered through Anthem to UnitedHealthcare beginning in 2025.
“We did that based on co-worker feedback,” Mackin said. “We actually wanted to use that as an innovative test case to then roll out a similar, simple, easy-to-consume model for all Missouri citizens. Unfortunately, Anthem was unable to effectively manage and adjudicate that – meaning our own co-workers getting false bills and claims that are not accurate.”
This is why Mercy made the decision to switch to United, Mackin said. He acknowledged that the change may have caused offense to Anthem.
“That was a slap in their face, and that wasn’t intended,” he said. “It was a hard decision. It’s not easy to flip carriers, but we’re moving all 70,000 lines that are under our plan to (United Medical Resources), and they did not respond well to that.”
Thompson said Anthem was given many opportunities throughout the yearlong negotiation to remedy the obstacles they had created throughout the negotiation process.
“They were unable to do that,” he said.
‘Elephants colliding’
Trevor Croley, president of Croley Insurance and Financial Inc., called the negotiations between Mercy and Anthem “kind of a weird deal.”
“It’s like two big elephants colliding,” he said, referring to the sizes of the hospital system and the insurance company. “Unfortunately, you’ve got two sides that probably have some legitimate arguments when they’re trying to negotiate over things.”
From the insurance carrier standpoint, he said, it’s important to be prudent with the cost of premiums.
“Nobody wants to pay more in premiums, but at the same, everyone wants their increases – their piece of the pie and their inflation adjustments,” he said.
Croley said similar negotiations go on all the time between hospitals and insurance carriers.
“Unfortunately, when you’ve got two big powerhouses, there are hundreds of thousands of lives in flux with this,” he said.
Croley said there is still a chance the two sides will work out their differences, but employers offering Anthem insurance to their workers will have to be proactive.
“There’s a little bit of immediacy to this,” he said, noting the individual health marketplace has open enrollment starting in October and running through the end of the year.
“People need to make decisions about their health care in those open markets,” he said. “It’s bad timing for both of these guys, and it may mean people have to shuffle the deck a little bit.”
Chase Marable, managing director of Higginbotham Insurance Agency Inc., said it’s likely Mercy and Anthem will come to an agreement before the contract expires.
“This is a negotiation tactic that we see often for an insurance company to agree to the hospital’s terms of their contracting process,” he said via email. “When an agreement is made you can only assume that the prices will ‘meet in the middle,’ which means more expensive cost for treatment with our hospital systems.”
Croley said that these situations typically resolve themselves at the last minute.
“The most important thing is that employers shouldn’t make a knee-jerk reaction today,” he said. “They’re working to try to resolve it, and there’s probably a middle ground – they’re just not there yet.”
Nonetheless, he said, employers need to pay attention.
“It’s not panic time right now, but it’s also not time to be asleep at the wheel,” he said. “At some point you have to create a contingency plan. Whether it’s an individual or a group plan, you really need to go back to your broker and have conversations about what you want to do if this doesn’t work out.”
He added, “Don’t wait until December to try to figure it out.”
Marable said if a deal is not reached, this will cause significant disruption to Anthem customers who use Mercy and pose a recruitment challenge for employers.
“Think back to the days of an employee asking a company, ‘Are you Cox or Mercy?’ and we may soon be asking the question, ‘Do you have Mercy in network?’ Not only does this make a challenge for recruiting and retaining, but the financial impact of a health insurance company also charging more for a broader network of hospitals will pose a real challenge to the budgets of employers in upcoming renewals,” Marable said.
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