Sutter Health vs. Blue Shield: New Contract Agreement Reached

Hospital operator Sutter Health and health insurer Blue Shield of California on Friday said they had reached a new two-year contract agreement, ending a dispute that would have forced thousands of people to switch health care providers.

Notices were sent to nearly hundreds of thousands of Blue Shield customers earlier this month warning that as of Jan. 1 the health insurer had canceled coverage for all hospitals and medical providers affiliated with Sutter Health.

The cancellation would have affected 140,573 HMO members, 4,413 PPO members who have used Sutter facilities in the past 12 months and another 139,338 PPO members living within 15 miles of a Sutter facility, according to Blue Shield officials.

[Previous: Blue Shield vs. Sutter Health Dispute To Force Thousands To Switch Doctors.]

Blue Shield had asked for a cut in reimbursement rates and argued that Sutter’s costs were well above those of other health care providers.

In addition, the insurance company objected to proposed contract language that would have required arbitration for all disputes and prevented lawsuits being filed over anti-competitive practices.

Sutter’s business practices have previously been the subject of lawsuits and an investigation by the state attorney general’s office.

Sutter officials disputed the claim that they have higher reimbursement rates and argued that they have reduced costs by more than $300 million in recent years. They argued that the proposed arbitration language was standard and had already been in previous versions of the contract.

The details of the new contract were not released Friday, but both sides appeared to be claiming victory.

“Blue Shield negotiates with providers with the goal of obtaining rates that help us keep healthcare coverage affordable,” the insurer said in a statement today. The company said it was “pleased that our existing legal rights and those of our customers have been protected.”

“The principles Blue Shield fought for in this negotiation with Sutter have been preserved,” the statement said. Sutter Health Chief Medical Officer Dr. Steve Lockhart said in a statement that the final agreement was “extremely close to the reasonable offer we made to Blue Shield several months ago.”

“We take seriously our role in helping control rising health care costs, and the contract we reached with Blue Shield reflects our significant progress,” Lockhart said.

Sutter officials said the new contract preserved language on arbitration that had existed in previous contracts.

In the Bay Area, the nonprofit Sutter Health network operates facilities in communities including San Francisco, Oakland, Antioch, Novato, Burlingame, Castro Valley, Vallejo, Menlo Park and Santa Rosa.

--Bay City News

--Image via Shutterstock

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