insurance

Blue Cross, Steward tangle over future contract

Posted 7/16/12

PROVIDENCE – Landmark Medical Center’s current contract with Blue Cross & Blue Shield of Rhode Island expires July 16. As a result of a breakdown in negotiations over a future contract with Steward Health Care of Boston, the proposed buyer of Landmark and the Rehabilitation Hospital of Rhode Island, the health insurer sent out letters to 198,000 of its members on July 6, alerting them that Landmark may be dropped from the Blue Cross network as of Aug. 1. For the Rehabilitation Hospital, the effective date of being dropped from the Blue Cross network is Aug. 31.

The number of members receiving the letter is about one-third of Blue Cross’s total membership of 600,000, a response reflecting what Michele Lederberg, Blue Cross general counsel and chief administrative counsel described as conditions set by the R.I. Department of Health about who needs to get notified of potential substantial changes in the network.

In addition to those households living in the Landmark service area, Lederberg explained, the letter was also sent to members who work for self-funded entities in the region – city employees of Woonsocket, the city’s school department, and self-funded businesses in the region, such as CVS Caremark.

Blue Cross and Steward paint completely different pictures of the negotiations to date.

According to Christopher Murphy, spokesman for Steward, the Boston-based hospital group that owns 11 hospitals in Massachusetts, Steward submitted a contract proposal that called for Landmark, as a part of Steward, “to continue to be reimbursed below the state average, with a significant percentage of reimbursement tied to quality.”

However, in the third year of the contract, Murphy said Steward proposed that it “move to a full-risk capitated payment model.” Murphy claimed that it would be the “first risk/global payment contract in Rhode Island. Murphy said that Blue Cross rejected the proposal and said it was not interested in continuing discussion, according to Murphy.

Blue Cross’s Lederberg said that had been numerous proposals back and forth with Steward. “We have an obligation to our members to reach an agreement, in line with reimbursement compared to the rest of our network,” she said. “Steward did not accept the statewide hospital quality program.”

The question about what is reasonable in terms of reimbursement is an issue that has dogged Landmark’s financial saga over the last four years. Efforts to mediate a legal dispute about money owed by Landmark to Blue Cross and Landmark’s claim of inadequate reimbursement from Blue Cross have apparently broken down, according to both sides. The mediation had been suggested by Superior Court Judge Michael A. Silverstein earlier this year.

Steward “has no timetable for closing the transaction” with Landmark, according to Murphy, who said that are still outstanding conditions in the asset purchase agreement, but did not identify what they were.

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