$900 million from Blue Cross

Texas Health Resources and UT Southwestern Medical Center are seeking an increase of more than $900 million over the next 32 months from Blue Cross Blue Shield of Texas, according to an email the insurer shared with brokers in late September.

The increase will be necessary for Blue Cross members to remain in network with doctors and facilities that are part of Texas Health and UTSW, the email said.

“By any measure, the estimated increase of billions of dollars over 32 months is significantly more than inflationary pressures require,” the email said. “Agreeing to their proposed rate increases would certainly cause hardship for every business, municipality, federal employee and individual Texan served by Blue Cross and Blue Shield of Texas in the Dallas-Fort Worth metroplex.”

Blue Cross confirmed the emails were sent to brokers and consultants so they could explain why the state’s largest insurer is at odds with Texas Health and UTSW, the Dallas-Fort Worth market share leaders.

The health systems formed an alliance in 2015, known as Southwestern Health Resources, and that venture is negotiating a new contract with Blue Cross. After months of failed negotiations, Southwestern Health filed to end its contract and leave most Blue Cross networks on Oct. 4 unless a new deal is reached.

Southwestern Health sent notices of the potential change to the 459,000 patients who have received care from its providers since April 2021. Southwestern Health said it is the largest provider network in North Texas with more than 5,500 doctors and clinicians, 29 hospitals and more of 650 care access points.

It’s not uncommon for health systems and insurers to clash over contract terms and threaten to part ways. In most cases, differences are settled by the deadline — and financial details are usually kept confidential.

But in December 2016, when Texas Health and Blue Cross were in a contract battle, a Blue Cross executive said the provider was seeking a $57 million increase. Texas Health did not confirm the number, but CEO Barclay Berdan said at the time that any figure from Blue Cross “should be taken with a truckload of salt.”

This time, Southwestern Health officials declined to confirm the $900 million increase and suggested it was part of the negotiation process.

“In negotiations, one side always starts high and the other side starts low, and you move together in some way,” Chief Marketing Officer Darin Szilagyi wrote in an email. “We want an increase well below the inflationary pressures that we are all experiencing.”

While some said the requested increase was shockingly large, others pointed out that Texas Health and UTSW have the largest health care footprint in the region. They generate billions in annual revenue from Blue Cross patients.

“Thousands of North Texas patients trust our doctors and caregivers with their health every day — that’s millions of visits each year,” Szilagyi wrote.

Contract negotiations are ongoing, but the threat of ending network coverage could cause anxiety and disruption for patients. If Texas Health and UTSW do sever their ties, most Blue Cross members will have to pay high rates for out-of-network treatment or switch to other doctors and facilities in the Blue Cross network.

Patients with certain medical conditions may be eligible to remain with their current providers regardless of the contract. On its website, Southwestern Health said pregnant women in their second or third trimester are encouraged to apply for continuity of care.

In an interview last week, a Blue Cross executive said affordability remains a major issue with employer-sponsored coverage and individual health exchange plans. Members can’t afford large health insurance increases, said Shara McClure, senior vice president of health care delivery for Blue Cross Blue Shield of Texas.

At the time, she declined to say what amount was being sought from Texas Health and UTSW. She said it was a “significant increase” and the gap had not narrowed.

“We would be happy to reach an agreement,” McClure said. “We’re just not there. And right now we are very far apart.”

Southwestern Health cited the spike in inflation as a key factor in the negotiations. Inflation is at a 40-year high and recent reports from industry consultants show double-digit gains in labor, prescription and consumables costs, Szilagyi said.

“We ask [Blue Cross Blue Shield] to cover just a small portion of our increased costs so we can continue to provide high quality patient care,” Szilagyi wrote in an earlier email. “This includes fairly compensating our hard-working employees in this highly competitive market.”

He said Southwestern Health remains “hopeful to reach a viable agreement by the deadline.”

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