Arkansas Heart Hospital said it will likely be out of UnitedHealthcare’s insurance network if its reimbursement rates aren’t increased, which would make it the second Arkansas hospital system that hasn’t reached an agreement with the insurance company since July 1.
“Arkansas Heart Hospital’s perspective is that we’re not being paid for the services that we’re providing,” said Dr. Bruce Murphy, CEO of the Little Rock hospital system, which includes a hospital in Bryant.
Arkansas Heart Hospital is “tired of getting paid roughly half of what” other hospitals are being paid, “and it’s time for change,” Murphy said.
The Heart Hospital’s contract with UnitedHealthcare is in a monthly extension, and they are negotiating a new contract. Murphy said that he wasn’t sure when the contract would expire but that the expiration wasn’t far off.
“And the likelihood that we can or cannot come to some sort of near parity agreement is all dependent on United. It is not dependent on us,” Murphy said. “If there’s an impasse, it will be because of them, because we know what we’re worth.”
UnitedHealthcare said in response to questions from Arkansas Business that it delivered a proposal in June to the Heart Hospital with rate increases and is waiting on a counterproposal.
UnitedHealthcare said that health care providers that demand rates similar to their competitors will significantly drive up health care costs for its policyholders and employers who use UnitedHealthcare for self-funded commercial health plans.
United said that rising health care costs make it difficult for employers who self-insured to continue offering their employees those benefits. “That is why they have asked UnitedHealthcare to advocate on their behalf by working to keep health care costs down through effective negotiations with the physicians and hospitals in our network,” United said. “We take the responsibility of being the fiduciary for our customers seriously and negotiate fully and fairly on their behalf to be certain they are receiving access to quality care at affordable rates.”
On July 1, Conway Regional Health System ended its contract with UnitedHealthcare after it couldn’t reach an agreement over rates. But contract negotiations have continued since then.
“We have been encouraged by improved responsiveness and productive dialogue in our recent conversations,” a Conway Regional spokesperson told Arkansas Business by email last week. “Patient care remains a priority for Conway Regional, and we are committed to resolving contractual concerns.”
UnitedHealthcare said that its goal is to reach an agreement with Conway Regional that is affordable for Arkansans and employers.
Conway Regional CEO Matt Troup said UnitedHealthcare was paying Conway Regional about 50% less than hospitals in its market for in-patient procedures, and on the outpatient side, the difference was even more dramatic.
Conway Regional’s hospitals, facilities and physicians are now out of network for employer-sponsored, individual and Medicare Advantage plans with UnitedHealthcare. Conway Regional has about 15,000 patients insured by a UnitedHealthcare plan, and about 10% of Conway Regional’s revenue comes from the insurer’s patients.
UnitedHealthcare said that it negotiates about 2,000 provider contracts annually and most of those result in renewed contracts. In Arkansas, Conway Regional was the first hospital to leave United’s network in six years.
Washington Regional Medical System of Fayetteville also is in contract talks with the insurance provider, which is based in Minnetonka, Minnesota.
“Washington Regional and UnitedHealthCare continue to work diligently towards reaching a new contract, and we are optimistic that we can reach a mutually beneficial agreement in a timely manner to avoid unnecessary disruption,” Lenny Whiteman, vice president of managed care, said in a statement to Arkansas Business.
A hospital system ending a contract with an insurance company is a harsh move, and typically the last resort.
“It shows when a hospital does that how they feel about the contract renewal that they’ve been offered that it’s just completely unfair to what they feel the market should pay,” said Bo Ryall, president and CEO of the Arkansas Hospital Association.
The move also is a burden on the hospital’s finances, he said.
“But [hospitals] feel they have to make the statement that we have to have more payment from a particular insurer to survive,” Ryall said.
He said that hospitals have done great work by reducing their expenses.
“And the pressure point now is reimbursements, whether that’s government payers with Medicaid and Medicare, which they’re not moving right now as far as their payments,” Ryall said. “So now it puts even more pressure on negotiations with insurers.”
Arkansas hospitals are being paid “very low” rates compared with other hospitals around the country.
“They’re looking at their contracts with a greater eye right now and saying, why are we not being paid what the market is bearing in other communities or other states?” Ryall said.
Up until 2021, hospitals had no idea what insurance companies paid other hospitals for their services.
That changed with the Centers for Medicare & Medicaid Services’ hospital price transparency rules. Hospital price transparency was designed to help patients know the cost of a hospital item or service before receiving it. Starting Jan. 1, 2021, each U.S. hospital is required to provide clear, accessible pricing information online about the items and services they provide, according to CMS, although some hospitals’ prices aren’t clear and their websites make it difficult for consumers to navigate and compare prices.
Murphy said that about three months ago he discovered the price differences between the Heart Hospital and other Little Rock hospitals using the public information.
“The feeling I had is, oh, for goodness sakes, this explains everything,” he said.
For about two years, the hospital’s senior staff held weekly meetings looking for ways to slash costs “in order to survive,” Murphy said.
Since the pandemic, the Heart Hospital has seen its prices for labor soar. Its equipment and medical devices prices rose 45%, while its pharmaceutical prices climbed 40%-50%.
“Now we have this revelation that we would not be in such a struggle, I’ll say financially, if we had been paid anywhere close to the same rates as our colleagues,” he said.
Murphy said UnitedHealthcare pays the Heart Hospital below market rates for several procedures including heart bypasses, for which it receives $32,000 while United pays another Little Rock hospital between $62,000 and $64,000.
UnitedHealthcare said contracts with providers take into account several factors including the number of services provided by a hospital, the complexity of the services a hospital offers, and the quality of care and cost of the service provided.
“For example, some of the hospitals Arkansas Heart has compared itself to have a far higher acuity of care needed for the patients they are seeing,” UnitedHealthcare said. “In other words, they’re frequently treating patients with a higher level of care needed due to the severity of their illness. This can also lead to longer stays in the hospital and higher levels of reimbursement.”
A Question of Fairness
Troup said that he can’t understand how one hospital would be paid 50%-60% more than another hospital for the same service.
“And so, the big policy question is, do we continue to tolerate that?” he said.
The health care system is largely funded and supported by private insurance companies. Hospitals don’t make margins off of Medicare and Medicaid patients and that isn’t sustainable, he said.
Last year, Conway Regional had its worst year on record with a $9 million loss, Troup said.
“We’re doing much better,” he said. “We’re still at a negative net income margin, but we have trended in the right direction.”
Hospital operating margins have improved this year, but most U.S. hospitals underperformed in June as high costs remain, according to Kaufman Hall of Chicago, which advises health care and education organizations and collects data from more than 1,300 American hospitals.
“As margins continue to stabilize on the surface, the gap between high-performing hospitals and those struggling in this new financial environment is widening,” according to a July 31 news release from Kaufman Hall.
Its report said that bad debt and charity care are increasing at hospitals, which have been affected by states stepping up efforts to redetermine Medicaid eligibility leading to more people being disenrolled.
In Arkansas, nearly 220,000 Arkansans have lost their Medicaid coverage since April 1.
“We’re going to continue to see this push toward private insurance funding the bill, which they have for a long, long time,” Troup said. “And I can understand from an employer’s perspective, enough is enough.”
Troup said that the reimbursement rates Conway Regional is seeking from UnitedHealthcare will be “a significant increase,” but declined to say how much other than it will still be lower than what other hospitals in the area are receiving.
Troup said that the costs will be more if Conway Regional and its network of doctors aren’t in UnitedHealthcare’s network.
“They created [the] market by entering into contracts at a substantially higher rate than Conway Regional, and when Conway Regional requests to be, not really at market, a little less than market, somehow we’re blamed for driving up the cost of care,” Troup said.
Troup said the pay inequity isn’t fair or reasonable.
“In Arkansas, when you’re a community-based health care organization, like we are with a 100-year history, we have an obligation to our staff to fight,” he said. “Because it’s their raises, it’s their organization, it’s their local health care that is very much at stake.”
He said requesting the higher rates is about having a level playing field, “where we can be compensated fairly and equitably for the services we provide so that we can continue to do so for the next 100 years.”