Opposite Opinions on Cost of Care End Payer-Provider Contracts

Two major payers were unable to seal their deals by the first day of the new year due to conflict over the appropriate cost of care.

UnitedHealthcare and Houston Methodist have ended their partnership. The deadline for their contract was January 1, 2020 and they were unable to come to a compromise.

The payer and hospital had been serving Texans together for a little over two decades. However, that ended in a tense contracting conflict. Reimbursement rates were at the center of the controversy.

UnitedHealthcare sought to adjust the reimbursement rates to more accurately reflect the cost of care, the payer explained.

“Care at Houston Methodist Hospital is significantly more expensive than care at other top-ranked hospitals in Texas as well as some of the most prestigious hospitals in the entire country,” the payer said in a statement published by ABC13. “Every time we attempted to reach a compromise during the negotiations, Methodist responded with proposals showing that it is intent on maintaining its position as one of the most expensive health systems in the country.”

The payer went on to allege that the health system has not only driven up healthcare costs for patients and contributed to the high overall healthcare spending, but also that Methodist used the revenue for marketing. Instead of putting the money back into serving its patients, UnitedHealthcare says, the funds went toward erecting billboards and paying for radio ads.

According to materials published by UnitedHealthcare, Houston Methodist is in part responsible for escalating costs in Houston. 

Compared to other cities in its region, Houston itself has a high level of healthcare spending, 32 percent more expensive than Austin or San Antonio. Houston Methodist, a nationally ranked teaching hospital, has prices that are 66 percent more expensive than hospitals in San Antonio and 44 percent more expensive than those in Austin. 

Even in Dallas, which has only 4 percent lower overall healthcare spending than Houston, Houston Methodist’s prices are nearly a third (30 percent) higher than Dallas hospitals.

Houston Methodist, however, offers a different narrative.

“It's obvious that UnitedHealthcare is more concerned with its bottom line than with thousands of patients having access to the No. 1 hospital in Texas,” the hospital said in its statement to ABC13.

“We are disappointed by United's actions-but not surprised given its aggressive actions against providers across the country. United's unfortunate decision—and disruption to their members' in-network access to Houston Methodist—is forcing employers and consumers to pick different health care options for this year.”

Dicey contracting situations this year for UnitedHealthcare included Boca Raton Regional Hospital and North Carolinian hospitals where patients went for three months without coverage as the dispute settled.

Meanwhile, in California, thousands of patients are in the crosshairs of a contract dispute between Cigna and St. John’s Oxnard and Camarillo hospitals.

With Houston Methodist’s contract termination still fresh, the situation feels like déjà vu. Like Houston Methodist, Dignity Health’s contract with Cigna ended January 1, 2020 and, also like Houston Methodist, reimbursements are at the heart of it all. Dignity sees Cigna’s actions as greedy and Cigna sees Dignity’s refusal of pay cuts as out of touch with the regional rates.

These two examples demonstrate the common disconnect between payers and providers and the potential damages of failing to overcome those differences. As a result of the terminated contract between UnitedHealthcare and Houston Methodist, as many as 100,000 UnitedHealth members will be out-of-network at Houston Methodist hospitals. This means high out-of-pocket healthcare spending for any who wish to continue to use these hospitals for treatment after the transition period.

At Xtelligent Healthcare Media’s Value-Based Care Summit in 2019, successful payer-provider partners shared the key to a strong payer-provider relationship.

Speaking specifically to value-based reimbursement, Worthe Holt, Jr., Humana’s vice president of the office of the chief medical officer, and Larry Blosser, outpatient medical director at Central Ohio Primary Care Physicians (PCP), discussed how critical communication is. They described a chain of interactions that lead at least a couple of Humana and Central Ohio PCP employees to connect on nearly a daily basis.

Holt enumerated some questions Humana asks the provider organization when they meet for Joint Operating Committee meetings, ranging from areas for Humana to improve to hearing the provider’s thoughts on recent Humana reports.

In some cases, the summit speakers said, a positive relationship with providers can go a long way, extending beyond that isolated partnership by enabling better provider communication with other payers as well.

These cases underscore the disconnect between payers and providers on the appropriate cost of care.