Blue Shield/Sutter Health Dispute Has 280,000 Looking for New Doctors

Monday, January 26, 2015

A dispute between Blue Shield of California and the Sutter Health network of providers has 280,000 customers in Northern California searching for new doctors.

The fireworks began long before their contract expired December 31, leaving Sutter customers who signed up with Blue Shield during open enrollment facing the prospect of out-of-network charges for visiting their doctors and hospitals. The change will begin taking effect in April if the two don’t reach agreement.

Access to particular medical practitioners is a critical reason for choosing a particular insurer. So, many who signed up with Blue Shield were not pleased to find that the contract between the health industry giants expired in a storm of accusations.

Blue Shield accuses Sutter, which operates 23 hospitals, of charging way more than other providers and wants a rate rollback. Sutter disputes that and wants to short-circuit lawsuits alleging anti-competitive behavior, not just medical disputes, by requiring binding arbitration instead of court review.

Blue Shield spokesman Steven Shivinsky told KQED why the insurer didn’t want that in a new contract: “We’d be telling our self-funded customers, you cannot sue Sutter for anti-competitive business practices in open court.”    

That’s what UFCW & Employers Benefit Trust (UEBT) has already done. The representative of 100,000 grocery workers filed an anti-trust suit against Sutter, alleging unlawful practices that included limits on sharing cost information with patients.

Aaron Neinstein, an endocrinologist at UC San Francisco Medical Center, told the Santa Cruz Sentinel it was a “game of chicken.” Each side blames the other, of course, while Santa Cruz insurance agent Pamela Fugitt-Hetrick opined that, “Both sides are equally at fault.”

Both sides are also making a lot of money these days, according to the San Francisco Chronicle. The not-for-profit Blue Shield had profits of $171 million in 2013 and the nonprofit Sutter made $300 million. They had revenues, respectively, of $10.5 billion and $9.6 billion.  

Although figuring out who the bigger villain is might be tough, it’s not hard to figure out who the victims are.

The Sentinel reported that 95% of the 2,700 employees in the Pajaro Valley Unified School District opted for Blue Shield over two competitors when they signed up for coverage because of access to doctors at Palo Alto Medical Foundation, a Sutter affiliate. Now their doctors will be outside the Blue Shield network and prohibitively more expensive.

Sutter proposed that Blue Shield let customers keep their doctors this year while the two settle their differences. Last week, the insurer countered with an offer to extend the contract for two years, trying to tie up Sutter as it maneuvers to establish its own Kaiser-like health insurance plan.

The dispute could last awhile.

–Ken Broder


To Learn More:

Blue Shield Responds to Sutter Health: Give Us Two More Years (by Kathy Robertson, Sacramento Business Journal)

Sutter Health to Blue Shield: Extend the Contract (by Jondi Gumz, Santa Cruz Sentinel)

Blue Shield, Sutter Impasse About More than Money (by Lisa Aliferis, KQED)

Sutter Moves to Launch Its Own Health Plan in Sonoma County (by Artin Espinoza, Santa Rosa Press Democrat)

Leave a comment