Costs could soar in 2023 for thousands who use Fresno’s biggest hospital system. Here’s why
Members of at least one major health insurance plan in the Fresno area have received letters in recent weeks notifying them that the region’s largest hospital system will no longer be in their health-care network when 2023 begins in a few weeks.
The letters from United HealthCare have come as that insurer and others continue 11th-hour negotiations with Clovis-based Community Health System, also known as Community Medical Centers, to renew expiring contracts and wrangle over reimbursement rates for hospital care for their commercial insurance plan members.
Expiration of the contracts could potentially throw into disarray health services for thousands of Fresno-area residents insured by those companies.
“The current contract between Community Health System and several health insurance organizations is set to expire on Saturday, December 31, 2022,” Community said in a statement on its website. “We are continuing negotiations for a new contract to continue access to the Health System’s hospitals and clinics.”
The negotiations revolve around what Community describes as rising costs because of the coronavirus pandemic over the past two years, “combined with extraordinary inflation” and other increased expenses. Community operates Community Regional Medical Center in downtown Fresno, Clovis Community Medical Center in Clovis, the Fresno Heart & Surgical Hospital in northeast Fresno and Community Behavioral Health Center.
The negotiations also include services at Community Subacute & Transitional Care Center, Community Home Health and Community Health Partners.
“Health care systems like Community simply need the health insurance plans to acknowledge the unprecedented cost challenges of delivering care to the residents of the Central Valley and join us in reaching a fair and reasonable agreement,” said Aldo De La Torre, Community’s senior vice president for network development and insurance services.
For its part, United HealthCare asserts that Community is being unreasonable in what it wants from the insurer.
“Community Medical Centers is demanding an egregious and unreasonable rate increase that would result in significantly higher health care costs for Fresno-area residents and employers. This is not affordable or sustainable,” a United HealthCare spokesperson said in a statement emailed to The Fresno Bee.
“We’ve offered Community Medical Centers market-competitive rate increases that will ensure its hospitals and facilities continue to be fairly compensated for the care they provide to our members.”
It’s unclear just how far apart the two sides are. But, the UHC spokesperson added, “we remain fully committed to good-faith negotiations with Community Medical Centers so that the people we serve have continued access to the health system at an affordable cost.”
In or out of network
The potential for Community’s hospitals to become out-of-network for insurance plans could mean substantially higher out-of-pocket costs for insured members, or force those members to seek hospital care at other facilities that remain in their plan’s network.
Insurers pick up a much larger share of the medical bills incurred at in-network facilities. But if insured patients seek care at an out-of-network hospital, the patient faces a much higher proportion of the bill.
“You may continue to see your health care professional as out-of-network, but your costs will increase or you may have to pay the full costs for services you receive,” United HealthCare’s letter to members said.
For members who are receiving ongoing treatments for medical conditions, United HealthCare’s letter notes that they can apply to the insurer for “continuity of care” that would continue to pay in-network costs even if their hospital or provider leaves the network.
In addition to United HealthCare, Community’s remaining unresolved contracts are with Anthem Blue Cross and Cigna. Representatives of Anthem Blue Cross and United HealthCare acknowledged to The Fresno Bee this week that their companies remain engaged in negotiations with Community.
Another insurer, Aetna, reported to The Bee that it is in ongoing negotiations with Community for its Medicare HMO (health maintenance organization) contract, but that its commercial and Medicare contracts are not affected by the negotiations.
Most contracts between insurance companies and hospital providers are multi-year agreements, and they don’t all renew at the same time, Community’s De La Torre said.
“We have been successful in renegotiating with some health plans and are working diligently with others to ensure our patients continue to have access to our hospitals and clinics,” De La Torre added. “This situation is not unique to Community Health System or uncommon.”
While it may be alarming for a patient to receive a letter from their insurance company that their hospital will be dropped from their plan’s care network, “sometimes these notification letters are sent early, which is a routine part of the negotiation process,” Community noted on its website. “More often than not, negotiations are successful and agreements are reached.”
“In our entire history of working with health plans, we have never had to go out of network – and we sincerely hope that’s not the case this time,” the company added on its website.
Rising expenses, costs of care
As the negotiations continue between the hospital organization and insurers, Community’s De La Torre said that insurers are able to annually raise the premiums they charge to members “while offering reimbursement increases to hospitals and other providers that do not even come close to addressing our current inflation rate, much less the enormous cost increases since the pandemic that continue to plague large hospitals.”
Community’s website statement notes that its Fresno and Clovis hospitals cared for more COVID-19 patients than all hospitals in San Francisco combined, creating a burden that left the company with “no choice but to pay exorbitant prices for supplies and 4 to 5 times the rate for traveling nurses and other clinicians during COVID-19 surges.”
And while Community and other health systems qualified for government subsidies during the pandemic, “reimbursements are sluggish,” the statement added. “For example, we are waiting for over $200 million in (federal emergency) reimbursements with no clear timeline for payment.”
In its 2022 annual report, Community reports that it had nearly 60,000 inpatient admissions and more than 176,000 emergency room visits. Those figures include more than 11,000 COVID-19 patients. The hospital system estimates that the coronavirus pandemic added about $219 million to its operating costs.
A database of hospitals’ financial information by the National Academy for State Health Policy indicates that Community Regional Medical Center and Clovis Community Medical Center did feel the effects of the coronavirus pandemic.
Hospital operating costs per discharged patient at Community Regional climbed from under $16,000 in 2019 to almost $20,000 in 2021, according to the NASHP database. At Clovis, the operating costs per discharged patient rose from about $10,600 in 2019 to more than $12,600 in 2021.
However, the database also reflects that while Community’ Regional’s and Clovis Community’s operating costs per patient in 2021 were the highest they’d been in at least 10 years, those costs were outpaced by net patient revenues per discharged patient.
The result, according to the NASHP database, was an operating profit of $4,335 per discharged patient at Community Regional – the lowest it’s been since 2017, and down from almost $13,000 per patient in 2020, the first year of the pandemic, but a profit nonetheless. Community Regional’s operating profit per patient in 2021 was higher than other nonprofit hospitals in the central San Joaquin Valley, including its sister hospital in Clovis as well as Saint Agnes Medical Center in Fresno, Madera Community Hospital in Madera, and Kaweah Health Medical Center in Visalia.
Community’s own independent financial audits also reflect that the organization’s annual revenues from all sources, including donations and investment gains, have exceed expenses since at least 2015. For 2021, the most recent available audit, the system realized net income after expenses of more than $64.1 million, and a gain in net assets of more than $94.2 million. Changes in net assets can include funds released for equipment acquisition and changes in pension obligations.
In previous years dating to 2015, net income and changes to assets have wobbled, but have not dipped into the red:
2020: Net income of almost $96.8 million, increase of net assets of $100.4 million.
2019: Net income of about $141.2 million, increase of net assets of $117.7 million.
2018: Net income of about $90.8 million, increase of net assets of about $108.5 million.
2017: Net income of about $35.8 million, increase of net assets of about $48.1 million.
2016: Net income of about $100.1 million, increase of net assets of about $102.3 million.
2015: Net income of more than $135 million, increase of net assets of about $119.5 million.
UnitedHealth Group, the parent company of United HealthCare, reported in its latest earnings statement that its net earnings through the first nine months of 2022 were more than $15.3 billion, compared to about $13.2 billion for the same period of 2021.
Anthem Blue Cross is part of Elevance Health, which reported net earnings of more than $5 billion from January through September 2022, up about 1.8% from the first three quarters of 2021.
Cigna Corporation’s net income through the first nine months of 2022 amounted to more than $5.5 billion, up from about $4.3 billion in 2021’s first three quarters.
