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Negotiations continuing between Memorial and Anthem

The 10-month negotiations between the city’s largest health care provider, the Memorial Health System, and its biggest commercial health insurance contractor, Anthem Blue Cross Blue Shield, appear to be nearing a resolution, Memorial’s president and CEO Scott Cantley said Monday.

The protracted negotiations over reimbursement rates – what the insurer pays the health system for services performed for its members – have been settled, Cantley said, but a number of details remain to be worked out, included Anthem’s insistence on using a new tracking and auditing system that will drive up Memorial’s billing and accounting costs.

“We started negotiations in March in hopes of avoiding this,” Cantley said. “When we last were in negotiations with Anthem eight or nine years ago, it was the same thing. The nature of it is, nobody is willing to give ground until there’s a crisis.”

The negotiations missed one deadline – Dec. 31 – and were extended for a month.

“We made them three counteroffers just in the past week, and we’ve essentially agreed on rates,” he said. “We’re really hopeful, but they want a payment methodology so rare we would have to create a new system to manage it.”

Down-to-the-wire negotiations are not unusual between insurers and health care systems. The two are at odds, with insurers invested in keeping reimbursement rates low and health care providers vying to keep their compensation up to maintain revenue.

Anthem and Memorial have not fought the battle in public, but they have presented their sides in news releases. Anthem has claimed that Memorial’s rates are higher than other comparable operations in the region and that the system is seeking “double digits” in increases.

“We have offered fair payment increases that maintain affordable access to care for our customers,” Jeff Blunt, public relations director for Anthem in Ohio, said in an email last week.

The amounts the insurer refers to were not disclosed, but on Monday Cantley offered data showing that Memorial is exactly on the national average in its aggregate charges expressed as Medicare spending per beneficiary.

With more than 120,000 items in its Chargemaster system, Cantley said, inevitably some items will be higher and some lower than national averages. The organization is constantly monitoring its charges, said vice president and chief financial officer Scott Silvestri, and has the entire array audited by a third party every several years.

“We go to great lengths to keep our prices at the national average, and in total we know our costs are in line with where they should be,” said Cantley.

The agreement is crucial for Memorial and important for Anthem.

Cantley said 70 percent of Memorial’s patients are either Medicare or Medicaid recipients with reimbursement rates fixed by the government which are well below the system’s costs.

“We lose money on all of those,” he said.

The system depends on commercial insurance patients to make up the difference, and Memorial said in a statement on its website that it has lost money in two of the past three years. In 2017, the most recent IRS 990 federal tax statement available, Memorial indicated it had an operating deficit of $9 million on revenues of about $440 million.

Anthem said it needs to negotiate low rates to keep its premiums to customers down. The company in the third quarter of 2019 declared an operating gain of $1.528 billion and issued a dividend of 80 cents per share.

Blunt said Anthem has about 15,000 members in Washington, Monroe, Noble, Morgan and Athens counties, not all of whom receive care at Memorial.

Michael Kelly can be reached at mkelly@mariettatimes.com.

Memorial Health System

• Largest health provider and employer in Marietta.

• Not-for-profit system.

• Depends on commercial insurance contracts to offset losses from Medicare and Medicaid.

Anthem Blue Cross Blue Shield

• Largest commercial insurance provider for Memorial.

• Second largest health insurance company by membership in the country: 40.2 million policies.

• Operating gain, third quarter 2019: $1.528 billion.

Source: Times research.

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