Erlanger looking to cut ties with United Healthcare

Sept. 18--The Chattanooga region's largest hospital system may soon be out of network for thousands of patients with UnitedHealthcare insurance if a bitter dispute with Erlanger Health System over payment rates is not resolved by the end of the month.

Erlanger officials say the current dispute, which centers on a contract with United's Medicaid product, is the final straw in a long-strained relationship between the public hospital and the for-profit insurer.

If a deal is not reached, children and pregnant mothers who have United insurance through TennCare will be out of network on Oct. 1. Erlanger has the area's only children's hospital.

For patients who have United insurance through their employers or through Medicare Advantage, Erlanger would be out of network as of Jan. 1, 2015. That would include all of Erlanger's affiliated physician groups and community health centers.

United officials say they still hope to reach some kind of agreement on the TennCare contract. Officials with both groups will meet today to continue talks.

United spokeswoman Molly McMillen said United has had a relationship with Erlanger for more than 20 years, "which suggests we are in fact good partners."

But Erlanger officials say the partnership has never been smooth.

"No other insurer has been this difficult to work with," Erlanger CEO Kevin Spiegel said.

The hospital has contracts with United for commercial insurance, Medicare, and TennCare for children and pregnant women -- for which United is a "managed care organization," or MCO.

As an MCO, United handles TennCare claims for the state, and TennCare pays the company a flat per-member, per-month fee, regardless of how much care a patient receives.

United's gross profit from TennCare was nearly $422 million in 2013 and $490 million in 2012, according to an equities analysis by CitiBank.

When United originally approached Erlanger with a TennCare payer contract five years ago, the payment rates the insurer proposed were so "ridiculously low" that the hospital agreed only to a limited pediatric and maternity plan, said Steve Johnson, vice president of payer relations with Erlanger.

The setup has been taxing, Erlanger says.

Even though Erlanger doesn't contract with United for adult TennCare services, it still must treat those United TennCare patients who come to the hospital needing emergency and trauma care. It is the region's only Level 1 trauma center.

United has been paying "pennies on the dollar" of what should be standard for its TennCare patients, Erlanger argues, and repeatedly denies the hospital's claims. The hospital sued United over this issue five years ago, and the litigation is ongoing.

In the last year, however, TennCare established a new payment spectrum that all TennCare MCO reimbursements must fall within to be "reasonable."

After the new spectrum was set, Erlanger decided that it could now negotiate with United to cover all of its TennCare patients.

"If we had a full-service contract, United would have to pay in-network prices for trauma care," Johnson said.

Hospital officials say they made an offer that was about 75 percent of the highest possible reimbursement. United rejected it.

"As a supporting state partner, it is our role to be good stewards of taxpayer dollars," McMillen said. "A rate increase has been offered, and declined thus far."

Spiegel said the hospital's offer is "well below" what the other large hospitals in the state are getting, and that United's stance is "unacceptable."

Erlanger is the third-largest TennCare provider in the state, and takes the highest percent of TennCare patients in the region.

"They are willing to walk away from the entire Medicaid population in East Tennessee," Spiegel said.

Because of this, he said, the hospital has informed the insurer that it will end its commercial and Medicare Advantage contracts with United as well.

If the contract is terminated, United members would be steered to other participating physicians in Chattanooga and the surrounding area, McMillen said.

For "adult and most children's services," they will direct patients to Parkridge Health System, she said.

While Parkridge East offers maternity and NICU services, it does not have most of the pediatric specialities that T.C. Thompson Children's Hospital at Erlanger offers. For many area surgeons and other pediatric specialists, Erlanger is the only hospital where they can perform procedures.

For that kind of care, United would send patients to Vanderbilt Children's Hospital in Nashville and East Tennessee Children's Hospital in Knoxville.

Contact Kate Harrison Belz at [email protected] or 423-757-6673.

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