Thousands in Central Mass. could lose insurance coverage Jan. 1.

WORCESTER — Thousands of Worcester-area residents could lose their health insurance coverage Jan. 1 because of a dispute over the amount of cash going to hospitals to cover the cost of care.

Point32Health, the second-largest health insurer in Massachusetts that combined Harvard Pilgrim Health Care and Tufts Health Plan, announced that it failed to reach a new contract on medical reimbursement rates with UMass Memorial Health.

The development impacts 16,000 UMass patients who may have to scramble to find alternative insurance plans to cover the cost of seeing primary care doctors and specialists.

The problem extends to for-profit Tenet Healthcare Corp., owner and operator of Saint Vincent Hospital and MetroWest Medical Center in Framingham. A new contract on reimbursement rates stalled as both sides claim the other is negotiating in bad faith.

Neither Point32Health nor the hospitals disclosed how far apart they are on the numbers. The impasse also affects thousands of patients at Boston Children's Hospital.

Point32Health and UMass did not agree on a reimbursement rate for low-income patients covered by Tufts Health Direct. The change takes effect at midnight Dec. 31, and Point32Health said patients were notified and advised on how to select a new doctor or find alternative insurance.

UMass denied a request to interview Dr. Eric Dickson, the health system's president and chief executive officer. In a statement, UMass said it's negotiating new commercial contracts with Point32Health. The current ones expire at the end of this year.

"We will continue to work collaboratively toward a fair and equitable agreement that enables us to provide the exceptional care that our patients across Central Massachusetts expect and deserve," the statement said.

It further explained UMass has separate contracts with Point32Health for its Medicare Advantage products (Tufts Medicare Preferred and Harvard Pilgrim Stride) and Tufts Health Direct, a qualified health plan offered through the state's health connector.

UMass said it does not expect to renew Tufts Health Direct and sent letters to enrolled patients to explain other managed care plans that provide access to doctors in the UMass system.

Tenet declined a request to interview Carolyn Jackson, Saint Vincent's chief executive officer. The Dallas-based for profit provides in-network care for nearly 50,000 Tufts and Harvard Pilgrim patients yearly through Point32Health and claims bad faith on the part of the insurer is keeping a deal from getting done.

"Unfortunately, Point32Health is not negotiating in good faith and our hospitals believe patients should be informed about potential network disruption so they can make the best health plan enrollment decision for their families during open enrollment."

A "challenging negotiation" is how Point32Health described the landscape because Tenet is demanding significant reimbursement rates over multiple years. They include 30.55% over four years for commercial plans and 26% over four years for qualified health plan members, according to Point32Health. Those double-digit increases exceed the 3.6% health care cost growth benchmark set by the state's Health Policy Commission.

Point32Health also mentioned insurance companies face rising medical costs and that reimbursements are a major factor in those costs. Given those constraints, the insurer called Tenet's demands "not tenable."

Also, Point32Health said Tenet prioritizes its shareholders and executives, noting that Tenet's stock price shot up more than 75% last year while its chief executive officer received more than $18 million in compensation.

"With Steward Health Care finally vanquished from the Massachusetts health care landscape, we cannot allow another for-profit company to extract local resources for the benefit of its executives and out-of-state interests," reads Point32Health's statement. "Unfortunately, it is the people of Worcester and surrounding communities who will ultimately bear the burden of Tenet's unreasonable demands."

While negotiations will continue to reach an agreement before the current contract expires at the end of this year, Point32Health said Tenet "does not seem interested in doing the same."

Some health care watchers believe what is playing out is another example of a dysfunctional health care system.

It's no secret that Massachusetts hospitals face strong financial headwinds. The Center for Health Information and Analysis, an independent state agency, recently reported that 57% of hospitals in the state have negative operating margins. That means a majority don't have enough revenue to meet expenses for patient care.

Three UMass entities had negative operating margins for the quarter that ended June 30, according to the center: Harrington Memorial (-5.1%), Marlborough Hospital (-0.3%) and UMass Memorial Medical Group (-3.9%).

Tenet's four Massachusetts entities had negative operating margins for the same period: Saint Vincent (-0.6%), Saint Vincent Medical Co. (-47.1%) MetroWest Medical Center (-11%), and MetroWest Physician Services (-41%).

Contact Henry Schwan at henry.schwan@telegram.com. Follow him on X: @henrytelegram.