Providence, Premera spar

The region’s largest health insurer is in a high-stakes contract fight with Sacred Heart Medical Center’s parent company that could pin higher medical bills on patients next year.

It’s a dispute among health sector leaders earning multimillion-dollar profits at a time when businesses and many workers are struggling to pay double-digit premium increases nearly every year, and medical bills continue to bankrupt families.

While both sides expect to reach a deal over reimbursement rates, failure to do so would mean that Sacred Heart, along with Holy Family Hospital, would not be part of Premera’s provider network. If that scenario unfolded, patients with Premera insurance receiving care at Providence hospitals could be charged for the large unpaid portion of their bills.

Insurance brokers and consultants received the news as they met with Premera executives this week to piece together health plan options for business and government agency clients.

The contract between Premera and Providence expires Jan. 31.

John Fletcher, chief executive of Providence Health & Services, wrote a memo last week that stated, in part: “We feel it is important to give everyone ample notice so that patients can make informed choices during the open enrollment period. This will ensure our patients have the opportunity to choose another insurance provider should they wish to do so.”

Premera says Providence is seeking a contract so rich it would add as much as $36 million to premiums that are already rising to new heights.

“That’s just for Providence,” said Rich Maturi, senior vice president of health care delivery systems at Premera. “If we extended that kind of deal to everyone, a sort of ‘what’s good for Providence is good for all hospitals,’ that would add $180 to $270 million to our customers.

“That’s a financial burden we don’t want to pass along.”

Premera is sympathetic to the rapid rise in costs faced by hospitals, Maturi said, but it wants hospitals to eliminate wasteful spending and run more efficiently. It’s the surest way to slow the soaring costs of premiums that are consuming the paychecks of workers and pinching businesses.

Suzanne Daly, director of contracting for Providence, said the hospitals run more efficiently than most others in the state. The system exceeds charity care guidelines that drain money from the bottom line and has plans for expansion projects to meet the emerging trends of more patients with more severe medical conditions.

Providence makes significant contributions to communities, Daly said, adding that maintaining that status requires a fair reimbursement from private payers such as Premera – especially since Medicare and Medicaid reimbursements fall short.

Financial records show Providence Health & Services last year reported earnings of $166.9 million for its eight hospitals in Washington - including Sacred Heart and Holy Family Hospital in Spokane – and two hospitals in Western Montana. The hospital system says it reinvests the money in communities for programs, technology, equipment and construction.

Premera’s cash surpluses have swollen to $789 million. The insurer says the reserves pay for new technology, provide stability and offer a financial check against the possibility of a pandemic.

The problems between Providence and Premera are chronic. Providence made similar threats of backing out of Premera’s provider network in 2004, the last time the sides negotiated a contract. They eventually settled on a reimbursement rate that both sides kept confidential.