(This story has been updated with additional information.)
UMass Memorial Health and Blue Cross Blue Shield of Massachusetts have agreed to a three-year contract, according to the companies, which announced the deal on Nov. 13.
Nearly 200,000 patients faced the risk of having to find medical providers outside the UMass Memorial Health system if an agreement wasn’t reached by the end of this year.
“The new agreement aligns with our shared interest in making health care more affordable while providing the resources UMass Memorial needs to continue providing high-quality care,” reads a statement from both parties.
Negotiations had been in a stalemate for months over how much the health system wanted in reimbursements for patient care and how much the insurer was willing to pay.
Despite the deal, UMass Memorial Health leadership painted a picture of a health care system burdened with the skyrocketing cost of care and how to pay for it.
“In the coming years, safety net hospitals and health systems like UMass Memorial Health that care for underserved patient populations will continue to face mounting financial challenges due to federal policy and worsening economic conditions,” said Eric Dickson, president and chief executive officer of UMass Memorial Health. “Stakeholders across the health care ecosystem need to continue to collaborate differently to develop new solutions for reducing administrative burden for providers, creating new models for providing care in the home, and building more access to primary care.”
The insurer noted the deal avoids disruption in care for thousands of patients.
“We’re grateful for the care that UMass Memorial Health’s talented clinicians provide our members. I’m so pleased that, working together, our organizations have reached an agreement that maintains coverage without disruption,” said Sarah Iselin, Blue Cross Blue Shield of Massachusetts president and chief executive officer. “Our company looks forward to partnering with UMass to provide access to affordable, quality and equitable care in the years ahead.”
Thousands of patients had feared losing access to doctors they had grown to trust, and Blue Cross said it had already connected 32,000 of its 42,000 members who get their primary care at UMass Memorial Health with other providers in case a new contract wasn’t reached. The remaining 10,000 work at UMass Memorial Health, where they would continue receiving care.
UMass wanted a 3.6% annual reimbursement bump from Blue Cross, and higher payouts to nurse practitioners and physician assistants who handle more primary care responsibilities, given the industry’s shortage of those doctors. Blue Cross, said UMass Memorial Health, should reimburse nurse practitioners and physician assistants at the industry standard of 85% of what primary care doctors receive to deliver similar care.
Plus fund a portion of the health system’s internal quality rewards program for its primary care providers.
Blue Cross countered with a 3.58% yearly reimbursement increase, an amount in line with the annual 3.6% health care spending benchmark set by the Massachusetts Health Policy Commission. Balancing rising costs for providers while keeping premiums affordable for families, employers and workers was the insurer’s stated goal.
Blue Cross claimed UMass Memorial Health is one of the highest-paid health systems in the insurer’s network. The health system countered that assessment, saying as a safety net hospital it’s obligated to treat all patients and must invest in services to do it. Nearly 70% of patients at UMass Memorial Health get their care through government insurance programs that pay lower reimbursements compared to private insurance.
Despite those costs, the health system said its community hospitals are among the least expensive in the state.
To rein in costs, Blue Cross believes UMass Memorial Health should join the insurer’s value-based program that pays reimbursements based on quality, equity and the cost of care. Dickson told Blue Cross leadership at a health care summit last year that value-based care doesn’t work, and no other country does it.
Negotiations were covered by a cloud of financial problems for both companies.
Blue Cross reported an operating loss of $173 million for the first six months of this year, nearly twice the $94 million loss reported over the same six-month period last year. Higher claims than expected, especially from older patients, were partly to blame for the loss, according to Blue Cross.
To stem the financial bleeding, Blue Cross offered voluntary severance packages to roughly 800 employees older than 55 who have worked for the insurer for at least 10 years.
UMass Memorial Health reported an operating loss of $87.5 million for the nine months that ended in June in its current fiscal year, compared to a $22.1 million operating gain over the same period in the prior fiscal year.
The risk of enhanced premium tax credits coming to an end in the Affordable Care Act, and massive Medicaid cuts in the tax and spending package approved by the Republican-controlled Congress and signed by President Trump in July present additional revenue problems for UMass Memorial Health.
Contact Henry Schwan at henry.schwan@telegram.com. Follow him on X: @henrytelegram