UPDATE: The Sutter Health network of doctors and hospitals proposed Monday, Jan. 19, to extend the current transition period with Blue Shield of California through the end of this year locking in 2014 contract rates and terms to prevent tens of thousands of patients from being displaced from their doctors, according to a press release.
Blue Shield has not announced whether or not it is accepting the offer. The contract between Blue Shield and Sutter Health expired Dec. 31, and the health insurance company announced it will reassign members to non-Sutter physicians.
"Our proposed longer-term transition agreement would help ensure patients have continued access in 2015 to the doctors Blue Shield promised them during open enrollment," said Stephen Lockhart, Sutter Health chief medical officer, in the press release. "We believe employers and Blue Shield members deserve the network they purchased."
Hundreds of thousands of people have been told they will need to switch doctors soon due to a contract dispute between Sutter Health and Blue Shield of California.
Notices sent to customers warn that as of Jan. 1 the health insurer canceled coverage for all hospitals and medical providers affiliated with Sutter Health.
Palo Alto Medical Foundation is part of the Sutter Health network of providers.
The cancellation affects 140,573 HMO members, who will get letters later this month warning that they will be assigned a new primary physician as of April 1, according to Blue Shield spokesman Steve Shivinsky.
In addition, letters have been sent to 4,413 PPO members who have used Sutter facilities in the past 12 months and another 139,338 PPO members living within 15 miles of a Sutter facility.
The letters inform patients that they can continue using Sutter providers until June 30, with some possible increase in out-of-pocket costs. After June 30, if no new contract is reached, Sutter will become an out-of-network provider and out-of-pocket costs will increase substantially.
The contract termination affects Sutter facilities throughout northern California, including all Palo Alto Medical Foundation locations.
Blue Shield is asking for a cut in reimbursement rates, and Sutter officials have asserted that the two sides remain "very far apart" on the financial terms of the contract.
"It's significant enough that it would have a devastating impact on Sutter Health's ability to meet our patients' needs," said Bill Gleeson, a spokesman for Sutter Health.
"This is really about a very large and powerful health-insurance company trying to cut back on the money it spends on actual patient care," Gleeson said.
Blue Shield, however, argues that Sutter's costs are well above those of other health care providers in the area and would remain so even if the company accepted the new reimbursement rates, in part due to the rapidly growing company's dominant market position in much of California.
Also at issue in the talks is a stipulation by Sutter that all unresolved disputes go to mandatory arbitration.
While Sutter officials maintain the provision was present in previous contracts, Blue Shield says the current stipulation would prevent both it and self-insured customers from suing in open court for anti-competitive business practices.
Sutter's business practices have previously been the subject of lawsuits and an investigation by the state attorney general's office.
"The new provision created by Sutter appears driven by their desire to avoid public scrutiny of business practices that have been frequently criticized by industry participants and observers," Shivinsky said in a statement.
Shivinsky said Blue Shield gave its best and final offer in the first few days of January and was happy to continue talks, but "at this time it is up to Sutter to initiate the next meeting."
Gleeson said on Tuesday, Jan. 13, that the two sides are not currently in negotiations but that Sutter has received offers from Blue Shield in the recent days. However, Gleeson said that Blue Shield has not yet offered a deal that "represents significant financial movement."