In California, Faceoff Between Major Insurer and Health System Shows Hazards of Consolidation

Lambert here: Best health care system in the world! If you’re the CEO at a ginormous monopoly. Has this happened to any of you, readers?

By Annie Sciacca, a California-based journalist and regular contributor to The Imprint and KFF Health News. Originally published at KFF Health News.

For weeks, more than half a million Anthem Blue Cross enrollees who receive health care from the University of California were held in suspense. It wasn’t clear whether they would have to find new doctors or switch plans as the health system and one of its largest insurance partners struggled to reach agreement on a new contract.

UC Health accused Anthem of not negotiating in good faith, while Anthem leaders retorted that UC Health had demanded too much and rebuffed the insurer’s request for administrative efficiencies. In fact, roughly 8 million Anthem members in California were at risk of losing in-network access to UC Health’s vast network of prestigious hospitals and medical facilities, which could have left them with much higher out-of-pocket expenses. While not all patients were made aware of the situation, Anthem notified some enrollees they would be reassigned to new primary care doctors if no deal were reached.

But even as the parties announced an eleventh-hour agreement on Feb. 5, industry analysts say the conflict has become part of a trend in which patients are increasingly caught in the crossfire of contract disputes. Amid negotiations over rising labor and equipment costs, it’s often patients who are ultimately saddled with higher bills as the health industry continues to consolidate.

“This type of contract dispute is a routine feature of the health care system,” said Kristof Stremikis, director of market analysis and insight at the California Health Care Foundation. “At the same time, from a patient’s perspective, it’s an unfortunate feature of our health care system because it creates uncertainty and anxiety.” (California Healthline is an editorially independent service of the California Health Care Foundation.)

Stremikis noted that as mergers occur in the health industry, patients are left with fewer choices. Any time there are disputes, disruptions are felt more widely. And such fights rarely result in lower costs for consumers long-term across California.

A KFF analysis found widespread evidence that consolidation of health providers leads to higher health care prices for private insurance. The same brief from 2020 found some evidence suggesting that large, consolidated insurance companies are able to obtain lower prices from providers, but that has not necessarily led to lower premiums for patients. And a 2022 report from the California Department of Health Care Access and Information found that health care costs have grown “at an unsustainable rate,” and noted that between 2010 and 2018 “health insurance premiums for job-based coverage increased more than twice the rate of growth for wages.” State regulators also found that health plans spent nearly $1.3 billion more on prescription drugs in 2022 than in 2021.

In trying to slow growth, California in 2022 set up an Office of Health Care Affordability, which has proposed a 3% spending growth target for the industry for 2025-2029. But enforcement will start in 2028 at the earliest, using spending data from 2026.

Cathy Jordan, 60, a social worker in Yuba City, California, has been a patient at UC Davis Health for two decades. Jordan was diagnosed at the end of 2021 with aggressive small cell carcinoma, a rare form of cancer. She has undergone surgery, chemotherapy, radiation, and other treatments since then, yet her cancer has returned twice.

“I don’t have the luxury of time — my cancer comes back fast,” Jordan said.

She is among the group of Anthem-insured patients at UC Health who were at risk of losing access to in-network care there, and when she got a notice from Anthem, she grew alarmed, she said.

Jordan’s oncologist, Rebecca Brooks, said in an interview prior to the agreement being reached that it would be “incredibly disruptive” for cancer patients to have to switch providers in the middle of their treatments.

“It’s a detriment to their care,” said Brooks, director of the gynecologic oncology division at UC Davis Health. “It’s going to disrupt treatment and cause worse outcomes.”

Jordan said she appreciates that UC Davis Health has a National Cancer Institute comprehensive cancer center designation; the only other cancer center of that caliber in Northern California not part of UC Health is at Stanford University, several hours away in Santa Clara County.

Jordan was worried that she and other UC Health patients would have to compete for treatment elsewhere. She was also uncomfortable with the idea of adjusting to a new setting and routine while undergoing intensive medical treatment.

“Someone needs to say, ‘We need to think about these patients.’ Someone needs to step up and say, ‘What’s going to be best for our patients?’” Jordan said. “This is my life.”

Stremikis said such concerns are ever more urgent as the health care industry consolidates. UC San Francisco recently announced it would acquire two struggling hospitals in San Francisco, and it is joining Adventist Health in making a new effort to purchase a bankrupt community hospital in Madera. And UC Irvine recently agreed to buy four hospitals in Southern California.

“There is consolidation vertically up and down the supply chain and horizontally,” he explained. “So when there are disputes between these large entities, it has a larger and larger impact because there are fewer choices for patients.”

While contract disputes between health care providers and insurers are nothing new, there is some evidence that they are increasing, at least in public view. FTI Consulting published data last year that found a steady increase in media coverage of rate negotiations between providers and insurers from 2022 to 2023. In addition to the fight with Anthem, UC Health narrowly avoided a break with Aetna last year by reaching an agreement in April. And regional hospital systems, including Sonoma Valley Hospital and Salinas Valley Health, have been at odds with Anthem within the last few months.

UC and Anthem have now agreed to extend the current contract to April 1 while terms of the new agreement are being finalized. UC Health spokesperson Heather Harper said the rate increases were below the inflation rate.

Anthem spokesperson Michael Bowman said the new contract would allow Anthem members to access care at UC Health for years to come.

“This underscores our mutual commitment to providing Anthem’s consumers and employers with access to high quality, affordable care at UC Health,” Bowman said in an email.

Print Friendly, PDF & Email
This entry was posted in Health care, Regulations and regulators on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. timbers

    Here’s a link for Aetna Health announcing huge stock buyback and dividend increases (note: internet says Aetna is pulling out of California in 2014, then 2019, and has fights w/CVS).

    Here’s a link for UnitedHealth Group. It’s a quarterly graph so they seem to do them big and frequently. Note sure it this is related to UC Health but the internet insists on popping this link every time I use UC Health.

    The State of California has a long list of “Healthcare insurance” “providers” with names that can be linked to but not proven to be owned by some of the more voracious profit seekers…

    …but I take it with a grain of salt because my self employed sister in California says she has a choice from a total list 1 (one) carrier.

    People should be allowed to deduct stock buyback and dividends from their insurance premiums. And that includes car insurance or any mandated insurance. For a valid deduction, they need only provide as little as calculations on a napkin plus because of the work they must exert they should also be allowance a minimum fee of $1,000 plus late fees and interest to be set at 48%.

    Bernie Sanders was able to slip in some funding for community health. How much was it…$16 billion? Healthcare insurance stock buy backs financed by our tax dollars and mandated premiums (taxes) I suspect are much more than that.

    1. Ana

      Thank you for the links. I may know why your web search pops up every time you input “UCHealth”. CalPERS contracts with the University of California for health care. A dumb AI probably mistakes UC Health for University of Calif healthcare. And CalPERS is beyond huge.

      As an aside, I am a CalPERS retiree. I live in Sacramento and the only way I can get medical care from the local UC medical center is to sign up for Advantage of infamy.

      I have a very rare genetic condition and simply can’t afford the copays etc of regular Medicare that would allow me to shop the local options. There are four: Mercy aka Dignity Health, Sutter, Kaiser and UC Davis Medical Center.

      None but UC can manage the complications and frankly UC is not all that good and certainly not very motivated. They too are infected with here have a pill for that rather than diagnosis and forming a treatment plan. So my choice, the only practical “choice,”
      is Advantage, be trapped having to keep living in Sacramento, and wrestle constantly with the pre approval appeal process.

      My issues are genetic however I have noticed that complex problems show up simply from my aging and are not part of my genetics. The pill for it sans diagnosis and treatment plan seems to be the one size fits nobody way for everything medical.

      I really don’t know what country I’m living in any more.

      Ana in Sacramento

      1. JonnyJames

        I’m sorry to hear about your situation. I also live in CA. The problems you outline are not just in Sacramento, we have an extortion racket posing as “health care” and it is a nationwide crisis. In this “election” year, the MassMedia McNews and politicians want us to focus on “wedge” issues to distract us from the rampant institutional corruption, housing crisis, health care extortion, monopoly price-gouging, abuse of power, funding Genocide and violence etc.

  2. jefemt

    The notion of insuring the health of a mortal being is a failing business model.
    The only way it works is as a single, well regulated utility, with buy-in from the society of a given nation-state- to the premis that health care for said mortal critters is a worthy use of time and resources.
    As to Amerika, there clearly is no “we” in US.

    1. Cat Burglar

      “Health Insurance” doesn’t insure your health.

      It should be called “Asset Insurance,” because what you’re really paying for is a limitation having all your assets seized by powerful organizations. No wonder that insurance companies routinely make care decisions that aren’t about your health or life — that isn’t the business they are in.

      “That’s a nice house you have. It’d be a shame if you got sick,hurt, or old and somebody took it.”

      1. JonnyJames

        And health care Inc. in “merka is little more than extortion. Worst health outcomes in the OECD, but the most expensive “health care” in the world. The Mafia is more honest, I would rather La Cosa Nostra ran our extortion system. More reason to move out of health care hell. No country is perfect, but at least in some other countries you can get good health care for a reasonable cost.

    2. gcw919

      Universal healthcare would save many people the trauma of worrying where to go when medical care is urgently needed. It also would save a tremendous amount of money.
      Several months ago, I needed an ER, and the closest was Scripps, in Encinitas, CA. I got excellent care, but they said I should stay overnight for extended treatment. Well, I have Kaiser, and they declined to have me stay at Scripps. Instead, I was transported by ambulance to a Kaiser hospital, twice the distance from my home. The 30 minute ride was north of $2000. This was a completely wasteful expenditure, which could have been avoided had I stayed at Scripps, not to mention a duplication of many tests. With one unified system, it would have been much simpler, and cheaper, to stay at the first ER.
      But Joe Biden promised when running in 2020, that if a universal healthcare bill came to his desk, he’d veto it. He’d rather spend billions on overseas wars. A man of the people -rich people.

  3. Rip Van Winkle

    Get rid of the insurance companies. California should be able to self-insure all health, life and property/casualty for all of their citizens. The ‘if it was a country it would be the 5th biggest GDP’ thing.

    1. Oh

      There is no role for health “insurance” in taking care of people’s health. Not only should we get rid of these parasites, we should get rid of the MBAs that run the hospitals. Look at the background of Suresh Gunasekaran, UCSF Health President and CEO. He has no degree as a medical doctor as most MBAs in Healthcare whose only purpose is to get more $$$$ out of it.

  4. Jokerstein

    My wife and I have both been caught in these who’s-gonna-blink-first “negotiations” between providers and insurers in WA state. in 2023 it was Premera vs. Evergreen, and as I predicted it went down to the very last day. last year it was UHC vs. Evergreen, and they went over the line for a few days, where UHC “customers” found all their Evergreen providers out-of-network.

    It also happened with UW Medicine and some other insurer (can’t remember who – we’re not registered with UW Medicine).

    It seems pretty common here now. I don’t ever recall this happening before 2019, but it’s getting to be an annual event now.

    1. adam

      It makes me wonder if they’re now playing the same game that Comcast and Charter play with the broadcasting companies to regularly jack up rates for consumers. (i.e. where a broadcast company suddenly decides to no longer provide service to a telecom and in the negotiations to restore service, somehow rates go up significantly for the telecom subscribers.)

  5. Fribble

    We are in the middle of one of these in Portland, Oregon right now with Legacy & Blue Cross. All our doctors and prior surgeons have been in Legacy, going elsewhere would be an enormous pain.

    My wife has been worried since we are on an ACA plan w/o an employer, and wonders if we should switch. I’ve been saying we need to wait and see if it actually happens.

  6. antidlc

    From 2023:
    Patients don’t panic: Blue Cross Blue Shield and Ascension negotiation update

    66,000 central Texans are still waiting for the resolution to ongoing contract talks between a major hospital system and one of the state’s biggest insurance providers after finding out they could lose access to nearby facilities. One local insurance consultant said that pressure is usually part of the negotiation process.

    From 2022:
    450,000 North Texans could lose in-network coverage as Blue Cross contract negotiations continue
    Blue Cross Blue Shield says UT Southwestern Medical Center and Texas Health Resources are pushing to raise prices.

    A contract dispute between two North Texas hospital systems and the state’s largest health insurer could leave hundreds of thousands of people without coverage.

    UT Southwestern Medical Center and Texas Health Resources have two weeks to make a deal with Blue Cross Blue Shield of Texas or more than 450,000 North Texans could see their health care costs soar, according to the insurer.

    The current contracts between the two hospital systems and Blue Cross expire Oct. 4 for most products, including the Blue Choice PPO and Medicare Advantage PPO plans, the insurer’s website says. If a new deal isn’t reached by then, UT Southwestern and Texas Health would no longer be part of most Blue Cross networks.

Comments are closed.