Sonoma Valley Hospital, Anthem Blue Cross ‘far apart’ in rate negotiations

Sonoma Valley Hospital and Anthem Blue Cross are “far apart” as they negotiate the rates the insurance company pays for services to members, and if an agreement is not reached by Feb. 1 the hospital would be considered out of network, possibly resulting in increased costs.

“The rates we receive for (Anthem) services have not had an increase in quite some time, and our current rate structure provides no margin for this hospital to cover its fully allocated costs,” said Benjamin Armfield, chief financial officer for the hospital. “It is not our intent to terminate this agreement, but we feel strongly that we must be paid reasonable rates for the services we provide.”

Sonoma Valley Hospital provides services to more than 1,500 Anthem members per year. They account for roughly 4,000 of the estimated 50,000 patient visits per year.

The hospital handles some 12,000 commercial patient visits per year, and approximately 3,200 of them involve Anthem members, making it the largest commercial payer.

If the hospital becomes out of network with Anthem Blue Cross, this would affect members’ ability to receive elective services. Members would still have access to the emergency department, however.

All Anthem Blue Cross health plans, including Anthem PPO, Anthem HMO and Anthem Medicare Advantage, would be affected. Anthem Blue Cross members who already have a procedure scheduled after Feb. 1 would still be considered in network.

Also, some patients — including those who are hospitalized, pregnant or undergoing an active course of treatment prior to the contract expiration date — may qualify for Continuity of Care through Anthem Blue Cross.

Sonoma Valley Hospital has been in negotiations with Anthem Blue Cross for about six months.

Michael Bowman, a spokesperson for Anthem Blue Cross, said the increases being sought by the hospital are unsustainable and would lead to consumers paying significantly more for their health care. He said the increases would have a direct impact on premiums and out-of-pocket costs, as well as on the overall health care system in Sonoma County.

“It is concerning that Sonoma Valley leadership would choose to leave our care provider network, effective Jan. 31, 2024, unless we agree to significantly increase health care costs for members, employers and families living in Sonoma County,” Bowman said. “We continue to negotiate in good faith, offering increases in line with those accepted by other local health systems and additional opportunities to earn significant revenue through quality improvement incentives.

Armfield, the hospital chief financial officer, said Sonoma Valley Hospital remains hopeful an agreement can be reached by Feb. 1.

“We continue to negotiate with Anthem Blue Cross, but in truth, we are far apart,” he said. “We intend to continue our negotiations in good faith so we can reach a fair and equitable agreement.”

Armfield said that losing Anthem Blue Cross would have an impact on the hospital’s financial situation in the short term.

“But Sonoma Valley Hospital needs to ensure it can continue providing quality care to patients in this community,” he said. “The current rate structure in place with Anthem makes this unsustainable, especially when coupled with the weight of continued rising operating costs and inflationary pressures.”

The hospital is not in negotiations with any other insurance companies. John Hennelly, the hospital’s president and CEO, said that when companies underpay, it impacts the hospital’s ability to staff and serve.

“Like anyone else, the hospital must pay its bills,” Hennelly said. “We must pay wages, buy supplies, maintain our building and equipment, and provide health insurance to our employees — which interestingly has gotten much more expensive this year. Those are paid for by reimbursement for the care we provide.

“As expenses go up, so must reimbursement. Insurance companies must appropriately fund the cost of their members. Anthem Blue Cross is no exception.”

Hennelly said that businesses and community members are reporting huge increases in the cost of health insurance.

“That says to me that insurance companies recognize that the cost of health care is rising,” he said. “The question becomes, ‘Why aren’t they providing corresponding increases to those providing the care?’”

Bowman said that Anthem Blue Cross appreciates that hospitals are facing labor, supply and other cost pressures.

“But the reality is that employers and consumers across California, including those we serve here in Sonoma County, are facing those same pressures,” he said.

Anthem is taking steps in case an agreement is not reached by Jan. 31, including notifying regulatory agencies, physicians, medical groups and members about the potential contract termination to ensure there are no gaps in care and all entities have ample time to prepare.

Individuals seeking nearby hospitals that offer Anthem Blue Cross insurance plans can contact Queen of the Valley Medical Center in Napa, Petaluma Valley Hospital and Santa Rosa Memorial Hospital.

Hennelly said that the hospital is trying to provide individuals with as much information as possible about the situation with Anthem Blue Cross so that they can plan for all possibilities.

Anthem Blue Cross members who acquired their plans through brokers could ask them about coverage options that would allow them to maintain in-network access to Sonoma Valley Hospital.

Those who receive coverage through their employer can ask their human resources or benefits manager about alternative or secondary coverage options that will protect their in-network access to the hospital.

Individuals who purchase their own insurance from the Health Insurance Exchange can select a new plan during California’s open enrollment period, Nov. 1 to Jan. 14, to guarantee in-network access to Sonoma Valley Hospital.

Hennelly said that the degree of ease or difficulty in reaching contract agreements with insurance companies varies.

“Some are collaborative and work with hospitals to create optimal outcomes for patients,” Hennelly said. “Deploying health coaches and collaborative claims management systems can really make the organizations hum. Other insurers take a more obstructionist approach by denying claims as a routine course of business.

“I see us dealing with challenges such as what we’re going through with Anthem Blue Cross from time to time.”

Reach the reporter, Dan Johnson, at daniel.johnson@sonomanews.com.