Time running out on Sonoma Valley Hospital, Anthem contract negotiations

Sonoma Valley Hospital and Anthem Blue Cross remain deadlocked in contract negotiations with the extended deadline of Friday, March 1.

If a new contract is not achieved, the hospital’s patients with Anthem Blue Cross coverage would be considered out of network and pay for a higher portion of all nonemergency services. This includes all Blue Cross health plans, including Anthem PPO, Anthem HMO and Anthem Medicare.

The contract was set to expire on Feb. 1, but was extended until March 1 as negotiations continued.

“The hospital continues to make its best effort to resolve our differences with Anthem Blue Cross,” said John Hennelly, president and CEO of Sonoma Valley Hospital. “Unfortunately, to date, we’ve not found common ground.”

He said that the hospital continues to be reimbursed through a contract signed in 2013.

“So, for the past 10 years, we’ve been paid 2013 rates, with no inflation adjustments,” he said. “Anthem has offered an increase from those 2013 rates that would move us to roughly the 2016 rates. It’s a step in the right direction, yet the hospital is paying 2024 expenses.

“The hospital cannot pay 2024 expenses with 2016 reimbursement rates. We sincerely hope to remedy this soon.”

Anthem Blue Cross members account for approximately 4,000 of the estimated 50,000 patient visits per year at Sonoma Valley Hospital, which provides services to more than 1,500 Anthem members each year.

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

Michael Bowman, a spokesperson for Anthem Blue Cross, explained the health insurance provider’s position.

“It is concerning that Sonoma Valley leadership would choose to leave our care provider network, effective March 1, 2024, unless we agree to significantly increase health care costs for our members, employers and families in Sonoma County,” he said. “We continue to negotiate in good faith, offering increases in line with those accepted by other health systems, and additional opportunities to earn significant revenue through quality improvement incentives.”

Bowman said that Sonoma Valley Hospital has rejected these offers and insists on increasing the costs it charges to Anthem Blue Cross members without making a commitment to improve the quality of care that is delivered.

“Such steep increases would excessively burden our members and business customers,” he said.

Even if a contract is not reached, Anthem Blue Cross members will have access to Sonoma Valley Hospital’s emergency department and those with procedures scheduled after Feb. 1 would still be considered in network.

Hennelly said in December 2023 that the hospital is trying to provide individuals with as much information as possible about the situation with Anthem Blue Cross so they can plan for all possibilities. The hospital subsequently fielded “countless” calls from community members interested in understanding the situation, he said.

Members of the health plan who receive coverage through their employer can ask their human resources or benefits manager about alternative or secondary coverage options that protect their in-network access at the hospital.

Individuals who acquired the Anthem Blue Cross plan through brokers can ask them about coverage that will enable them to maintain in-network coverage at the hospital.

Those who purchase their own insurance from the Health Insurance Exchange were able to select a new plan during California’s open enrollment period from Nov. 1 to Jan. 14, 2023, to guarantee in-network access to the hospital.

Bowman said that Anthem Blue Cross is encouraging its members to consider scheduling their elective care with any of the network’s nearby alternative providers, including Sutter Novato Community Hospital, Santa Rosa Regional Hospital, Petaluma Valley Hospital and Providence Queen of the Valley Medical Center in Napa.

“Members seeking assistance can reach out to our service center by using the contact information on their Anthem ID card,” he said.

Hennelly said that he remains hopeful that a contract agreement can be reached.

“Our purpose here is to care for our Valley residents,” he said. “While we will continue to do that for our Anthem members in the ER, we do hope that Anthem values the high-quality services provided at Sonoma Valley Hospital and appreciates that with a reasonable increase in contracted rates, we will still be the most affordable hospital for Anthem in the North Bay.”

Meanwhile, the hospital continues to face financial challenges. In December 2023, they were mainly due to lower-than-anticipated patient volumes across many core service areas.

“While it’s not uncommon to experience month-to-month fluctuations, particularly around the holiday season, December presented some unique obstacles — many of which are short-term in nature as nearly all areas saw volume levels rise back to historical levels in January,” send Ben Armfield, chief financial officer for Sonoma Valley Hospital.

He said that from a year-to-date perspective, the hospital is facing some challenges to meet its budget.

“A lot of these challenges relate to anticipated volume growth that was budgeted but has yet to be fully realized this year,” Armfield said. “It is important to note that while faced with budgetary challenges, the hospital is still outpacing the prior-year performance.”

Given these challenges, the hospital is looking at eliminating all waste in the system.

“That includes contracts that can be renegotiated, supplies that can be used even more efficiently and work hours that can be used more effectively,” Hennelly said.

He noted that the hospital has made several major additions, such as joining the Age Friendly Health Systems initiative — aimed at enhancing health care for older adults through person-centered care — a new emergency department physicians group and a new electronic health record system.

“As those develop, they will add to the performance of the organization,” Hennelly said. “But they are still young and expensive. Additionally, we are losing one of our main surgeons, Dr. Michael Brown, who has been an anchor at Sonoma Valley Hospital for the past 14 years. All those changes are negatively impacting our financials.”

Hennelly does not expect that the hospital will face ongoing financial challenges, though.

“The investments we’ve made will yield positive benefits over the next 12 months,” he said. “We expect to have a replacement for Dr. Brown in orthopedics sooner — in the next few months.”

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