How Sauk Prairie Healthcare and Anthem failed to come to an agreement

What may best represent the distance between Sauk Prairie Healthcare and Anthem Blue Cross and Blue Shield/Elevance in terms of the negotiations whose end resulted in many across the area losing access to healthcare services is the fact that they don’t even agree on what the negotiations are about. Anthem Blue Cross Blue Shield says they “[were] negotiating the prices that Sauk Prairie [Healthcare] charges for health care services provided to Anthem members.” Sauk Prairie Healthcare’s CFO Jim Dregney says “Sauk Prairie Healthcare and Anthem (Elevance) negotiated reimbursement rates, meaning the amount Anthem will pay for its enrollees to receive care.” For Anthem, their perspective is that they’re negotiating the cost of service charged by the hospital to customers. For Sauk Prairie Healthcare, their perspective is that they’re negotiating the cost of reimbursement—the amount they get from Anthem for their customers’ care. What Anthem sees as a charge for service Sauk Prairie Healthcare sees as repayment for service provided.  The same negotiation, just two different perspectives. Is it a dispute between buyer and seller, where Anthem is trying to negotiate a fair price for their customers, or one about what a rural hospital needs to do in order to stay open—charge fair prices for everyone? The failed negotiations played out across local newspapers, as both parties battled it out in competing Letters to the Editor. Accusations were made, statistics were cited, but ultimately the result was that Anthem Blue Cross Blue Shield customers, as of April 1, could no longer to go Sauk Prairie Healthcare and its associated clinics. Emergency services are not affected, but everything else, from Urgent Care to physicians’ services and clinics are out of network. For some, this means a change from a 15-minute drive to closer to 45 for the same services. Along with that comes the hassle of switching doctors. Both parties have been speaking strongly and directly about the negotiations, and have been at times blunt in their communication with the public. In reaching out with questions, the Star News found the same—this is a passionate issue for everyone involved. One fact is certain: neither party agreed on amounts. Sauk Prairie Healthcare, in explaining why its reimbursement costs went up, explained:   “As you know, inflation has increased the price of everything, and healthcare is no exception. Just like other businesses, we need to be able to keep up with the rising costs of labor and supplies. We need to offer competitive wages and benefits to recruit and retain our incredible team members who live in our communities. We believe an increase in reimbursement between 4-5 percent overall is reasonable and fair.”   Anthem responded with:   “Sauk Prairie […] has demanded to dramatically increase its charges to Anthem members.” They continued:   “The price increases upon which Sauk Prairie is insisting would directly impact our members in the form of unacceptably higher out-of-pocket costs. It’s also important to remember that the vast majority of area employers use self-insured health plans, meaning they directly pay health care claims for their employees and would feel the full brunt of these increases.”   Anthem has characterized Sauk Prairie Healthcare’s proposed reimbursement rates as “more expensive than comparable health systems.” Anthem also claims their offered rate have been “in line with those accepted by other Wisconsin health systems..” Their online page dedicated to the issue states bluntly: “Sauk Prairie [Healthcare] remains steadfast in their demand for unreasonable price hikes.”   In a Letter to the Editor printed in the Lodi Enterprise (online on April 9th), Anthem President and General Manager Paul Nobile made several claims that further escalated tension between both sides. Nobile made claims but didn’t not provide references and data, something that Sauk Prairie Healthcare did in its online rebuttal, which can be found here: https://www.saukprairiehealthcare.org/public-statement/anthem-myth-vs-fa...   Nobile’s claims included that “Sauk Prairie is already a very expensive place to receive care, currently charging Anthem members and employers an eye-popping 45% more than state average.” Sauk Prairie Healthcare responded with “’Charges’ do not reflect what Anthem actually pays for services. As with all insurance contracts, the insurance company pays a negotiated rate (which is sometimes calculated at a discount off charges), not the actual charge.” Nobile also said “Sauk Prairie is demanding to hike prices even further at rates two times inflation.” Sauk Prairie Healthcare’s online explanation hints at something deeper. They reply:   “There are many reasons why Sauk Prairie Healthcare has chosen, over the years, to try and keep charges low, the most important of which is to make healthcare more affordable for individuals who don’t have any type of insurance coverage. However, at the beginning of our negotiations, the Anthem contract rep indicated [Sauk Prairie Healthcare]’s charges [were] too low, and that we needed to increase our charges more so that they could present to employers that they were able to negotiate a discount on our standard charge. Anthem feels it’s easier for them to sell insurance if they show larger discounts. So their policies require providers to increase the amounts we charge or they limit the reimbursement providers receive. For the past few years, [Sauk Prairie Healthcare]’s charge increases have been an overall increase of 3 percent applied to all services. To meet Anthem’s demands, for 2024, [Sauk Prairie Healthcare] agreed to increase prices an overall 6.89%.”   Anthem’s claims include, according to Sauk Prairie Healthcare, that the Hospital charges commercial customers “4x the rate of Medicare.” The Hospital pushed back, explaining:   “At Sauk Prairie Healthcare, as with hospitals nationwide, Medicare and Medicaid reimbursement levels do not cover the cost to provide services to patients. Because of that, hospitals need to receive higher payments from commercial insurances than they do from Medicare and Medicaid; this has been the case for decades (in the industry, this is called ‘cost shifting’). In fact, in 2022, [Sauk Prairie Healthcare]’s costs to provide services to Medicare and Medicaid patients was $6.5 million more than what we were paid.” As for the negotiations Sauk Prairie Healthcare CFO Jim Dregney described them this way:   “Negotiations are a series of back-and-forth proposals on reimbursement amounts. Each proposal requires a detailed calculation to estimate the impact to the overall financial stability of the organization. Our finance team works with an outside consultant who provides a valuable perspective in terms of what rates are fair and reasonable based on her knowledge from working with many hospitals.”   He continued:   “Increasingly, insurance companies are starting negotiations with a proposal that would result in a decrease in reimbursement to the health system. Due to significantly higher inflation beginning in 2020, it’s not surprising that our operating expenses have increased. Labor is the single biggest expense for any hospital, and we are no exception. Employee compensation has needed to be increased so our team members are able to afford their living expenses. Costs of supplies, pharmaceuticals, and equipment have also increased.”   He continued by explaining the timeline:   “Our negotiations with Anthem went back and forth for six months before reaching the original deadline of December 31. While we hadn’t yet reached an agreement, we did feel we were very close so agreed to extend the contract to March 31 while negotiations continued. We tried to negotiate a middle ground that still allowed us to cover cost increases.”   The narrative of the negotiations diverges at this point, with Sauk Prairie Healthcare’s Dregney saying:   “However, after Anthem made a proposal in February, they ceased trying to find middle ground. Despite them giving us the same proposal in March with no changes, we continued to make revisions to each of our proposals, moving further in their direction. The contract extension was through March 31, but Anthem indicated their proposal would expire on March 29; a tactic to further pressure us into accepting their proposal. Although Anthem has walked away from the negotiations, we have made it clear that our offer is still on the table. Initially, we wanted to negotiate another three-year term with Anthem. However, as we continued to reduce the reimbursement amount we were willing to accept, we determined we would also need to reduce to a two-year term. Accepting rates lower than what will fully cover our cost increases for longer would have put the hospital’s financial stability at risk.”   From Sauk Prairie’s website, we find:   “Unfortunately, after their February proposal, Anthem stopped working toward a middle ground and unlike other health plans who agree to retroactively pay at the new agreed upon rates, Anthem was not willing to do this. Therefore, the longer the negotiations continue, the longer we get paid at the lower, previous rate and Anthem saves money.”   And Sauk Prairie alleged: “We understand this to be a common tactic Anthem uses and, in our case, they then spun this into a deceptive speaking point to make themselves look well-meaning.”   Anthem’s characterizations of the negotiations differ. In the Letter to the Editor printed in the Lodi Enterprise, Nobile comes out swinging with:   “Sauk Prairie [Healthcare] could have easily avoided this disruption, and instead of negotiating with us in good faith, is now spreading misinformation. The fact is that Anthem has offered reasonable payment increases like those accepted by other area health systems. We even offered to extend our current agreement to allow more time for discussions. Sauk Prairie rejected these offers – choosing instead to needlessly disrupt care, put our members in the middle, and prioritize profits over patients.”   This was in response to two Letters to the Editor from Sauk Prairie Healthcare CEO Shaun Lerch that had printed in the Star News on March 21 and April 4. The March 21 letter reads, in part:   “This is a ‘David vs. Goliath’ story. Anthem Blue Cross Blue Shield (renamed Elevance) is threatening to take away access to Sauk Prairie Healthcare doctors and services for about 2,700 area residents. After months of negotiating an agreement for us to provide healthcare services to Anthem enrollees, this ‘Goliath’ insurance company’s strong-arm tactics of bullying a small, independent community health system with take-it-or-leave-it terms is leaving patients in limbo about whether they need to cancel appointments and look for a new provider.”   The April 4th Letter read:   “Our offer to Anthem was fair and reasonable, focused on keeping costs as low as possible to provide the level of care our patients deserve. I’ll leave it to your readers to decide whether Anthem’s motivation is truly to help lower health care costs or rather to enrich its shareholders. […] Anthem glibly tells its enrollees to simply choose a new provider from their network. But we know the reality is much more disruptive to our patients’ lives.”   When reached for comment after negotiations concluded, Anthem’s Senior Director of Public Relations, Jeff Blunt said that “Anthem enjoys collaborative, productive relationships with nearly all health systems in Wisconsin. In the vast majority of cases, we successfully negotiate new contracts with care providers that maintain affordability and meet the financial needs of our state’s health systems. We will continue to work toward an agreement with Sauk Prairie.”   And as for whether Sauk Prairie Healthcare made a good faith effort, he said: “We are disappointed that Sauk Prairie chose to reject our multiple offers to avoid disrupting care for our members.  We will keep lines of communication open in hopes of reaching a new agreement.” Sauk Prairie Healthcare, as evidenced repeatedly above, also made clear it did not think Anthem negotiated in good faith. That’s the coda to this story of two parties who just couldn’t make it work: they don’t agree on who broke up with who. Sauk Prairie Healthcare’s Dregney says Anthem “walked away from negotiations,” while Anthem claims “Sauk Prairie [Healthcare] refused these offers and left our network on April 1.” The result is people having switch doctors—at best—and at worst losing access altogether to their healthcare.    Sauk Prairie Healthcare has a webpage—cited here—with information about the issue: https://www.saukprairiehealthcare.org/public-statement/anthem-myth-vs-fact/ Anthem has a web\page as well—also cited—that can be found here: https://www.anthem.com/saukprairie/