TERRE HAUTE — Contract talks between mega-insurer Anthem Blue Cross/Blue Shield and Union Hospital Health Group apparently have stalled as both sides stand firmly by their negotiating positions.

If a new contract is not signed by July 31, Union Hospital facilities eventually will become “out-of-network” health-care providers for Anthem patients.

The issue has elicited strong words and accusations from both sides. The standoff has left many in the Wabash Valley bracing for the fallout.

Anthem is one of the largest health-insurance providers in the nation and accounts for about 15 percent of Union’s patient load. While Union officials have said they will work to minimize the impact to patients insured by Anthem, eventually, the “out-of-network” status would mean higher costs for Anthem clients who undergo treatment at Union Hospital and its affiliated facilities.

“We want to stay in the Anthem network,” said Wayne Hutson, chief financial officer for Union Hospital, in an interview Wednesday. However, talks broke down June 18 and have not resumed, he said. “The ball is in their court.”

A resolution to the contract tug-of-war is important for many in the Wabash Valley. Several large employers provide Anthem-managed or funded insurance benefits for their employees, including the Vigo County School Corp., AET, the Tribune-Star, the City of Terre Haute and the Vigo County government.

What’s the hangup?

The dispute centers on how Union Hospital bills Anthem for services at satellite facilities such as the Wabash Valley Surgery Center, Thomas Plaza on U.S. 41 South and for some cancer treatment services at the Hux Cancer Center, the Hope Center and the Providence Medical Group.

In each of these cases, and others, the hospital has entered into what Hutson calls “management service agreements” with doctors and physician groups. Anthem considers these clinics “outpatient” facilities. Union considers these clinics “departments of Union Hospital.”

The difference is important. Anthem and other insurance companies typically reimburse medical-service providers less for the care they perform when that work is done at outpatient clinics or a doctor’s office. When medical work is done in a hospital, the reimbursement is greater.

“For example, imaging procedures [MRIs, CT scans and X-rays] generally receive higher reimbursement in a hospital setting than in a physician-office setting,” said Daniel Murphy, an independent expert who is an attorney in the Health Law Practice Group of the law firm of Balch and Bingham in Birmingham, Ala. “That also applies to a lot of other types of procedures.”

Hospitals have higher overhead costs because they operate round-the-clock emergency rooms, must treat even patients without any means to pay, and are staffed 24 hours a day, Murphy said. These are expenses standalone medical clinics do not have, he said.

Multimillion-dollar gap in reimbursement

Union Hospital cannot accept typical, standalone clinic reimbursement from Anthem for work performed in these satellite facilities, Hutson said. What Anthem is offering to pay for “off campus” medical work is “dramatically different” from what the hospital requires, he said.

At present, there is a $19-million difference between what Anthem is offering to pay Union over the next three years and what Union will accept, Hutson said. That is an improvement over the $30-million difference in the two sides’ positions a few weeks ago, but it is still a significant gap. And most of that gap exists because of Anthem’s desire to reimburse work at outpatient clinics at lower rates than if that work were done inside the hospital itself, Hutson said.

“It’s the majority of [the $19 million gap],” Hutson said in an interview Wednesday at Union Hospital’s Professional Office Building. “It’s not all of it. It’s the majority.”

An important

source of revenue

According to Union Hospital documents, newly formed arrangements with Wabash Valley doctors to jointly provide cancer treatment have been an important new revenue source for the hospital.

According to the documents, Union’s patient revenue — after expenses are subtracted — increased $41.4 million for the eight months prior to April 30, 2007, compared with the same period in 2005-2006. This 23-percent increase in net revenue was “related primarily to … agreements entered into in September 2006 with three medical oncology groups to provide chemotherapy services to patients as a department of the hospital.”

The three medical cancer treatment groups that entered these agreements with Union Hospital Health Group are the Hope Center, the Providence Medical Group and AP&S; Clinic. The Hope Center and AP&S; provide chemotherapy services at the Hux Cancer Center next to Union Hospital’s main Terre Haute facility. Hope and the Providence Medical Group also provide chemotherapy at their main locations on Terre Haute’s south side.

What Anthem wants

Anthem wants Union Hospital to make it clear that some health-care services it provides are coming from outpatient clinics, not the hospital. At present, Union bills Anthem on a form that only shows the hospital’s main address, 1606 N. Seventh St. Anthem says this makes it impossible to know when services have been provided at outpatient clinics.

At a June 10 meeting with Wabash Valley employers and insurance brokers at the Terre Haute Holiday Inn, Anthem officials said they had done audits of some bills from Union and discovered the work had not been done at the hospital.

“It’s hard for us to identify this,” said Eric Schmitz, a regional vice president with Anthem, speaking to the group of around 50 employers and brokers.

Anthem wants to reimburse Union Hospital at typical outpatient clinic rates for medical services provided at Hux, Thomas Plaza, the Wabash Valley Surgery Center, the Hope Center and Providence Medical Group.

“Hospitals can sometimes be paid double and sometimes even more than that” compared with what a free-standing outpatient clinic is paid, Schmitz said in a recent interview with the Tribune-Star. “They are billing off-site joint ventures at hospital rates.”

Reasons for higher compensation

Union’s Hutson says there are important reasons Union Hospital should be paid more than standalone clinics for medical services provided at its affiliated outpatient facilities. In the first place, switching to new billing forms that would indicate the actual site where a service was provided would be a costly and a needless administrative burden, he said.

In addition, while Anthem may view these clinics in isolation, he said that as the hospital’s chief financial officer, he must view them as part of the entire Union Hospital Health Group.

“We have to look at the total operation,” Hutson said. “Down there [at some clinic facilities] maybe the cost [to the hospital] is a little less. I’ve got to make sure my [total hospital] costs are covered.”

When asked whether this means revenue from the outpatient clinics is needed to ensure the hospital itself at least breaks even, Union Hospital’s director for marketing and public relations, Lorrie Heber, said some of the hospitals outpatient facilities make money and some don’t. And while some clinics, such as chemotherapy clinics, may generate positive revenue, that is not why the hospital opened them.

“We didn’t angle out there looking for profit,” Heber said. “We needed to assume chemo[therapy] services so they would still be provided in the community.”

In its 2007 official documents, Union Hospital Inc. noted that “If the actual financial effect [from outpatient joint ventures with doctors] is different than expected levels, revenue in excess of expenses [for Union Hospital Health Group] could be affected and the effects could be material.”

“under

arrangements”

Anthem officials at the Holiday Inn meeting referred to Union Hospital’s joint ventures with area physicians as “under arrangements.” This is also the term used in Union’s official 2007 bond documents. Those documents state:

“The Corporation has collaborated with physicians and physician groups to improve quality of services, eliminate duplication of services, and improve standards of care by entering into various so-called ‘under arrangement’ agreements. The Corporation has ‘under arrangement’ agreements with physicians and physician groups for ambulatory surgery, chemotherapy, radiation oncology and cardiac catheterization laboratory services.”

As part of these arrangements, Union Hospital collects the billing for services provided as “departments of the Hospital” and “pays a fee to the physician and physician groups for each unit of service provided,” the documents state.

Patients visiting these clinics often receive two bills — one from their doctor and one from Union Hospital.

Union’s Hutson is clear that these arrangements mean Union Hospital has “taken over” services provided by their joint venture partners.

“The services provided [at these outpatient facilities] are a department of the hospital and controlled by the hospital, regardless of where,” Hutson said. “If the hospital controls it, it’s a department of the hospital.”

In fact, Hutson notes that the term “under arrangement” is inaccurate to describe these joint ventures. “That term ‘under arrangement’ should not have been used” in official hospital documents, he said. “That’s our fault.”

Why the joint

ventures?

Without the higher reimbursement provided by the joint ventures, Terre Haute may have lost three medical oncology groups, Union officials have said.

“We were concerned that [Terre Haute’s] three medical oncology groups were going to go away,” Hutson said.

Medicare, Medicaid and commercial insurance reimbursement for chemotherapy drugs has been going down “dramatically,” Hutson said, adding that Union Hospital was told that all three Terre Haute oncology groups, AP&S;, Hope Center and the Providence Medical Group, were going to stop doing chemotherapy because of the lower reimbursements. “The reimbursement was inadequate to continue to provide the service,” he said.

Patrick Board, CEO of AP&S; Clinic, agrees this was the case. In an e-mail response to a question from the Tribune-Star, Board stated, “The reimbursement rates from Medicare and commercial insurance for chemotherapy have decreased significantly during the past five years. So much so that, in some cases, the reimbursement rates would not cover our costs to order the medicine. This is an expense AP&S; Clinic would not be able to absorb. Ultimately, we would have stopped providing this service and sent our patients to the hospital for chemotherapy treatment.”

Dr. George Bittar of the Providence Medical Group was unavailable to comment last week when asked whether his chemotherapy services were in jeopardy. Dr. Chandra Reddy of the Hope Center also was unavailable to comment.

Anthem admits that reimbursement for chemotherapy drugs has decreased. However, “it’s important to note that the cost to the provider to purchase the drug has also decreased. Reimbursement changes were made as a result of the decrease in the provider’s cost to acquire the drugs,” said Tony Felts, an Anthem spokesman in Indianapolis.

Union, meanwhile, admits that patients and employers have had to pay more for chemotherapy since the joint ventures began.

“That is absolutely a correct statement,” Hutson said. However, he argues, by bringing three previously competing oncology groups together under the hospital’s umbrella, patient care and quality of service have improved. These clinics are now required to meet hospital-quality standards, which increases the costs of running them, he said.

“We were able to get three competitors together,” Hutson said. “Now, they are no longer competitors, they are colleagues.” The cost to the community and to the patient is more, “but we thought it was worth it.”

What’s next?

To say the Union vs. Anthem dispute has gotten the attention of area employers and insurance brokers would be an understatement. Union has issued two media releases warning of difficulties in the talks and hospital officials recently conducted their own meeting June 24 with area insurance brokers.

None of this has been lost on area employers that provide Anthem insurance for their workers.

“We’ve told Anthem we want a fair settlement with Union Hospital,” said John Orr, director of human resources for the Vigo County School Corp., which uses Anthem to administer its self-funded employee insurance benefits package. “We employ Anthem to get the best service at the best cost for the money. … We pay the bill.”

If nothing else, patients using outpatient clinics operated by Union should be made well aware of that fact in advance, said Ken Baker, corporate director of human resources for AET, whose 550 local employees are fully insured through Anthem.

“There should be clear signage as to the rates I’m paying,” Baker said. Union Hospital officials said that while signage at at least one of the two southside oncology clinics may need improving, all the consent forms signed by patients have “Union Hospital” printed on them. “Everything they look at and sign has ‘Union Hospital’ on it,” Hutson said.

Anthem officials contend Union Hospital broke their contract by entering into joint ventures without informing the insurance company. Union’s Hutson says that he hasn’t known Anthem to be uninformed about anything. He also said that if the company believes there has been a breach of contract, it is normally quick to file a lawsuit.

To suggest the hospital has done anything in breach of the agreement or behind the scenes “is an insult to me and to Union Hospital,” Hutson said.

Union contends, meanwhile, that Anthem is trying to control what services the hospital offers and where it offers them. Anything offered outside the “four walls” of the hospital, Anthem wants to set the fee for, Hutson said. “That is absolute control,” he said.

But Anthem officials say their goal is not to control Union Hospital. “We are only telling them, if you are going to compete with other free-standing surgery centers and other radiology centers, Anthem will pay you what the rest of the marketplace is getting paid,” Schmitz said.

For now, Anthem customers, employers and medical-service providers can only wait to see what happens in the now more than yearlong negotiations.

“I have a lot of respect for Union Hospital,” AET’s Baker said. “They do a lot of good in the community,” often at a big financial loss. “They are a jewel in that respect.”

“This is a business issue, but it’s a very emotional issue,” the school corporation’s Orr said. “I hope Anthem is watching our money. … If there has been money paid that should not have been paid, we want it back. … Fair is fair.”

Arthur Foulkes can be reached at (812) 231-4232 or arthur.foulkes@tribstar.com.