The ongoing contract dispute between Cigna HealthCare and Catholic Healthcare West is a symptom of a bigger problem of decreasing government funding of health care, according to John Rivers, president and CEO of the Arizona Hospital and Healthcare Association.
He is concerned that more contract disputes between hospital systems and private insurers will result as the Arizona Legislature cuts funding to the Arizona Health Care Cost Containment System (AHCCCS), the state's Medicaid agency.
Cigna no longer has a contract with Chandler Regional Medical Center, Mercy Gilbert Medical Center, St. Joseph's Hospital and Medical Center or any Catholic Healthcare West-related facility. According to the hospital system, reimbursement rates currently offered by Cigna are "lower than we can accept to maintain the quality programs offered at our facilities."
"We're still in negotiations," said Julie Graham, Mercy Gilbert Medical Center spokeswoman. "We're still trying to get this finalized, to come to some agreement." Cigna remains "in discussions" with Catholic Healthcare West, said Leigh Woodward, Cigna HealthCare of Arizona spokeswoman.
"With respect to Catholic Healthcare West facilities and physicians, transition issues will be considered on a case-by-case basis and in accordance with applicable law, the member's benefit program and applicable Cigna policies and procedures," she said.
When a government payer like AHCCCS does not pay the full cost of providing care, hospitals normally "try to shift those costs as much as possible to private payers who view it as a hidden tax and something that they prefer not to do," Rivers said.
"The drama that's playing out is a drama that's caused by underpayment by AHCCCS for hospital services provided to AHCCCS beneficiaries," he said. "AHCCCS' own study shows that their hospital payments are at about 85 percent of actual cost. So from a hospital perspective, you're going to have to try and recover that 15 cents on the dollar somewhere else or you're not going to be in business very long. So, in their contract negotiations with private insurers ... hospitals are going to try to make up that difference."
When the insurer balks at that, the result is a contract dispute exactly like the one that unfolded between Cigna and Catholic Healthcare West, Rivers said.
"As the government backs further and further away from paying adequately, that burden inevitably gets shifted to the private sector in the form of a hidden tax, and that's exactly what's happened in this case," he said.
The fiscal year 2008 state budget includes cuts to AHCCCS funding, and more are proposed for fiscal year 2009, Rivers said.