Turmoil raises risk in choosing health plans

Beth Kendrick had nearly decided to choose Blue Cross as a health plan option for 115 employees at Valley Services Electronics, a south San Jose technology company. Then three local hospitals dropped out of the Blue Cross network, and she changed her mind.

It's not the first time in the past year that Ms. Kendrick, the company's chief financial officer, has had to switch health plans for Valley Services. And her company is only one of many in San Jose that have taken a bumpy ride in the rough health care marketplace here.

With the only large local HMO going out of business, San Jose Medical Group in bankruptcy, hospitals dropping out of the Blue Cross network, and individual physicians dropping out of several managed-care networks, San Jose residents have been faced with continued disruption in care.

The latest bump came Oct. 1, when Nashville, Tenn.-based HCA terminated its contract for six of its California hospitals with Blue Cross of California because they couldn't come to terms on a new agreement.

Three hospitals are in San Jose: San Jose Medical Center, Regional Medical Center San Jose and Good Samaritan Hospital. Together they control 40 percent of the local health-care market. The other three HCA hospitals are in Southern California.

Valley Services had been with Blue Cross once before, but switched last year to the Lifeguard HMO because Sutter Health had dropped out of Blue Cross's network. The Sacramento-based Sutter health-care chain includes the Palo Alto Medical Clinic and the Camino Medical Group in Sunnyvale.

Sutter and Blue Cross had a standoff for about three months before a state legislator pulled them back to the negotiating table. At the time Lifeguard seemed more stable, Ms. Kendrick says.

Now Lifeguard's going out of business has thrown Ms. Kendrick back into the marketplace to find a new health plan for company employees. She wanted to move quickly because employees were already complaining that doctors were delaying procedures or not taking referrals, fearing they wouldn't get paid.

Ms. Kendrick almost went with Blue Cross because it had a large network of hospitals and physicians while offering a competitive market price. Then the HCA hospitals dropped out of Blue Cross over issues of reimbursement and the contract period.
"We didn't want to offer employees a health plan that didn't have the hospitals in our neighborhood," Ms. Kendrick says. She eventually went with HealthNet and Kaiser Permanente.

"I've never been a Kaiser member, but they seem great because they don't have all these issues," Ms. Kendrick says.

She's not alone. Health insurance broker Diane Borrison, a partner with Advanced Professionals in San Jose, says she has clients that are choosing health plans other than Blue Cross because of the HCA standoff.

"When an employer has raised premiums and decreased benefits, the last thing they want to do is go to their employee with a plan that doesn't include three San Jose hospitals," Ms. Borrison says.

To get Blue Cross back on the negotiating table, HCA went directly to the public by placing advertisements in the San Jose Mercury News this past week to inform readers that its three hospitals aren't in the Blue Cross network. Four ads where published over a period of four days in different sections of the newspaper.
"Blue Cross doesn't want you to use the quality health-care services of three of the valley's top hospitals," says the Sunday ad, which offers a list of health plans that do include the three hospitals in their networks.

The tactic drew scorn in some circles.

"I'm very disappointed in the way HCA has conducted themselves," says Peter Kuhn, health insurance broker with IBP Insurance Services in San Jose. "They are trying to negotiate in the press."

Some employers working with IBP have avoided Blue Cross because of the hospital situation, while others have chosen Blue Cross because they expect it will negotiate a contract with HCA, he says.

"HCA is taking a page out of Sutter's strategy," Mr. Kuhn says.

When Sutter Health terminated its contract with Blue Cross last year, the Sacramento-based hospital chain also took out ads in local newspapers.

Blue Cross is hearing about employers choosing other health plans because of the HCA issue.

"It's too early to say what affect that will have on our new accounts or renewals," says Michael Chee, spokesman for Blue Cross.

He says the advertisements were predictable.

"It's usually the next step in a game plan that hospitals use time and time again. This accomplishes nothing for negotiations," Mr. Chee says. "Our door has never been closed. We never left the table."

This is the first time a group of HCA's 181 hospitals has placed ads in the newspaper about a contract termination, says Leslie Kelsay, spokeswoman for HCA.

"We just want Blue Cross consumers to know the consequences of these contracts," she says.

The ads were locally produced by Orloff/Williams. Next week, local HCA officials plan to evaluate the results of their advertising campaign and decide whether to expand it to radio and other print publications, Ms. Kelsay says.

The three HCA hospitals have already seen a drop in patient volume as Blue Cross members are diverted to other local hospitals. O'Connor Hospital has seen a 10 percent increase in surgery volume in the past week and has received some Blue Cross patient transfers from HCA hospitals, says Mandy Urquhart, spokeswoman for O'Connor.

In the tug-of-war to keep health costs down while trying to provide high quality care, the patient often gets stuck in the middle.

"There has been a lot of turmoil for employees and employers. I don't like so much upheaval," Ms. Kendrick says.