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Jun 2, 2009 8:03 PMPublication: The East Hampton Press

East End hospitals facing deadline with health insurer

Jun 2, 2009 8:03 PM

In less than two months, Empire Blue Cross Blue Shield policyholders face the prospect of being unable to use their health insurance at the three East End hospitals for anything other than emergency care.

In April, Southampton Hospital, Peconic Bay Medical Center and Eastern Long Island Hospital began negotiations with Empire, the biggest health insurance provider in the region, on a new contract for patient care. If the parties do not agree to contract extensions or come to a new agreement before August 1, the three hospitals will no longer accept Empire insurance for anything but emergencies. Empire policyholders would need to pay out of pocket for care, or find another hospital.

The sticking point of the negotiations is reimbursement rates, the amount of money insurance companies pay hospitals and doctors for various types of care given to policyholders.

Last year, Southampton Hospital President and CEO Robert Chaloner said that because Empire’s reimbursement rate was so low, his hospital was losing $2,000 every time it admitted a patient with Empire as its health insurance provider. But Southampton partnered with Eastern Long Island Hospital in Greenport and negotiated a one-year contract with Empire with higher rates that closed the $2,000 deficit per patient.

Still, at the conclusion of last year’s negotiations with Empire, Mr. Chaloner said Southampton Hospital was only about halfway to the ultimate rates the hospital is seeking—something that would have to be addressed in future negotiations.

Since this year’s negotiation will also include Peconic Bay Medical Center on Southampton and Eastern Long Island’s side of the table, the combined clout of the three hospitals may result in higher reimbursement rates for all three hospitals.

The hospitals came together under one umbrella organization last summer, the East End Health Alliance, to provide strength in their negotiations and eliminate competition among them when setting up contracts.

Health Alliance spokesman Paul J. Connor III said on Tuesday that, in the past, insurance companies saw the three healthcare providers as little hospitals, unable to negotiate. But now that they negotiate as one entity, he said, “we have more market power, and we need to use it.”

Of the hospitals’ top commercial payers, Empire is paying the lowest reimbursement rate, Mr. Connor said. He noted that it does not cost the hospitals any less to care for an Empire patient than Oxford or HIP patients.

“As in prior years, Empire expects to complete a multiyear agreement with reasonable increases that adequately cover expected inflation of actual hospital operations cost,” Empire spokesman Craig Andrews said Tuesday, reading from a prepared statement. “This is Empire’s same approach in every hospital contract discussion already concluded throughout New York where the hospitals take their responsibility for managing their own costs seriously.”

Mr. Andrews said the East End Health Alliance is demanding a 60-percent increase in reimbursements the first contract year and subsequent double-digit increases in the following years.

“Hospital costs make up nearly half of every premium dollar Long Islanders and their employers, unions and governments pay, and this increase 
would directly impact the cost of their coverage,” he said. “These customers would not expect or permit us to entertain this kind of increase on their behalf, let alone in this economic environment.”

“The percentages to us are irrelevant,” Mr. Connor replied. “It’s getting our rate up to our other rates like, Oxford, United, HIP—the other big payers that we have. We believe that those are the market rates. Whatever percentage it takes to get us there, there’s where it has to go.”

Hospital officials have said the East End hospitals are underpaid by insurance companies and should be paid equitably with what western Suffolk County and Nassau County hospitals are paid. Officials have consistently said they could not reveal exact monetary figures because of contract and negotiation confidentiality.

“Insurance reimbursement rates must keep pace with the costs of providing health care,” a statement posted over the weekend to the Health Alliance’s website, healli.org, reads. “Our 
ability to continue to offer high quality services to the region is dependent 
on it. Like all hospitals in our region, our costs for labor, pharmaceutical, utilities, etc, are escalating at the same time that the government is cutting hospital reimbursement. In fact, New York State cut Alliance hospital reimbursement by $1.2 million this year with an additional $300,000 MTA tax hitting in 2010.”

The Health Alliance is releasing up-to-date information on the negotiations at healli.org and (631) 726-FACT.

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