Negotiations between Stillwater Medical and BlueCross BlueShield of Oklahoma ceased on Dec. 31, 2022, and have yet to resume. If a deal is not made by May 1, 2023, all BCBSOK members will be considered out-of-network at SMC.
Looking at the high cost of out-of-network healthcare, Rachael Himes Jenson, who is a BCBSOK member through her husband’s employer in Oklahoma City, is looking for providers outside of Stillwater.
“We’re relatively healthy, and I’m really happy for that, but I don’t want to pay the out-of-network cost,” Jenson said. “We’ll be finding new doctors in Oklahoma City for next year.”
Alan Lovelace, VP and CFO at Stillwater Medical understands the tough spot this puts people in while they work towards an agreement with BCBSOK.
“I respect that choice,” Lovelace said. “If an agreement is made before May 1, then I guess those people might then re-evaluate the next year if they want to change again.”
Both SMC and BCBSOK told the News Press that they are open to returning to negotiations.
“We are definitely willing to enter into negotiations at some point in the future,” Lovelace said. “But there’s got to be an opportunity for productive and reasonable discussions around our cost increases, which there has not been.”
BCBSOK is one of the largest insurers in the state and is the only major health plan in all 77 counties.
“We know that we represent a lot of people in the greater Stillwater community,” Rick Kelly, Divisional VP at BCBSOK said. “We certainly empathize with the fact that the local hospital and the local physicians are important.”
Negotiations are centered around an increase in reimbursement for services Stillwater Medical provides to BCBSOK members. Both parties disagree on the appropriate level of increase to meet the rising costs of healthcare.
“We opened our books to Blue Cross, which we’ve never done before,” Lovelace said. “I’ve been here 12 years and in my previous negotiations with Blue Cross, we’ve never shared this type of data with them and to my knowledge, they’ve never gone and looked at our cost reports.”
According to Lovelace, those cost reports haven’t made an impact on negotiations with BCBSOK.
“They never responded to it. They would just go back to what they’re saying, ‘5%, you’re asking for more than what the CPI has increased.’”
The Consumer Price Index is published by the U.S. Bureau of Labor Statistics. BLS defines CPI as a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Analysis of the 2021-22 BLS CPI published in November 2022 by the Peterson Center on Healthcare and the Kaiser Family Foundation medical care costs have increased by 5%, with all goods and services increased by an average of 7.7%.
The U.S. Bureau of Labor Statistics produces the change in consumer price index for all urban consumers called CPI-U. The data in the chart show medical care increased by 5% from October 2021 to October 2022.
“What they’re asking for is multiples of general CPI,” Kelly said. “If you actually look at healthcare inflation, it’s closers to five times that.”
Stillwater Medical has claimed that its costs have increased by 26% since 2019. In 2020, COVID-19 required SMC to bring in expensive contract nurses and specialists that contributed to a 35% increase in labor costs since 2019, equaling $43,000,000.
“Mainly, it’s increased wages,” Lovelace said. We’ve had to pay people more to keep them here.”
Lovelace states that a 3-4% margin of profit is necessary to provide high-quality healthcare services that the community has come to trust. A 2022 operating income report shared by SMC shows a negative 2.3% margin, falling short of budget by over $20,000,000.
“This is the first time Stillwater Medical Center has lost money in over two decades,” Lovelace said. “We rarely miss budget.”
The KFF CPI analysis also shows that health insurance costs increased by 20.6% in 2021-22. The report notes that health insurance CPI data is almost one year lagged and likely reflects insurer margins for the 2020 calendar year. Healthcare use declined in 2020 due to COVID-19, which increased profits as insurers paid fewer medical claims than in a typical year.
The U.S. Bureau of Labor Statistics produces the change in consumer price index for all urban consumers called CPI-U. The data in the chart show health insurance increased by 20.6% from October 2021 to October 2022.
Kelly said CPI is crucial to their negations, and they have come to terms with 83 healthcare providers in the state over the last year.
“This is important information from our standpoint when we go to work with the hospitals because we want to be fair and support the hospitals appropriately from a financial perspective,” Kelly said. “It’s (CPI) is kind of our North Star or a guiding point of what we consider to be fair and reasonable.”
BCBSOK is one of the biggest insurers in the state and represents some of the largest employers in Stillwater, including Oklahoma State University. On Jan. 3, OSU sent an email to employees notifying them of the situation.
“BCBS has acted as our third-party administrator, negotiating on our behalf with the intent to keep our medical costs down while allowing reasonable increase due to the nationally rising costs of healthcare,” the OSU email said. “We remain hopeful that BCBS and SMC will reach an agreement in the coming months.”
The Stillwater Medical Center Authority has scheduled a special meeting for Tuesday where they will discuss a proposed resolution regarding the agreement between the SMCA and BCBSOK.
“We can accept Blue Cross rates that are less than one-half of our cost increase. But things are going to change if we do that,” Lovelace said. “This is why hospitals close. This is why hospitals get acquired by large healthcare systems. It’s because they can’t get the appropriate funding from the only funding source that makes a profit for the hospital.”
