NEWS

Thousands of Bayhealth patients face coverage disruption

Xerxes Wilson
The News Journal
View of the current Bayhealth hospital in Milford. Bayhealth is currently in the middle of protracted contract negotiations with Highmark Blue Cross Blue Shield of Delaware, which threatens to affect coverage for Delawareans.


A rift between Bayhealth Medical Center and Highmark Blue Cross Blue Shield of Delaware threatens to suspend coverage for thousands of the hospital's patients or force them to seek care elsewhere.

The current contract between Bayhealth and Highmark to reimburse the hospital for its care of the insurer's customers expires May 15. Both sides say they want a resolution but are preparing for a contract lapse that could make it more expensive or impossible for a portion of the 18,000 Highmark customers that use Bayhealth to receive certain healthcare.

"It will be extremely disruptive for patients that we serve today if they continue with this push to terminate this relationship," said Terry Murphy, CEO for Bayhealth, which is the largest healthcare provider in Kent County, and stretches into Sussex.

The hospital admits 18,000 patients each year and sees 135,000 emergency department visits. The company is also one of the primary insurers for state employees. 

"Our goal is to balance the needs of providers that we work with and the needs and demands of our customers. Our customers are focusing on high quality care," said Tim Constantine, president of Highmark Blue Cross Blue Shield of Delaware.

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If the contract is allowed to expire, some Highmark customers will have to pay more expensive out-of-network rates for certain treatments at Bayhealth facilities or go somewhere that accepts Highmark. Depending on the coverage plan, other customers will have to pay out of pocket, which could cause some not to seek treatment or have to drive long distances for care. 

A contract lapse will not affect emergency room treatment, Medicare or Medicaid recipients. 

Murphy and Constantine said their organizations are working on a plan to allow those with established treatment relationships at Bayhealth to continue if the contract expires. An example of such a patient is someone receiving regular cancer treatments. 

"We are working on continuity of care," Murphy said. "It is a very disruptive thing. That is why our first priority is to get a new agreement." 

Constantine said many of the services that will be affected by a potential lapse in the contract can be accessed through other providers in the area.

Bayhealth CEO Terry Murphy speaking at the Bayhealth press conference announcing a new hospital planned for Milford in 2014.

"There are plenty of alternatives available for lab work, imaging services and surgeries as well as any elective admission," Constantine said.  

While that may be true for some medical needs, Murphy said the disruption is not just about having the option of Bayhealth's facilities. 

"Patients will be upset because of this termination," Murphy said. "If you think about your relationship with your physician, hospital or nurse, those relationships are very important." 

Both sides have taken steps to inform customers of the potential disruption with letters being mailed to Highmark members that have used Bayhealth as well as Highmark customers that live within 30 miles of the hospital's facilities. Highmark spokesman Matt Stehl said those letters include information for those who need to continue ongoing treatments at Bayhealth. 

The crux of the contract disagreement is the reimbursement rates paid to Bayhealth by Highmark for various treatments. The discussions around Bayhealth follow a trend of Delaware hospitals, and health care around the country, moving from a fee-for-service payment method to one that is more value-based. Providers will be paid higher amounts for better outcomes and no longer just able to bill for individual services.

Highmark is actively negotiating with hospitals to convert their reimbursement models, but has said that they have gotten pushback. Highmark’s goal is have 80 percent of hospital services reimbursed under the new model by the end of 2016. Constantine said Highmark has been pressing Bayhealth to move to the new model since 2011. 

"We are focused on paying for value, paying for outcomes, paying for quality. Moving away from the traditional fee for service," Constantine said. "We have been successful in negotiating these types of arrangements with every other adult acute care hospital in Delaware. We have not yet been successful in converting the Bayhealth contract into a value-based contract."

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The new model puts the hospital at greater financial risk, which Bayhealth management has agreed to, Murphy said. But the rates involved have stalled negotiations.The hospital system would be out $21 million annually under Highmark's terms, Murphy said.

Bayhealth has said it  would be open to an arrangement that is revenue neutral, Murphy said. 

"Our operating margin is 3 to 4 percent. We are not for profit. [Highmark's terms] would have a significant impact on our operating margin. It will impact jobs and services. It is just not sustainable," Murphy said. 

Constantine said he disagrees with the $21 million annual estimated cost for the new model and rates. He said Bayhealth already receives more than the average hospital though he declined to provide specific numbers to illustrate the point. He also said Bayhealth is unwilling to agree to the expedited time frame for moving to the new model.

Tim Constantine, left, president of Highmark Blue Cross Blue Shield Delaware at the Wilmington Heart Ball at the Chase Center on the Riverfront in Wilmington earlier this year.


Highmark is the largest health insurer in the state with more than 444,000 members. Its parent company Highmark Health, which covers Western Pennsylvania and West Virginia, has reported hundreds of millions in losses tied to its offering of plans under the Affordable Care Act. Murphy said it is up to Highmark to answer whether the company is seeking more out of network hospitals to recover those losses. 

"We are doing our share by taking more risk, by trying to keep people healthier and keep people out of the hospital. We have taken reductions from the Medicare program with the Affordable Care Act. I don't think we should be paying for that twice or subsidizing for those loses with the work we do on the commercial side. That may be happening," Murphy said.  

Constantine rejected the notion that the company was seeking to mitigate those loses on the backs of hospitals. He noted that Highmark has been pushing for Bayhealth to move to the new model since 2011. 

"We don't view this as a power play, we are just trying to level the playing field and reach terms of that are consistent," Constantine said. 

Delaware Department of Health and Social Services Secretary Rita Landgraf was not available for comment. Wayne A. Smith, president & CEO of the Delaware Healthcare Association, declined comment.

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The rift parallels failed contract negotiations between Nemours hospital and insurer UnitedHealthcare, which upended coverage for thousands who relied on Nemours for hospital, specialist and primary care. The foundation is currently seeking $15 million in damages from United for providing unpaid health care to Delaware’s Medicaid recipients. 

In a complaint filed with the federal U.S. District Court for Delaware last year, the foundation alleges that United has not paid Nemours in full for covering Delaware's Medicaid recipients.

"Instead, United has wrongly taken advantage of its position as a provider of health insurance for Delaware's underprivileged children to enrich itself at the expense of Nemours, a longstanding provider of and advocate for medical services for all of Delaware's children," the complaint reads.

Nemours maintains that United's Medicaid contract with the state is not adequate and has forced thousands of families to travel out-of-state without access Delaware's only children's hospital.

UnitedHealthcare has already had to pay the Nemours Foundation, which owns pediatric physician practices in Pennsylvania, New Jersey and Delaware, millions of dollars in damages for unpaid bills related to providing care for the insurer's Medicaid recipients in New Jersey, Maryland and Pennsylvania

Jen Rini contributed to this article. Contact Xerxes Wilson at (302) 324-2787 or xwilson@delawareonline.com. Follow @Ber_Xerxes on Twitter.