Refusal by Blue Cross and Blue Shield of North Carolina to Pay Fair Rates Forces NCBH to Cancel Contract

March 4, 2005

Citing the refusal of Blue Cross and Blue Shield of North Carolina (BCBSNC) to agree to adequate reimbursement rates that will allow the hospital to continue to provide medical services, North Carolina Baptist Hospital has given notice that it will cancel its primary contracts with BCBSNC, effective June 4, 2005.

Len B. Preslar Jr., Baptist Hospital’s president and CEO, said the hospital regretted having to take the step of canceling the BCBSNC contract, but that it had no choice. For more than a year, hospital officials have been trying in good faith to negotiate with BCBSNC officials for a new reimbursement rate, without success.

Despite Baptist’s increasing costs of providing care, BCBSNC has increased its reimbursement rate to Baptist by only 5.1 percent since Feb. 1, 2001. During the same period, BCBSNC raised the premiums for its small-group plans, on average, by a total of more than 94 percent, based on information from the N.C. Department of Insurance. For the period Jan. 1, 2003, through Dec. 31, 2004, BCBSNC raised premiums for its large-group HMO by a total of more than 36 percent.

“We strive to keep our costs down and to provide excellent value for our patients’ and their insurance plans’ health care dollars,” Preslar said. According to data from the Council of Teaching Hospitals of the Association of American Medical Colleges, North Carolina Baptist Hospital’s gross charges have consistently been well below the national average for teaching hospitals.

“In return we ask that the plans adequately reimburse us for our expenses,” Preslar said. “It’s unfortunate that we must cancel our BCBSNC contract, because we have been able to reach acceptable agreements with all of the other health care plans that we work with.”

BCBSNC now pays by far the lowest reimbursement rate of all private insurance companies under contract with the hospital, and on average the rates paid by BCBSNC are actually lower than the cost of providing the medical care.

“It isn’t fair to employers and patients covered by other plans to give BCBSNC rates that are less than our cost, or even substantially less than other plans’ rates, because that just shifts an unfair financial burden to them,” Preslar said.

BCBSNC members make up about 10 percent of Baptist’s patient base. Preslar said that by refusing to negotiate a fair contract with the hospital, BCBSNC is raising the potential of inconvenience and even hardship to its members.

“We are the only academic medical center in western North Carolina,” Preslar said. “We provide a level of care and highly specialized services that cannot be found anywhere else in this part of the state. It would be extremely unfair for BCBSNC to suggest to their members that they don’t need Baptist Hospital, that they can get the same care somewhere else. Because they can’t.

“We have one of the highest patient satisfaction ratings in the nation among our peer institutions. For the past six years we have won the Consumer Choice Award, presented by the independent National Research Corporation, as the most-preferred hospital in the Piedmont Triad. And we will continue to work very hard to serve our BCBSNC patients.”

At the end of Baptist’s last three-year contract with BCBSNC, hospital financial officials asked BCBSNC for an equitable rate that would have taken effect at the beginning of the contract year on Feb. 1, 2004, but the new rate has not been granted. The hospital has continued to ask for new rates.

Prior to the cancellation effective date, there will be no effect on BCBSNC members. For members of some BCBSNC Plans, Baptist Hospital may be obligated to defer the cancellation date until the Plan’s next anniversary. After the effective cancellation date, BCBSNC members may be able to continue to receive emergency and/or out-of-network care at Baptist Hospital, and hospital officials will continue to work with members’ employers to ensure that the members’ medical needs are met.

The hospital’s financial managers said the hospital will continue to submit claims for BCBSNC members after the contract ends and will work with the members to ensure that their medical expenses are filed under the terms of their BCBSNC membership.

Like most medical insurance plans, BCBSNC allows for members to receive care from “out-of-network” providers, although deductible, co-pay and patient liability amounts may increase.

“We will do everything in our power to make sure that BCBS members are given the medical care they require from us,” said Preslar. “We will work with our patients any way we can to facilitate the reimbursement process, although we cannot guarantee that their out-of-pocket expenses will be as low as they would be if their plan had agreed to an equitable contract rate.”

During recent communications BCBSNC has accused the hospital of trying to raise rates to cover money that the hospital has agreed to repay BCBSNC as a result of a payment dispute about a group of claims submitted by Baptist. Although the alleged overpayment resulted from BCBSNC’s own billing instructions, which Baptist had followed explicitly, Baptist agreed to repayment terms and has already repaid a portion of the disputed amount.

Hospital officials firmly deny BCBSNC’s suggestion that the request for a reimbursement rate increase is an attempt to recoup the money being repaid to BCBSNC. “In fact,” Preslar said, “in December BCBSNC leadership agreed to negotiate new reimbursement rates in good faith, and they simply haven’t done so. They say they already pay us more than they pay any other academic medical center in North Carolina – a statement that BCBSNC is notorious for routinely using as a negotiating strategy – and it's just not believable.

“This is about rates that are too low, that have been too low for quite some time,” Preslar emphasized. “We have to be adequately reimbursed for the care that we provide. We expect it of all third-party payers that we have contracts with, and that includes BCBSNC.

“We would hope that BCBSNC members who have entrusted us with their medical care – and their employers – would understand that. We want to continue to serve them, and we hope they will continue to make Baptist their hospital of choice.”

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Media Contacts: Mark Wright,, (336) 716-3382, cell-(336) 462-2167; Shannon Koontz,, or Karen Richardson,, at 336-716-4587.

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