Northwest Health System in Contract Dispute with Insurer

Northwest Health System intends to terminate its provider agreement with Arkansas Blue Cross & Blue Shield effective Aug. 19 if a financial impasse is not resolved, NHS CEO Dan McKay has warned.

In a letter dated July 16, McKay alerted area employers of the dispute with ABCBS over potential rate increases and reimbursement reductions. The matter remains unresolved.

Northwest Health System consists of Northwest Medical Center in Springdale, Northwest Medical Center-Bentonville, Willow Creek Women’s Hospital in Johnson and Siloam Springs Regional Hospital.

All are owned by Community Health Systems Inc. of Brentwood, Tenn. CHS operates eight hospitals in Arkansas and touts itself on its website as “one of the nation’s leading operators of general acute care hospitals.”

Also according to the website, CHS affiliates “own, operate or lease 135 hospitals in 29 states, with an aggregate of approximately 20,000 licensed beds.”

McKay, in his letter, wrote that NHS had spent eight months in discussions with ABCBS regarding “reasonable rate increases.” He also expressed concern over a new payment methodology set to be implemented Jan. 1 that could result in a reduction in reimbursements.

That combination is cited as the reason for NHS’ notification it will terminate its agreement with BCBS.

“This decision has not come easily or without thorough evaluation,” McKay wrote. “We are well aware of the disruption this may cause in the short-term for the employer, provider and patient communities; however, we are confident that long-term stability in this market will be compromised significantly, if we do not take this step. Should [ABCBS] be unwilling to negotiate, we are prepared to move to direct contracts with major employers and transition small group business over time to more favorable payor partners.

“To be clear, it is our desire to maintain our relationship with [ABCBS]; and it is our hope that [ABCBS] will respond with a similar desire.”

A source familiar with process estimated that 70 percent of Northwest Arkansas employers use ABCBS.

McKay did not return a telephone call seeking comment.

ABCBS spokeswoman Max Greenwood said discussions with CHS are ongoing and said the insurer is “hopeful” an agreement can be reached.

“They want more money and we already pay CHS the exact same amount for out-patient services we pay every other hospital in Arkansas. And for in-patient services, we actually pay CHS more,” Greenwood said.

“As you probably know, these kinds of contract discussions are not uncommon. This isn’t the first time we’ve had these kinds of discussions with out-of-state, for-profit organizations.”