QualChoice Terminates PremierCare?s Contract

Due to a failed renegotiated contract earlier this year, QualChoice members in Northwest Arkansas will soon have their health care options limited.

On Oct. 19, the contract between insurance group QualChoice of Arkansas (QCA) and health care network Northwest Health System will terminate. That will leave approximately 15,000 to 20,000 QCA members in Northwest Arkansas — including about 3,000 University of Arkansas employees — with the possibility of having to switch hospitals and doctors.

The termination comes after Northwest Health System and its jointly owned PremierCare Northwest in Springdale, which negotiates contracts for the hospitals and physicians with insurance companies, declined QualChoice’s renegotiated contract offer — four months after one had been agreed upon for 2006.

Because of the “Any Willing Provider” law that allowed it to go into other competitive markets in Northwest Arkansas, QualChoice felt it was time to “modernize” its long-standing relationship with PremierCare, said Francis Browning, president and CEO of the Little Rock-based company.

“We had changed that type of contract over time to reflect revolving trends and pricing,” Browning said of QCA’s contract terms with PremierCare since the network’s inception in 1997. “As we compared the provisions of the contracts we’re executing around the state … PremierCare was out of date.”

But the hospital decided those provisions sent to it in April weren’t reasonable, said Roy Beebe, executive director of PremierCare. Northwest Health believed the payer agreement rates QualChoice wanted was too low, meaning NHS would lose money on some services.

Beebe said he wasn’t sure how much the system stood to lose with the new contract, but that its profit margin is already well below its goal of 5 percent. Accepting QCA’s proposal, which Northwest Health believed was below the market, would push it even further from making any kind of profit.

However, QCA makes up only a small percentage of PremierCare’s business with about 1,500 patients seen throughout its network in Washington, Benton, Carroll and Madison counties. Only providers contracted strictly through PremierCare would be affected, Beebe said, adding that it has contracting rights just in the four-county area.

Three hospitals will be affected by the split: Northwest Medical Center in Bentonville and Springdale, and Willow Creek Women’s Hospital in Johnson. Other NHS hospitals and clinics have direct contracts with QCA and circumvent PremierCare.

Its 405 doctors will also be affected, but due to “Any Willing Provider,” those doctors can join QCA’s network as long as they agree to its rates.

PremierCare is the state’s largest provider-owned network with 130,000 enrollees in the region.

QCA is the fourth largest health insurance company in Arkansas. It had combined premiums of $57.5 million in 2004, down 17 percent from $69.5 in 2003.

Timing

At the end of last year, Beebe said PremierCare’s contract was renewed with QCA for 2006, including hospital rate terms. But on April 19, he received a letter stating that unless a new contract was negotiated, QCA would terminate the existing one on Oct. 19.

Beebe was floored.

“We had contracts all the way through 2006,” he said. “If they couldn’t agree to that, I wish they would have told us way back in December.”

But Browning said the two companies have been in discussions regarding the contract since late last year and that the termination shouldn’t come as a complete surprise to PremierCare.

He said the contract is “evergreen” — meaning unless there was a change in the terms, the contract was automatically renewed. But it was also a bilateral contract, so if any party wanted to terminate it for any reason, all that was needed was a 180-day notice.

But QCA agreed to the contract for 2006 thinking it was going to achieve a more up-to-date agreement in the future, Browning said. When that proved futile, QCA chose to terminate the contract.

Beebe said he understands that it’s a business decision, but doesn’t understand QCA’s timeliness of its decision.

After he received the April 19 letter, there were some discussions between QCA and PremierCare in late July. After that, Beebe said he didn’t hear anything from QCA until Aug. 4, when he received the first notice of termination from QCA’s Rose Ann Cato, director of network services, stating:

“Contract discussions between QualChoice and PremierCare Northwest have been ongoing the past few months. Our hope had been to have a new contract in place by August 1, 2006. Unfortunately, we have not been able to reach an agreement regarding hospital rates. Effective October 19, 2006, providers contracted with QualChoice exclusively through PremierCare Northwest will no longer be participating providers in the QualChoice Network.”

Beebe said it was the only letter or word he’d received regarding the termination. After he received the letter, he sent one out to PremierCare Northwest providers on Aug. 15 notifying them of the pending terminated contract.

“We have always supported QualChoice/QCA in an effort to keep as many viable payors in the market as possible,” Beebe’s letter stated. “However, PremierCare Northwest recently received certified letters from QualChoice/QCA terminating the existing agreement mid-year, and requesting that provider rates be renegotiated. We find this approach very distasteful … Northwest Health System has reviewed the QualChoice/QCA proposal and determined it is not in the best interest of Northwest Health System to enter into a new agreement with QualChoice/QCA.”

Patient Impact

Beebe’s concern was trying to get QCA to finish out the term of the contract for employers who usually make insurance decisions at the end of the year and for members who are in the middle of pregnancy.

“We’re going to do everything we can because my concern is the people who get caught up in the middle,” Beebe said.

In order to make sure QCA members networked with PremierCare weren’t left adrift, Beebe negotiated with QualChoice that anyone who is pregnant and registers by Oct. 1 will be covered by Northwest Health providers through June 1, 2007.

At the same time, Beebe again tried to get QCA to finish out the length of the contract to the end of 2006 at its current rates, and again, PremierCare’s offer was turned down in a letter dated Sept. 9:

“You had asked about extending the existing Agreements through the end of the year for all services. We appreciate that offer; however, we have elected to maintain the original terminate date of 10/19/06. We have already communicated the pending termination to our providers, clients and members. We feel it would be confusing to change the dates at this time.”

Beebe said that even though no agreement has been reached, he doesn’t understand why QCA won’t finish out the term of the contract.

Although, he did admit that PremierCare could have accepted QCA’s terms until the remainder of the year then break ties with the insurance company. But that would mean losing revenue to an already thin profit margin.

“It’s just a business decision [QCA] made, and it’s forced us into a decision,” Beebe said.

But Browning said it wouldn’t matter when it happens, people will still be affected.

“No matter when you terminate a relationship or start a relationship between a carrier and a provider, somebody’s going to get caught in a trap unless the carrier and provider works out something to transition the care,” Browning said. “For all members who are affected, they should receive a letter this week [Sept. 18] … very soon anyway.”

At the University of Arkansas, the area’s biggest pool of QualChoice members, Richard Ray has been scrambling to figure out what’s going to happen to the school’s almost 3,000 QCA insured employees.

Ray, the school’s benefits director, said he’s been working with QualChoice to get UA employees who have scheduled surgeries or who are pregnant set up for the change. Surgeries needing to be scheduled must be preauthorized by QCA by Oct. 19 and will be covered until Oct. 31, Ray said.

For pregnancies, employees will be covered throughout the remainder of the pregnancy and 90 days after delivery.

However, Ray said that PremierCare represents less than 10 percent of the UA’s business. In the 2005-2006 school year, about 90 percent of UA’s employee hospitalizations were at Washington Regional Medical Center in Fayetteville or St. Mary’s Hospital in Rogers.

“But that doesn’t change the fact that those people who are using PremierCare are going to be adversely affected by this,” Ray said.

Even with QCA’s agreement to cover pregnancies for a certain period of time, Ray said many employees’ doctors and specialists are using the “Any Willing Provider” privileges at Washington Regional.

Ironically, “Any Willing Provider” seems to be the issue that started the split between QCA and PremierCare. Once AWP became a law late last year, the markets opened up for QualChoice, and immediately it started discussions with Washington Regional to negotiate a contract.

That left PremierCare’s old terms a little dated for QCA.

“One of the outcomes of AWP is it not only gives providers more access, it forces more standardization,” Browning said.

Asked if QCA would be open for discussions for future negotiations with PremierCare, Browning said, “No comment.”