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The big ask from Texas Health and UT Southwestern: $900 million from Blue Cross

Without a new contract, in-network coverage ends for most Blue Cross patients on Oct. 4.

Texas Health Resources and UT Southwestern Medical Center are seeking an increase of more than $900 million over the next 32 months from Blue Cross Blue Shield of Texas, according to an email the insurer shared with brokers in late September.

The increase would be required for Blue Cross members to remain in-network with doctors and facilities that are part of Texas Health and UTSW, the email said.

“By any metric, a presumptive billion-dollar increase over 32 months is considerably more than inflationary pressures demand,” said the email. “Agreeing to their proposed price increases would surely cause hardships for every business, municipality, federal employee and individual Texan served by Blue Cross and Blue Shield of Texas in the Dallas-Fort Worth metroplex.”

Blue Cross confirmed that emails were sent to brokers and consultants so they could explain why the state’s largest insurer is at loggerheads with Texas Health and UTSW, the market share leaders in Dallas-Fort Worth.

The health systems created an alliance in 2015, known as Southwestern Health Resources, and that venture is negotiating a new contract with Blue Cross. After months of unsuccessful talks, Southwestern Health filed to terminate its contract and leave most Blue Cross networks on Oct. 4 unless a new deal is reached.

Southwestern Health sent notices of the potential change to 459,000 patients who have received care from its providers since April 2021. Southwestern Health said it is the largest provider network in North Texas with over 5,500 physicians and clinicians, 29 hospitals and more than 650 access points for care.

It’s not uncommon for health systems and insurers to clash over contract terms and threaten to go their separate ways. In most cases, the differences are settled by the deadline — and financial numbers are usually kept private.

But in December 2016, when Texas Health and Blue Cross were in a contract fight, a Blue Cross executive said the provider was seeking a $57 million increase. Texas Health would not confirm the number, but CEO Barclay Berdan said then that any figure from Blue Cross “should be taken with a truckload of salt.

This time, Southwestern Health officials declined to confirm the $900 million increase and suggested it was part of the negotiating process.

“Negotiations always have one party start high and one start low and you move together in some way,” chief marketing officer Darin Szilagyi wrote in an email. “We are asking for an increase significantly below the inflationary pressures that we all are experiencing.”

While some said the requested increase was shockingly large, others pointed out that Texas Health and UTSW have the biggest health care footprint in the region. They generate billions in annual revenue from Blue Cross patients.

“Thousands of patients in North Texas trust our doctors and caregivers with their health every day – that’s millions of visits every year,” Szilagyi wrote.

Contract talks are continuing, but the threat of ending in-network coverage can cause anxiety and disruptions for patients. If Texas Health and UTSW actually sever ties, most Blue Cross members would have to pay high out-of-network rates for treatment or switch to other doctors and facilities in the Blue Cross network.

Patients with certain medical conditions may be eligible to remain with their current providers regardless of the contract. On its website, Southwestern Health said pregnant women in their second or third trimester were encouraged to apply for continuity of care benefits.

In an interview last week, a Blue Cross executive said affordability remains a top issue in employer-sponsored coverage and individual plans on the health exchange. Members cannot absorb large increases for health insurance, said Shara McClure, divisional senior vice president of health care delivery for Blue Cross Blue Shield of Texas.

At the time, she declined to say how much was being sought by Texas Health and UTSW. She said it was “a significant increase” and the gap had not narrowed.

“We’d love to reach an agreement,” McClure said. “We’re just not there. And we’re very far apart right now.”

Southwestern Health cited the surge in inflation as a key factor in negotiations. Inflation is at a 40-year high, and recent reports by industry consultants showed double-digit gains in the costs of labor, prescriptions and supplies, Szilagyi said.

“We are asking [Blue Cross Blue Shield] to cover only a small fraction of our increased costs so that we may continue delivering high-quality patient care,” Szilagyi wrote in an earlier email. “This includes fairly compensating our hard-working employees in this highly competitive market.”

He said Southwestern Health continued to “hope to reach a viable agreement by the deadline.”

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