| Hanover Hospital has announced plans to cancel its | | | | wrote. "We did not." |
| contract with Capital BlueCrosswhen the current | | | | Hospital officials termed the adjustments as |
| contract ends July 1, 2012 -- potentially leaving | | | | "minor" and said they do very little to close the |
| Capital customers without insurance coverage at | | | | gap between what Capital pays and the rates of |
| the hospital. | | | | other insurance companies. |
| Hospital President and CEO George Kyriacou said | | | | The tone of Lehr's response was terse. |
| Capital -- the second largest insurer at the hospital | | | | "Now -- less than halfway into the five-year |
| -- is paying "dramatically less" for services as | | | | contract -- you have decided to publicly announce |
| compared to other insurers with contracts at the | | | | that you are canceling our contract 30 months |
| hospital. | | | | from now, on June 30, 2012," he wrote. "You |
| The change applies only to those who use Capital | | | | indicate you are doing so because we have not, in |
| BlueCross, who account for 12 to 13 percent of | | | | your judgment, offered sufficient voluntary |
| the hospital's revenue, said Lisa Duffy, hospital | | | | enhancements to the contract terms that |
| director of marketing. Other BlueCross entities are | | | | Hanover Hospital itself agreed to, a little more |
| not affected, she said. | | | | than two years ago." Hanover Hospital's strategy |
| In a letter Thursday to local employers, insurance | | | | of hoping companies will pressure Capital is nothing |
| agents, and elected and municipal officials, | | | | new to the industry, let alone the business world |
| Kyriacou said the hospital has renegotiated its | | | | in general, said Dennis Shea, a Penn State |
| contracts with major insurance companies, such | | | | University professor who studies health |
| as Highmark, Aetna, HealthAmerica, CIGNA and | | | | economics and policy. |
| United HealthCare. Capital was the exception. | | | | "Things like this happen all the time," he said. "And |
| "We had multiple discussions with them and there | | | | sometimes agreements are written and it never |
| was almost a feeling of pride they were the | | | | hits the news." |
| lowest-paying insurance company," Kyriacou said | | | | Looking at the situation from Capital's point of |
| in an interview Wednesday. "There was a sense | | | | view, Shea said he can see some justification for |
| of arrogance." | | | | paying less. With more than a million customers in |
| Kyriacou sent a letter Thursday to Capital CEO | | | | central Pennsylvania, it's one of the largest |
| William Lehr giving notice of the cancellation. | | | | insurance providers in the area and, consequently, |
| By the end of business that same day, Lehr had | | | | brings a lot of customers to the hospital. |
| drafted a response that defended the company's | | | | "They might be saying, 'We bring to the table a |
| position -- and criticized the hospital's | | | | larger patient base, so we ought to get a better |
| announcement of the contract termination -- but | | | | rate from people for that," Shea said. "It depends |
| said Capital would be willing to negotiate. | | | | on what negotiating leverage they can bring to |
| "Capital BlueCross always seeks to negotiate the | | | | the table." |
| most cost-effective and responsible | | | | And, presumably, the savings is passed on to the |
| reimbursement rates with our valued providers, | | | | customer, he said. |
| and we do so for one reason and one reason | | | | On the other side of the coin, Hanover is a small |
| only -- because those reimbursement rates | | | | hospital trying to ensure it can meet its obligations. |
| directly impact how much our members and | | | | Shea noted that by bringing the negotiations to |
| employer-customers pay for their health | | | | light, it could put pressure on Capital. |
| insurance," Lehr wrote. | | | | "This certainly can lead to a situation where this |
| He continued: "Every dollar we pay out to a | | | | coming year, employers are going to look at what |
| provider such as Hanover Hospital comes directly | | | | is offered in health insurance coverage," Shea said. |
| from the pockets of the people of Hanover." | | | | "They're going to look at what they can get." |
| Though the contract terms can't be released | | | | Hanover Borough's 175 employees use Capital |
| publicly because of a confidentiality clause, | | | | BlueCross and, in fact, the borough council last |
| Kyriacou said there was a 25- to 30-percent | | | | month renewed its contract with the company |
| difference between what Capital pays and other | | | | for another year -- at a 16-percent increase. |
| insurance companies. | | | | With more than two years to go until the |
| In addition, Kyriacou said Capital pays Gettysburg | | | | contract between Capital and the hospital ends, |
| and York hospitals -- members of WellSpan Health | | | | Hanover Borough Manager Bruce Rebert said |
| and Hanover's competitors -- "significantly more | | | | there is no reason to panic. |
| than they pay Hanover Hospital for the same | | | | But because the borough's revenue comes from |
| services." | | | | taxpayers, it is required to shop for the |
| According to statistics collected by the | | | | lowest-priced health plan that meets the needs of |
| Pennsylvania Health Care Cost Containment | | | | employees. And practically all employees live within |
| Council, which tracks the performance of hospitals | | | | the area and use Hanover Hospital for treatment. |
| across the state, Hanover also charges less for | | | | It could mean the borough would drop Capital -- |
| many -- though not all -- services as compared to | | | | which now was the cheapest of insurance plans |
| the WellSpan hospitals, at least in 2008. | | | | borough staff examined. But he noted other |
| For example, Hanover charges $11,913 for | | | | insurance companies were close. |
| treatment of abnormal heartbeat. Gettysburg | | | | "We figure they'll work it out," Rebert said. "If it |
| charges $17,058 for the same procedure; York | | | | becomes an issue, we can move to This e-mail |
| charges $16,405. | | | | address is being protected from spambots. You |
| Kyriacou argues that, even if Capital agreed to | | | | need JavaScript enabled to view it |
| pay more to Hanover, it would still be less | | | | FAQs |
| generally than what it pays to the other two | | | | Hanover Hospital prepared a list of frequently |
| hospitals. | | | | asked questions and answers it will give to |
| "If all the other companies can sign (contracts) | | | | patients. |
| and sell products competitively in the market, | | | | What is the concern with Capital BlueCross? |
| why can't Capital?" he said. | | | | Hanover Hospital has successfully reached |
| Hospital officials made the cancellation | | | | agreement for fair, equitable contracts with all |
| announcement more than two years in advance | | | | major non-governmental payers except Capital |
| to give employers and others time to make | | | | BlueCross. As a result of Capital not being willing |
| arrangements for when the contract expires. | | | | to renegotiate their contract to a fair, equitable |
| "We didn't want to do what usually happens, | | | | level, we have notified them that we will be |
| where the parties wait until 60 days from the end | | | | terminating our contract effective July 1, 2012. |
| of the contract and create a panic," Kyriacou said. | | | | Why is Hanover Hospital doing this now? |
| The hospital has plans to hold health fairs soon so | | | | As part of our strategic plan, the hospital has |
| "companies and individuals can go to one location | | | | reviewed all of its contracts and is working with |
| to meet representatives from all the alternative | | | | the insurance companies to negotiate fair and |
| insurance companies," Kyriacou's letter states. | | | | equitable contracts. |
| But hospital officials hope it won't come to that. | | | | When will the contract with Capital BlueCross |
| Kyriacou's letter to Lehr expressed a willingness | | | | expire? |
| on the hospital's part to resolve the contract | | | | Hanover Hospital's contract with Capital BlueCross |
| issues. | | | | is effective until July 1, 2012. |
| "Our hope is we reach an agreement with | | | | What does this mean for our patients? |
| Capital," said Bill Heiser, president of the hospital | | | | Hanover Hospital will continue to accept Capital |
| board of directors. "That would be the least | | | | BlueCross from individuals and businesses in the |
| intrusive." | | | | community who have BlueCross as a provider. |
| In his response, Lehr noted Capital wanted to | | | | We are providing this information now so that |
| work with the hospital and that their "mutual goal | | | | individuals and businesses alike will have ample |
| should be more affordable, quality health care for | | | | notification and be able to plan for insurance |
| our shared customers." | | | | coverage in 2012. |
| "But this is far too important a conversation to | | | | If Capital BlueCross were willing to agree to a |
| conduct as a public-relations campaign," he wrote. | | | | phased improvement in their reimbursement to |
| He also noted the current rates, set in July 2007, | | | | parity with all other payers, we would be happy |
| were a double-digit increase over the previous | | | | to withdraw our termination notice. We look |
| rates, took into account the Hanover market and | | | | forward to this resolution. |
| "have contributed to increasing operating profits | | | | What will happen in 2012? |
| for the hospital." | | | | We hope to come to a resolution with Capital |
| Since he took over the job 16 months ago, | | | | BlueCross before 2012, but we will be working |
| Kyriacou said the goal of hospital administrators | | | | with other companies and individuals to assure |
| has been to ensure each non-governmental | | | | that there is ample time to identify alternative |
| insurance company is paying the same rate for | | | | insurers. |
| the same services. | | | | Will this mean higher costs for companies and |
| "There were huge variations in terms and rates," | | | | individuals? |
| he said. "Capital BlueCross has been very resistant | | | | If all the other companies such as Highmark, |
| and unwilling to reopen their contract." | | | | Aetna, United, etc. can competitively price their |
| Lehr said that characterization is unfair. Capital | | | | insurance and also pay Hanover Hospital a fair |
| agreed to discuss possible adjustments to rates | | | | rate, Capital BlueCross could do the same. |
| and had agreed on "several adjustments." | | | | Have any local employers switched from Capital |
| "Most businesses would simply say, 'Too bad, you | | | | BlueCross recently? |
| signed a contract agreeing to those rates,'" Lehr | | | | |