Jimmy Mayor is not sure what his next appointment at OU Health in Oklahoma City will cost.
Mayor, 59, relies on disability insurance for his income after working as a commercial loan servicer for 20 years. He is among as many as 140,000 UnitedHealthcare policyholders slated to lose in-network access to Oklahoma’s only academic medical center on July 1.
“I just wish those two would come to some type of agreement and think of the patients,” said Mayor, who receives treatment for HIV, a brain tumor and a sleep disorder at not-for-profit OU Health.
After failing to ink a new contract in May, UnitedHealthcare and OU Health are nearing the end of a one-month transition period that allows patients to receive in-network care from the health system while the insurer identifies replacement providers. Both companies blame the failure to reach an agreement on a dispute over rates.
Their negotiations offer insight into UnitedHealthcare’s strategic approach to large health systems as its clinician buying spree of 2021 has given them an edge over hospitals struggling with inflation and the effects of the COVID-19 pandemic, said Paul Keckley, an independent healthcare consultant.
“That’s the rub for the hospitals,” Keckley said. “They’re gonna get a double hit. They don’t get as much non-operating income from their investments, and the insurers are going to negotiate much, much harder this year.”
UnitedHealthcare is the second-biggest large group insurer in the state and held 13% of the market in 2019, according to the most recent data compiled by the Kaiser Family Foundation. Blue Cross and Blue Shield of Oklahoma, which is owned by Health Care Service Corp., held the most self-insured contracts, with 64% of the market that year.
Blue Cross and Blue Shield of Oklahoma’s market share gives OU Health the ability to walk away from UnitedHealthcare’s offer, Keckley said.
UnitedHealth Group’s large medical practice business gives the company confidence to drop OU Health from its insurer network, Keckley said. After scooping up 10,000 physicians in 2021, UnitedHealth Group is the largest employer of providers, and the company’s Optum healthcare services subsidiary has at least 65,000 clinicians on staff.
UnitedHealth Group is thinking nationally about its strategy to lower healthcare costs for employers in an effort to persuade companies to switch their contracts from Blue Cross and Blue Shield plans, particularly in markets such as North Carolina and South Carolina that are dominated by the Blues, Keckley said. That means big-name hospitals such as OU Health are poised to lose in-network status, he said. UnitedHealthcare recently ended its contract with WakeMed Health in Raleigh, North Carolina, and is in negotiations with the Medical University of South Carolina in Charleston.
“They’ve got a 75-market strategy in mind,” Keckley said. “The hub of those activities is not necessarily hospital contracts; it’s medical groups.”
This is the first time in at least a decade that OU Health will not be in UnitedHealthcare’s network, said Dr. Robert Mannel, director of the OU Health Stephenson Cancer Center, the only National Cancer Institute-accredited facility in the Sooner State. OU Health also operates Oklahoma’s lone Level 1 trauma center and freestanding children’s hospital. Approximately 8% of the health system’s patients are UnitedHealthcare members.
The Oklahoma City-based provider alleges UnitedHealthcare requested a 39% rate cut for its physicians and a 20% rate cut for its facilities. The three-hospital system initially asked for a rate increase of up to 7% to accommodate inflation, rising labor costs, and higher healthcare and construction supplies expenses, Mannel said.
“The very, very modest rate increase that we requested would not keep up even with all those costs,” Mannel said. “The reductions are just unfathomable at this point.”
OU Health reported a net loss of $4.7 million on revenues of $1.4 billion for the quarter that ended March 31.
After five rounds of negotiations, the health system was willing to accept a 15% cut for its facilities, Mannel said. But UnitedHealthcare would not budge, he said.
“They say they need the decrease in order to be competitive in the market. We know that with what we were offering, these would be very competitive rates,” Mannel said. “The fact that they weren’t willing to change or to address it, or to even discuss it, is the biggest problem here. They had pre-made up their mind.”
UnitedHealthcare reported $3.8 billion in net income on revenues of $62.6 billion in the first quarter.
The nation’s largest insurer said OU Health initially asked for a 40% rate increase over three years that would have raised healthcare costs for residents by $49 million. The health system has since offered to accept a one-year deal that would make it 34% more expensive than other Oklahoma City hospitals, a UnitedHealthcare spokesperson wrote in an email. OU Health is the most expensive provider in the state, according to the insurer.
“Our top priority is to renew our relationship with the health system at market-competitive rates so that our members have access to affordable healthcare,” the spokesperson wrote.
Patients like Mayor who are struggling to find new providers are caught in the middle. Mayor plans to chose an insurer that has OU Health in its network for next year. “I have a lot of very good specialists that I would love to continue to see,” he said.