State’s biggest health insurer severs ties with obstetricians

Tuesday, Oct. 1, 2002 | 11:13 a.m.

The state's largest managed-care insurer has parted ways with an unspecified number of local obstetricians in a dispute over the amount of money the physicians are reimbursed for services.

The feud between Sierra Health Services and members of the Clark County OB/GYN Society has its roots in complaints from physicians over skyrocketing medical malpractice insurance costs.

Many OB/GYNs said that because reimbursement rates from insurers have been relatively flat for years, they could no longer afford to practice medicine in the face of rising malpractice premiums and other costs. At least 35 have retired or left town this year, society president Dr. John Nowins said.

Some OB/GYNs began notifying Sierra as early as spring that they were going to terminate their contracts with the insurer unless reimbursements were increased. But in other cases, such as that involving Nowins, Sierra chose this month to terminate its relationship with the physicians.

The Nevada Insurance Division, meantime, believes it is powerless to step in. That's because the relationship between insurers and health care providers in Nevada is based on contracts between those parties without input from the state.

The contracts, at least a year in duration and negotiated on an individual basis, usually contain a clause that gives either the insurer or physician the opportunity to terminate the relationship for any reason with 90 days written notice. Some contracts involve physicians who get a lump sum of money in exchange for agreeing to take all patients in a given health plan. Other contracts are based solely on reimbursement for specific services rendered with set rates agreed upon by both parties.

"We simply don't have the authority to set reimbursement rates," Guy Perkins, the division's chief insurance examiner, said. "I don't know any state that does. The federal government sets rates for Medicare and Medicaid and a lot of HMOs (health maintenance organizations) base their rates on what is set by the federal government."

The tension between Sierra and the OB/GYN society leadership escalated after several society executives and other physicians met on Sept. 18 in Las Vegas with Gov. Kenny Guinn to complain about reimbursement rates from Nevada's Medicaid program for low-income patients. Sierra is one of two insurers that participates in that program.

The doctors would like to deal directly with Medicaid patients to get rid of the red tape, including the need to get insurance company permission to perform certain medical services. But Sierra argues that that's a bad idea because few doctors will want to handle low-income patients not covered by a health plan.

Nowins said he believes that he and other members of the society's nine-man executive committee were targeted this month with termination notices from Sierra because of their meeting with Guinn. Nowins' termination notice came on Wednesday, a week after the meeting.

"Sierra is basically negotiating with some doctors and not others, which is their legal right," Nowins said. "Everything they're doing is legal but it leaves a bad taste in your mouth."

Fellow Dr. Robert Comeau, the society's communications officer, received a letter two days before the Guinn meeting from Sierra's Chairman, Dr. Anthony Marlon. Marlon wrote that Comeau lacked credibility and that "I would appreciate it if you would terminate your relationship with us as soon as possible."

"I will be terminated in December because they didn't like me talking to the governor about the Medicaid HMO issue," Comeau said. "I was standing up for the rights of people in the society who deal with Medicaid. How can you make a living doing OB/GYN work when your malpractice premiums are $100,000 a year and you haven't seen a reimbursement increase in 10 years?"

But Jenny DesVaux Oakes, assistant vice president of Sierra Health Services, said her company chose to terminate "a small number" of obstetricians because of their vocal opposition to managed care companies.

"They've made a lot of statements we take issue with, and a lot of their statements have been inaccurate and misleading," DesVaux Oakes said. "We don't think it's appropriate to send our clients to a provider who criticizes the plan under which our clients are covered. We don't want to send pregnant women to someone who is reluctant to provide care."

Sierra Health Services, with more than 400,000 customers statewide, runs a variety of health insurance plans, including health maintenance organizations, preferred provider organizations and a Medicaid plan. Sierra has 90 percent of the state's physicians under contract and they can negotiate to participate in any or all of those plans.

DesVaux Oakes said that four of the 84 OB/GYNs who participated in her company's Medicaid plan decided to terminate their relationship this year. An unspecified number of OB/GYN's have also dropped out of Sierra's preferred provider organizations. She conceded that those who left felt they were not getting properly reimbursed.

But Scott Cassano, vice president of Sierra's managed care division, said that OB/GYNs and other physicians his company will continue to work with will see reimbursement rates increase 15 to 40 percent beginning November.

"Within the last two weeks I've mailed out 50 amendments to providers, including reimbursement increases for all types of services," Cassano said.

OB/GYNs affiliated with Sierra say the company covers 15 to 30 percent of their patients. Dr. Robert Gatlin, another society executive, said he terminated some but not all of his Sierra affiliations earlier this year because of reimbursement issues.

"Doctors are traditionally in a weak position to bargain," Gatlin said with regard to insurers.

Gatlin said that large insurers such as Sierra are in a position of strength because they carry considerable financial clout compared to the individual physician and because of their dominant share of the market. Some OB/GYNs, like Nowins, will have to turn to other insurers for patients.

Dr. Paul Chao, another society executive who has severed ties with Sierra, said he hopes to pick up patients from a partner obstetrician who is leaving the state.

"I wanted to drop out of Sierra because they're a pain in the ass," Chao said. "Their reimbursements are average but everyone's reimbursements are crappy."

But DesVaux Oakes said Sierra's reimbursements are reasonable.

"We do take a look at the reimbursement rates on a regular basis to make sure were comparable with the local market and with national trends," she said.

Sierra has 19 OB/GYNs on staff at its Southwest Medical Associates Inc. clinics and has not lost enough OB/GYNs to impact the company's insurance plans, DesVaux Oakes said.