Contract standoff

By Marshall Allen

Tuesday, Oct. 31, 2006 | 7:24 a.m.

About 600,000 people have no seat at the bargaining table in a contract standoff between two health care giants, but they have much at stake and are being used as leverage.

Unless a contentious contract dispute is resolved, insureds who are covered by Sierra Health Services - the state's largest health insurer - won't be reimbursed for nonemergency visits to Sunrise Health facilities - MountainView Hospital; Southern Hills Hospital and Medical Center; Sunrise Children's Hospital; and Sunrise Hospital and Medical Center - after Dec. 31.

The impasse is expected to lead to a massive shuffling of doctors and patients to new insurance carriers and hospitals. Similar outcomes occurred with Sunrise's parent company, HCA Inc., in disputes in Colorado and Florida. There, insurance companies refused to buckle, and the affected patients had to shift to other hospitals.

Among the physicians distraught by the standoff in Las Vegas is Dr. Florence Jameson, chief of the OB/GYN department at Sunrise Hospital.

Sierra officials have instructed Jameson to send 20 of her pregnant patients, who are expected to deliver after the contract expires, to Valley Hospital Medical Center. Jameson cannot make the switch to Valley Hospital. Thus, the women would have to change doctors and facilities for their deliveries, which Jameson said would be "emotionally devastating" to them.

"Talk about pulling the rug out from someone," Jameson said.

The contract dispute centers on how much Sierra Health should reimburse the hospitals for treating patients covered by its insurance plans. Sunrise says that the existing contract, struck 17 years ago, is a dinosaur that doesn't reflect modern health care costs. Sierra says Sunrise wants four times the reimbursement increase given to other hospitals and if it caves in to the hospitals' demands, premiums will skyrocket.

Neither side will disclose specifics.

But how they resolve the dispute may influence contract talks between other hospitals and insurance carriers across the valley.

The two sides have taken their dispute public, resorting even to scare tactics in their appeals for support.

In a newspaper advertisement Oct. 15, Sunrise wrote that patients insured by Sierra risk losing access to "life-saving services and advanced medicine found only at our family of hospitals." It also asserted that patients will be hard pressed to find other hospital beds in Las Vegas without the Sunrise group.

The letter said being barred from Sunrise hospitals will be "particularly distressing" for children with cancer or needing complex surgeries, women with high-risk pregnancies and people with complex heart conditions.

Sunrise's bold ad alienated other hospitals in Las Vegas, which defensively bought a full-page ads to "set the record straight." Executives from Valley Health System, St. Rose Dominican Hospitals, North Vista Hospital and University Medical Center signed the ads, disputing Sunrise's claim that without its hospitals "the community's access to life-saving services and advanced medicine is compromised." That is "simply not true," the other hospitals said.

Sierra then entered the imbroglio with its own full-page ad, chastising Sunrise as "shameless" in its attempt to intimidate consumers. The ad said it would be irresponsible to give in to Sunrise's terms.

"Demanding rate increases of this magnitude," the Sierra ad said, "would make coverage unaffordable for many of our members and their families."

If Sunrise and Sierra each claims to best represent the interests of the patient, it's also true that they want to remain profitable.

Sunrise is owned by HCA Inc., whose holdings include 176 hospitals and 91 free-standing surgery centers nationwide. According to Capital IQ, a Standard & Poor's company, HCA's revenue for the 12 months prior to Sept. 30 was $25 billion. The company generated profits of $1.24 billion. Sunrise officials say their parent company is healthy, but Sunrise in Las Vegas is not, which is why the contract must be fixed.

Nevada-based Sierra boasted revenues of $1.56 billion, and a net profit of $122 million, for the 12 months through June 30.

Under the current agreement, Sierra promises to deliver to Sunrise hospitals a minimum number of patients. In exchange, Sunrise discounts its hospital bills to Sierra. Because of that pact, Sierra sends more than half of is patients who need hospitalization to Sunrise hospitals - a figure that amounted to 70,000 inpatient days and 20,000 emergency room visits in 2005. Sierra clients accounted for about a fourth of Sunrise's business in 2005.

"That's why this is so significant," said Amy Stevens, system vice president for Sunrise Health. "It's not an immaterial rearrangement of (Sierra's) network."

Because the negotiations are private and each side is issuing rhetoric, hospital administrators, insurance brokers, doctors and others in the valley can only speculate - sometimes dramatically - about the repercussions to health care if the dispute is not resolved before Dec. 31.

John Egermayer, an insurance broker and executive vice president of KIA Insurance, has sent many of his clients to Sierra and takes the insurer's side in the dispute. But his biggest concern, he said, is for the welfare of the patients.

"These giants - one's a local, one's national - are not concerned with the individual or the consumer, the client," Egermayer said. "They're concerned more with their bottom line."

Employers who shop for insurance plans for their workers are watching the dispute because they must balance the cost of premiums with good health benefits, said Frank Nolimal, employee benefits specialist for Assurance Ltd., one of Sierra's largest brokers. Sierra usually provides the best financial bottom line for employers, Nolimal said, so few have mentioned dropping the insurance company if the contract ends.

On the flip side, Nolimal wonders whether the other hospitals can handle a larger patient load if Sierra patients no longer go to Sunrise facilities. Sunrise hospitals account for nearly a third of the 3,420 licensed acute beds in Clark County.

Larry Matheis, executive director of the Nevada State Medical Association, said the contract dispute is a reminder of how insurance companies such as Sierra can radically affect health care delivery.

"Every time there's a major shift in contracting, physicians are suddenly not available for patients they've been treating for some time," he said. "This is very disruptive to long term physician-patient relationships."

Jameson is telling Sierra patients she can not take them because she delivers at Sunrise. Sierra, in response, told her she should resign from its physician roster.

It would not seem to create a financial bind for her. Sierra's reimburses her about $50 for each new-patient visit, compared to $100 that most insurance companies pay, she said.

"When you consider overhead, you're almost seeing Sierra patients for free, and you're working like a dog," Jameson said.

But nonetheless, she said, giving up her Sierra patients will be personally painful.