Blue Shield of California‘s Provider Network Update On UCLA

Network News
Negotiations with UCLA hospitals and medical groups continue; contracts could terminate

Blue Shield of California knows that you look to us for large and reliable provider networks to offer your clients easy and affordable access to quality health care. That’s why we want to keep you informed of some important updates for our provider network in the Los Angeles region.

Blue Shield of California is currently in discussions with Ronald Reagan UCLA Medical Center and Santa Monica UCLA Medical Center (UCLA Medical Center), and UCLA Medical Group (includes UCLA Medical Group-Santa Monica Bay Physicians (SMBP) and UCLA Medical Group), all located in Los Angeles County, to renegotiate the terms of our HMO/PPO hospital agreements and medical group agreements for PPO and Medicare plans. If we are unable to reach an agreement, the contracts are scheduled to terminate effective 12:01 a.m. on January 1, 2012.

Blue Shield of California value’s our relationship with UCLA and we’re working to keep these providers in our network while doing what we can to keep the cost of care affordable.

UCLA network contracts by plan type
In the chart below summarizing our current contracts, the areas marked “yes” show where members will be impacted if we are unable to reach agreement and the contracts terminate.

(Medicare Supplement members are not impacted)

Note: None of the network medical groups in our commercial (non-Medicare) HMOs use UCLA hospitals as their primary hospitals.

What’s at stake in this negotiation
Blue Shield of California is a not-for-profit health plan, with a mission to ensure all Californians have access to health care that is high-quality and affordable. Our focus on quality and affordability is reflected in our network negotiations, but UCLA is making contract demands that would unjustifiably drive up costs for our members.

To demonstrate our commitment to affordability, this year we pledged to limit our annual net income to 2% of revenue. In comparison, according to data from the University of California website, the profit margin (net income) from the two UCLA hospitals is 15%, which is nearly four times the state average for hospitals, and almost eight times Blue Shield’s 2% cap.

UCLA is currently demanding that Blue Shield enter into a new six-month contract for both their hospitals and medical groups. At the end of that contract, UCLA has made the decision to band together with four other University of California hospitals and negotiate as a group, even though they are independent from each other. This tactic would give UCLA an overwhelming negotiating advantage, allowing it and the other four UC hospitals to drastically increase their charges and make care less affordable for our members. We cannot support this contracting strategy to increase UC’s reimbursement rates at the expense of our members. We are refusing to accept UCLA’s demands – and are calling on them to do their part to keep care affordable.

UCLA is one of the highest paid Blue Shield network providers in Southern California. Under our current contract, Blue Shield already pays UCLA for inpatient hospital care at rates 41% higher than our Southern California average and approximately three times what Medicare pays.Under its current Blue Shield contract, UCLA enjoys a 35% profit margin. Its rates have increased 98% since mid 2006.

We hope that UCLA will reconsider its position and that we can reach an agreement with them.

Resources available for you, your clients, and our members
To help keep everyone informed, we are sharing additional materials that explain more about our position with UCLA and provide information on the strength of our provider network in the Los Angeles region. You can access this information by visiting Producer Connection.

These resources include a letter you can send to employers that could be impacted by this possible network contract termination.

We assure you that this change will not alter members’ benefits or interrupt their access to quality care. If the UCLA providers leave our network, our members will still have access to quality care from more than 40 hospitals and over 17,000 doctors in the Los Angeles area. Ten of these hospitals offer tertiary services that can support members who would otherwise go to a UCLA facility.

We will send letters directly to PPO members who have sought care with UCLA medical group physicians during the past year to tell them about this change.

In addition, we are launching a new website on Tuesday, December 13, full of information about how we are working to support our mission of affordable healthcare at www.MakeCareAffordable.org.

If you have any questions before our next update, please contact your Blue Shield sales executive. You are a valued Blue Shield producer and we will continue to keep you informed of new developments.