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Hospital and insurer in negotiations that could leave public employees paying out of network costs

A sign identifying a nearby building as an outpatient pavilion of Adventist Health Ukiah Valley hospital, with arrows pointing to various locations.
A sign outside Adventist Health Ukiah Valley.

Adventist Health says Anthem Blue Cross doesn't pay enough. But studies show that hospital consolidation leads to higher costs that depress workers' wages. Nearly all the public employees in the county are covered by Anthem under taxpayer-funded plans.

July 20, 2022 — A recent announcement by Adventist Health about its negotiations with Anthem Blue Cross, the county’s main insurance provider, has caused widespread panic. The contract between Anthem and Adventist, a faith-based nonprofit hospital system that manages all three of the county’s hospitals, was originally due to expire on July 18, but has been extended to August first.

Adventist posted FAQs on its website this week, directing patients to call the number on their insurance card for answers to most questions. But patients are advised that if they are in the hospital after midnight on August first, Anthem could choose to transfer them to another hospital. Some patients may be able to continue receiving care for some time as a “continuity of care service.”

In a letter to patients last month, Adventist claimed that Anthem has enjoyed record profits for the past two years, but continues to pay Adventist “substantially less than other hospital systems. Anthem is one of our lowest-paying health plans, and we can’t continue to provide quality care for patients at such significantly reduced rates.”

Adventist offered to be interviewed on this subject, but we declined because President Judson Howe refuses to speak to us about the faith-based hospital’s policies on abortion, which remains legal in the state of California.

Recent studies show that much of the high cost of doing medicine in the state of California is due to a lack of competition, both in healthcare and insurance markets.

According to a study by the California Healthcare Foundation, titled, “Markets or Monopolies,” “the preponderance of evidence suggests that hospital consolidation leads to higher prices… Furthermore, workers bear the burden of these increased premiums as employers depress wages to pay more for health insurance coverage.” The MediCare Payment Advisory Commission told Congress in 2018 that “hospitals with large market shares have the leverage to negotiate relatively high prices from commercial insurers.”

This affects small local governments offering employer insurance, as well as private citizens who pay for their own coverage. The county’s health plan is currently close to $5 million in the hole, with the county paying about 81% of the cost of skyrocketing claims, according to a presentation by Deputy CEO Cherie Johnson during last month’s budget hearings. “So we would really need to change our whole plan,” she told the Board of Supervisors. “We need to be looking at the deductibles, the co-insurances…Fully insured is where we’re looking at, so we know, with a fully insured plan, what your payments are every single month. Right now, we don’t know. We project what we believe our monthlies will be, but it’s unpredictable. We could get a $60,000 claim week, and then the next week, we could get $116,000.”

Julie Beardsley, President of SEIU Local 1021, which represents most county workers, said it’s time to cut loose. The union is in a battle with the county, which is offering a 0% cost of living allowance. “The county has been stalling about looking into new plans,” she said at a union rally during the budget hearings. “Obviously Adventist has kind of monopoly here in the county and they can charge whatever they want, but we need to look at other plans.”

Adventist told its patients that in the last five years, it’s given away more than $276 million in charity to those in need. We have not had the opportunity to review detailed financial information for Adventist Health.

But according to a report by Stat, a healthcare-focused news website produced by Boston Globe Media, nonprofit hospitals in the U.S. received an estimated $25 billion in tax exemptions in 2015. Its authors, Ge Bai and David A. Hyman, write that “many nonprofit hospitals do not provide enough charity care to justify their exemptions…More than one-third of nonprofit hospitals (36%) provided less than $1 of charity care for every $100 in total expenses.” Nonprofit hospitals are exempt from federal, state, and local property taxes, and donations to them are tax-deductible. Ge and Hyman argue that, “If nonprofit hospitals are unwilling to provide sufficient charity care to justify the amount of their current tax exemption, there is no reason we should deprive local communities of the property tax revenues that allow them to fund local schools, parks, and other public services.”

Assembly member JimWood’s office responded to our inquiries with a statement reading in part that the Assembly member understands that, “In this case, Adventist is the one initiating the action to renegotiate, requesting higher reimbursements in a number of areas…On the other hand, Anthem is seeking an agreement that would not reflect significant cost increases to the employers, employees or others with Anthem coverage. It’s important to note that the entities being affected, such as the school districts, city of Ukiah and (the) county, are self-insured and, as such, are tax-payer funded and can only absorb certain cost increases before they have to look for other ways to make it up, like cutting costs. This is not a situation that Asm. Wood wants to see happen and commends these self-insured entities for being responsible to the taxpayers and by pushing back against any attempt to raise the cost of coverage beyond what they can afford.”

Some of the largest employers in the county, including the county government, the city of Ukiah, and the Ukiah Unified School District, rely on Anthem for their insurance. The county has 961 employees with 810 dependents, while the school district has about 750 employees with approximately 350 dependents. The city of Ukiah has 194 workers and 234 dependents, and is consulting with a regional insurance provider about its options. If the contract between the hospital system and the insurance provider is terminated, people with Anthem will have to pay out-of-network costs at Adventist facilities.

After last month’s healthcare presentation during budget hearings, Supervisor Ted Williams said the choices seem to be to continue to invest in an ever more expensive system, or look to the state and federal government for a whole new system. “We can ask staff to shop around, try to find a creative solution, (but) the bottom line is, without a single payer solution, or some national and state level solution, we’re going to see continued increase in health costs. And the only answer is, we need to contribute more.”

Local News
Sarah Reith is the lead reporter for KZYX News. She joined the KZYX News team in 2017, and covers local politics, water, law enforcement and the arts in Mendocino County.