Stellaris Health, Empire BCBS Trade Barbs as Contract Expires

John Commins, April 2, 2010

Saying it could "no longer subsidize the record profits of a health insurance conglomerate," Stellaris Health Network this week announced that its contract with Empire Blue Cross Blue Shield expired April 1 after six months of fruitless negotiations.

The nonprofit health system based in Armonk, NY, sent a sharply worded notice of the contract termination this week to thousands of Empire policyholders, who use the four Stellaris hospitals, including Lawrence Hospital Center in Bronxville, Northern Westchester Hospital in Mount Kisco, Phelps Memorial Hospital Center in Sleepy Hollow, and White Plains Hospital Center.

"Our nonprofit community hospitals can no longer subsidize the record profits of a health insurance conglomerate, and that is what Empire expects us to do," said Arthur A. Nizza, president/CEO of Stellaris Health. "Our hospitals are committed to providing quality medical services to the communities we serve. However, that commitment cannot be met if we are forced to accept reimbursement rates that are far below the cost of providing the services."

Stellaris sought a reimbursement increase of 15%, while Empire's counter-offer was "in the single digits," Empire Director of Public Relations Sally Kweskin confirmed.

Empire, a subsidiary of WellPoint Inc., disputed Nizza's interpretation of events in its own contract termination notice to policyholders.

"The issue at the center of the negotiation is Stellaris' demand for higher-than-market reimbursement rate increases," Empire said. "Though Stellaris earns a substantial profit on Empire's business and operates profitably overall, they continue to demand annual double-digit rate increases during the proposed period of the new agreement."

Nizza countered that Stellaris did not ask Empire for reimbursement increases that are any greater than what they already receive from other insurers in the market.

"In order to maintain their position in providing high-quality health services, Stellaris Hospitals need an adequate revenue base," he said. "In the past six months, Stellaris Hospitals have reached renewal agreements with two national and two regional insurance companies. Empire has stood alone in its refusal to agree to reimbursement rates that are even close to those that other insurance companies in the market are paying."

Empire called Nizza's justification inadequate. "With hospitals' costs being almost 50% of healthcare costs, the rate increase Stellaris is demanding would be directly reflected in increases in member premiums, medical expenses, and cost share amounts," Empire said. "Stellaris has made no effort to justify this increase other than to say that what they want from Empire is what they get from other payers. They are ignoring the fact that their rates already provide them with market competitive reimbursement."

John Commins

John Commins is a senior editor at HealthLeaders Media.

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