Salem Hospital could be out-of-network for Regence members starting in July if a deal isn't reached between the health system and insurer. (Caleb Wolf/Special to Salem Reporter)

A contract dispute between Salem’s largest health care provider and a major insurer that could raise prices for thousands in Marion and Polk county remains unresolved, with negotiations now on hold.

With weeks to go before Regence BlueCross BlueShield of Oregon must file proposed insurance rates for 2020 with the state, the insurer has taken an aggressive approach in ongoing negotiations with Salem Health.

Caught in the middle are the nearly 23,000 Salem-area residents who are insured through Regence and face potential premium increases if a deal is reached, or paying more out-of-pocket for care at Salem Health if one is not.

Hospitals and health care providers have set prices for procedures and care but negotiate discounted rates with insurers. Insurance companies charge customers monthly premiums for coverage which are driven by the amount they pay for care and their administrative costs.

In a full-page ad in Sunday’s Statesman-Journal, the insurer proclaimed, “Salem Health is asking for a bigger raise than you can afford” and said the health provider needed to “put patients first, not profits.” In a linked blog post, Regence urged customers to contact Salem Health CEO Cheryl Nester Wolfe directly and ask her to compromise.

James Parr, Salem Health’s chief financial officer, said the ad came as a surprise. In response, the health provider is pausing negotiations, which have continued on and off for about 18 months, until Regence has completed what he called a “PR stunt.”

“I can’t think of another health care provider or insurer that would stoop to these type of tactics because it’s really designed to divide a community,” Parr said.

At issue are the prices the insurer pays to Salem Health at its hospitals in Salem and Dallas, as well as for appointments with Salem Health doctors and other providers at clinics.

Salem Health is seeking an increase in those rates after a current contract between its hospitals and Regence expires in July.

Regence leaders said the health system is seeking “double-digit” increases to current prices, which would be passed on to customers in the form of higher premiums.

Salem Health leaders have not disputed that figure, but said the move would bring Regence in line with what other commercial insurers pay.

The Oregon Hospital Guide shows the median cost of procedures at Salem Hospital is typically close to the average for Oregon hospitals, based on claims data from commercial insurers. But that data doesn’t show what a single commercial insurer pays at any one hospital.

Neither side has been willing to publicly state the precise amount of the increase or what Regence currently pays for care. Regence has repeatedly claimed Salem Health is more expensive than Oregon hospitals of “similar size and quality.”

Parr said Salem Health has offered to have an independent accountant look at the hospitals rates for other commercial insurers to ensure Regence isn’t paying more. Regence has declined, calling it a “negotiation tactic to drive up the cost of care for our members,” spokesman Jared Ishkanian said.

“Fairness isn’t about paying more - it’s not a race to the top,” said Angela Dowling, president of Regence Oregon.

Regence has 22,865 people insured through commercial plans in Marion and Polk counties, and another 5,689 insured on Medicare plans, Ishkanian said.

Of those, about 6,000 have used Salem Health in the past year, he said.

Salem Health’s two hospitals would be out-of-network for Regence customers starting in July if a deal is not reached, meaning customers would pay more for care and might have to pre-pay the hospital, then seek reimbursement from Regence.

That would make Salem Health’s hospitals the only ones in the state outside Regence’s network, Dowling said.

The hospitals would remain in-network for Medicare customers until the end of 2019. Such changes would not affect emergency room care.

Kyle Freres, vice president of Freres Lumber in Lyons, employs about 480 people insured through Regence, many of whom live in Salem. He said either outcome – higher premiums or the hospital going out-of-network – would be difficult for his employees.

If premiums rise, “We can’t take up those cost increases internally as a company - we have to start pushing them back on our employees,” he said.

Regence must file proposed rates for individual and small group insurance plans with Oregon insurance regulators by May 13. Those groups are a relatively small percentage of Regence’s customers, but Dowling said they’d like to have an agreement with Salem Health before that deadline to know what they need to charge.

Brad Hilliard, spokesman for Oregon’s Division of Financial Regulation, said the agency is monitoring the situation and will discuss Regence’s plans with the insurer if a deal is not reached.

“As the insurance regulator, we want to make sure the affected consumers have an adequate network of providers to choose from regardless of the outcome,” he said in an email.

Reporter Rachel Alexander: rachel@salemreporter.com or 503-575-1241.

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