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Jun 9, 2008 9:41 AMPublication: The East Hampton Press

Hospitals and insurer settle on a new contract

Jun 9, 2008 9:41 AM

After months of negotiation, the three East End hospitals and Oxford Health Plans settled on a new contract Friday, ending fears that Oxford clients would no longer be able to use their insurance for non-emergency care at Southampton Hospital and Peconic Bay Medical Center in Riverhead.

On Tuesday, hospital officials said they had achieved the goal when they started negotiating: to be paid at “market rate.” The hospitals have said that Oxford and other health insurers should reimburse them at a rate on par with the higher rate applied to hospitals in western Suffolk County.

Without an agreement, Southampton Hospital and Peconic Bay Medical Center would have gone out of Oxford’s network on Saturday, but the agreement reached Friday meant coverage was not disrupted. The new contract, which hospital representatives signed Monday, also means an improved financial picture for the struggling hospitals, according to Southampton Hospital’s CEO.

“It will have a major positive impact on the hospital,” said Robert Chaloner, the president and CEO of Southampton Hospital. On Tuesday, he said the new reimbursement rates from Oxford were better than what the medical facility had budgeted for, and that they will bring the hospital closer toward a budget that breaks even.

Each of the three East End hospitals, negotiating collectively as the Eastern Suffolk Health Network, are operating at a deficit.

“We had a combined operating loss of about $8 million last year,” noted Paul Connor, the spokesman for the health network and the president of Eastern Long Island Hospital in Greenport.

The hospital presidents indicated that they plan to negotiate firmly with every insurer they contract with. Soon Southampton will begin negotiating with GHI and HIP, he said. Southampton and Eastern Long Island settled with the biggest insurer in the region, Empire BlueCross BlueShield, last month. Peconic Bay was not involved in those negotiations because it has a continuing contract with Empire that it had jointly negotiated with Stony Brook University Medical Center. Next year, all three health network hospitals will negotiate with Empire together, as they had done with Oxford.

Mr. Connor credited the hospitals’ success in the Oxford negotiations to consolidating their bargaining power. “Without these three hospitals coming together, we would not have gotten that outcome,” he said.

He advised that when its contract with Oxford runs out in a couple of years, the health network will be prepared to negotiate for more favorable rates once again.

He added that the health network, which was incorporated this year, will also have the luxury of time to prepare for future negotiations and assess the hospitals’ future needs. “A lot of stuff happens in health care in two years,” he said. “Who knew that these energy costs would be so high? And we have food costs going up in 15- to 18-percent increases.” Malpractice insurance and workforce costs are also escalating, he said.

Mr. Connor admitted that the hospitals did not have much lead time to plan before the negotiations with Oxford and Empire began in these past few months.

Mr. Chaloner said he expects things to go smoother in the future. But he said it is still likely that, in order for the hospital to get favorable results, in the future negotiations will still have to come down to the wire again. Sometimes deadline pressure is needed to create focus, he said, describing it as the “nature of the beast.”

“Nothing ever comes easy to the hospitals,” Mr. Connor added.

During the Oxford negotiations, the hospitals came close to going “out of network” with Oxford several times. Mr. Connor said that was because the negotiations were more hard-nosed than with Empire. Coverage disruptions were avoided when both sides agreed to brief extensions as negotiations continued. Both Oxford and hospital spokespeople had said that neither side wanted to see a disruption of service at the hospitals for their patients and clients.

Once out of network, Oxford policyholders would have had to pay for non-emergency visits to the medical facilities or find an in-network hospital. Oxford clients could have continued to use Eastern Long Island once Southampton and Peconic Bay were out of network, because the hospital had a contract with Oxford that continued into 2009. The new two-year contract supersedes that agreement and encompasses all three hospitals.

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