Scripps Health sent letters Thursday to more than 125,000 of its patients letting them know that if it is unable to broker what it considers a fair deal with their health insurance company, Anthem Blue Cross, it will allow its contract with the carrier to lapse on Jan. 1, 2025. Should the provider and insurer fail to come to terms by Dec. 31, Scripps hospitals and doctors would exit Anthem’s medical provider network, meaning policyholders would have to pay out-of-network rates to continue seeing the same doctors, though there are “continuity of care” provisions for those currently under treatment for a medical condition. This is a similar situation to the one that unfolded between Anthem and the University of California health system in 2023. Contract brinksmanship continued past a Dec. 31, 2023, expiration date due to temporary deadline extensions that allowed an estimated 98,000 of UC San Diego Anthem enrollees to continue seeing their doctors through the new year until a deal finally materialized in February. Similar breakdowns in contract discussions have been reported nationwide as medical providers and insurance companies find themselves far apart on issues such as reimbursement rates and requirements for care approval and appeals. One of the largest in play this fall involves Duke Health and UnitedHealthcare in which the respected North Carolina health system has notified the nation’s largest health insurance company that if terms aren’t to its liking by Oct. 31, the university will walk away from the company’s care network. Prior approval — the requirement to get a patient’s health insurance company to sign off on many services before they are rendered — and appeals of decisions to deny approval, are at the core of Duke’s negotiations, and were also cited in the now-resolved University of California stalemate. Duke’s CEO told industry publication Beckers Hospital Review last week that United denies 40 percent of care payment requests and the health system has hired “236 full-time workers to appeal all denials from payers.” These issues also were the first item cited by Scripps executives Wednesday in the list of reasons why it was necessary to send out contract notices to so many of its patients Thursday. Authorization, said Richard Neale, a corporate executive vice president at Scripps and its chief growth officer, has become a major issue with Anthem denying 2,300 claims in the past year valued at about $34 million. Appeals, he said, were able to recover only about $6.5 million of that amount. “Through those denials, we ended up providing $27.5 million of services that remain unpaid from Anthem,” Neale said. He added that Scripps, which operates five hospitals and a vast outpatient network across San Diego County, has also struggled with reimbursement for routine procedures that weren’t supposed to need pre-approval. “In the past 12 months, we’ve had more than 800 instances with Anthem where we were told there was not a prior authorization required,” Neale said. “When we presented the bill to them, they reversed course and now are stating that an authorization was necessary.” The extended prior approval and appeal process, adds Dr. Anil Keswani, Scripps’ chief medical and operations officer of ambulatory services, diverts resources from patient care. While he acknowledged that prior approval will still exist for the most expensive medical procedures, routine care should not have so many hurdles. “There must be a way to make it less onerous for things that may be more standard, more common,” Keswani said. The rates that Anthem and other insurance programs pay is another sticking point. Neale said that it has become more difficult to absorb the cost increases that Scripps has incurred. “In the last three years there’s been significant inflation that just drives our costs up,” Neale said. “We want to pay appropriate wages; it’s the right thing to do. “But, just to provide a benchmark, between 2021 and 2024, our cost of compensation has increased over 8 percent annually,” Neale said, adding that a new state law that specifies higher minimum wages is also expected to add about $20 million per year to Scripps’ wage expense. “Also, in the period from 2021 through 2024, our pharmaceutical costs have increased over 14 percent annually. This is not only about being paid fairly today. It’s also about ensuring that the contract is constructed in such a way that we can cover our future costs as well.” In response to Scripps sending warning letters to patients Thursday, Anthem issued the following statement: “Anthem remains firmly committed to reaching a new agreement that maintains our members’ access to long-term affordable care at Scripps Health doctors and hospitals. Our members and customers remain at the core of these negotiations which are focused on keeping local costs affordable and predictable for the consumers and employers that pay for health care, now and in the future.” Nathan Kaufman, a San Diego-based health care consultant, was among the first in the region to receive one of the notification letters Thursday. He noted that medical providers, especially those perceived as offering high-quality care in their markets, are simply at a point where they feel they must insist on better contracts. He pointed to a 2022 member survey by the American Medical Association, which reported that 24% of respondents said the prior approval process led to patient harm, including 19% who said that prior authorization delays “led to a patient’s hospitalization,” and 7% who said it “led to a patient’s disability/permanent bodily damage.” For his part, Kaufman said that he is more likely to find a different insurance company with a network that includes Scripps than he is to stay with one that does not. However, he does not expect the situation to reach the point where patients must start making such difficult decisions. “My belief is that this will get settled,” he said. “The unfortunate thing about our health care system is that it’s the patients in the middle.”