Cigna to end contract with Memorial Hermann; 178,000 customers affected

Memorial Hermann Health System and Baylor Scott & White Health have signed a letter of intent to merge to create the largest health system in Texas Monday Oct. 1, 2018 in Houston. Memorial Hermann Health System and Baylor Scott & White Health have signed a letter of intent to merge to create the largest health system in Texas Monday Oct. 1, 2018 in Houston. Photo: Michael Ciaglo, Houston Chronicle / Staff Photographer Photo: Michael Ciaglo, Houston Chronicle / Staff Photographer Image 1 of / 41 Caption Close Cigna to end contract with Memorial Hermann; 178,000 customers affected 1 / 41 Back to Gallery

Cigna, the nation’s fourth-largest health insurance company, on Monday said it would terminate its contract with Houston-based Memorial Hermann hospital system in March, dropping as many as 178,000 plan members and 1,460 affiliated doctors from its network.

The move, which comes after months of negotiations over hospital billing rates, would affect anyone with an employer-sponsored Cigna plan. However, those covered under the insurer’s Medicare Advantage program for seniors will not be affected. The contract termination will take effect March 16.

“Our goal is to keep health care affordable,” said Mark Slitt, a Cigna spokesman. “To a large degree, that means having tough conversations with large hospital systems in our markets all over the country.”

Cigna’s decision to sever ties with one of the largest hospital systems in the Houston area underscores just how contentious contract negotiations between insurers and providers have become amid mounting public scrutiny over the skyrocketing cost of American health care.

On HoustonChronicle.com: United Healthcare terminates contract with Houston Methodist; 100,000 plan members affected

In October, UnitedHealthcare shocked the Houston insurance market by announcing it was dropping the Houston Methodist hospital system from its network of providers as of Jan. 1 if an agreement could not be reached by year’s end. The move could affect as many as 100,000 people who hold employer-sponsored plans as well as the insurer’s Medicare Advantage programs for seniors. Contract talks have since stalled, a hospital spokeswoman said.

“We continue to negotiate, but there has been very little progress,” said Stefanie Asin, public relations director for Houston Methodist.

Community Health Choice in October said it would cut ties with Pearland-based Kelsey-Seybold Clinic at the end of this year, affecting an estimated 2,800 plan holders. Cigna earlier this year said it planned to end its contract with Southwestern Health Resources in the Dallas area.

Cigna said it decided to terminate its contract with Memorial Hermann after the hospital system earlier this year raised the list prices of its services “significantly” above market rates and refused to budge in negotiations.

“We felt that it was no longer productive and the time had come to do what we think is best for preserving affordability for our customers,” Slitt said. “Of course, our preference is that we’re able to come back to the table and negotiate an agreement that is fair and affordable for our customers.”

Texas Inc.: Get the best of business news sent directly to your inbox

Memorial Hermann spokeswoman Alex Loessin said the hospital system has engaged in meaningful discussions to find common ground during negotiations, including offering to enter into a so-called value-based program where health care reimbursements would be tied to hospital performance. The hospital system has several value-based agreements with other insurers.

“Unfortunately, Cigna has been unwilling to meaningfully engage with Memorial Hermann in the creation of value-based programs as an effort to collectively lower costs for patients across our service area,” Loessin said. “We remain open and ready to work with willing partners in this effort.”

Cigna members receiving ongoing care for certain health conditions, such as cancer, late-term pregnancy and organ transplants, may be able to continue their care at Memorial Hermann at the in-network cost for a set period of time under their plan’s continuity of care guidelines. The insurer is encouraging its members to call its customer service representatives or log onto its website to access its provider directory.

Memorial Hermann operates 17 hospitals employing 27,000 in the Houston area. The company reported net income of $190 million on revenue of $5.5 billion during its fiscal year 2019.

Cigna, based in Connecticut, reported net income of $1.3 billion on revenue of $38.5 billion during its most recent quarter ending Sept. 30.

paul.takahashi@chron.com

twitter.com/paultakahashi

Jenny Deam contributed to this report.