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Blue Cross Leader: Southwestern Health Resources Dispute Is ‘Close to the Deadline and We’re Far Apart’

Texas Health Resources and UT Southwestern are asking for a $900 million increase in reimbursements over the next 32 months.

With less than a week to reach a new agreement, Southwestern Health Resources and Blue Cross Blue Shield of Texas are not close to finding a resolution to their contract dispute, according to a BCBSTX executive.

After months of unsuccessful negotiations with Blue Cross Blue Shield of Texas, the current contract is set to end on October 4th. At that point, UTSW and Texas Health providers will be out of network for most of BCBSTX’s members. The Dallas Morning News reported this week that the providers are asking the insurer for a $900 million increase in reimbursement over the next 32 months, according to a letter Blue Cross sent to brokers.

Texas Health and UT Southwestern joined to form Southwestern Health Resources in 2015, an agreement that allowed patients to receive services at both systems. This is the third time in six years that the hospital system and Blue Cross haven’t seen eye to eye; the previous two times, in 2016 and 2018, the two reached an agreement right before the deadline.

The good news is that a provider of this size has never been fully dropped from Blue Cross’ network for any significant length of time in recent memory. Houston area provider Memorial Hermann Health System was in a similar months-long standoff with Blue Cross, but the system was out of network for only 10 days before the two sides agreed to a compromise in March.

Inflation seems to be taking its toll on the new contracts, with hospitals asking for increases to reflect the higher prices of goods and services. BCBSTX says that SWHR’s request doesn’t align with what other health systems have requested.The $900 million increase may seem significant, but the amount is spread across thousands of patients. Nearly 500,000 SWHR patients were notified of the change earlier this year. Blue Cross Blue Shield of Texas says it would affect about 230,000 members.

“The demands that we’re seeing from Southwestern Health Resources, at least at this point, are far in excess of the types of agreements that we’ve made in the Dallas Fort Worth community over the last six months,” says Shara McClure, divisional senior vice president of health care delivery for Blue Cross Blue Shield of Texas. “Although we realize that health care providers like Southwestern health resources are experiencing inflationary pressure, other systems are as well.”

This isn’t the first time the two sides have been in a similar conflict, but they always found a resolution before the contract expired. McClure says the two sides are still meeting daily to end the dispute, but the discussions haven’t been productive so far. While several issues are being discussed, McClure says reimbursement is the sticking point. “It’s coming down to the wire; we’re close to the deadline, and we’re far apart,” she says.

UTSW officials didn’t respond to a request for comment, but SWHR chief marketing officer Darin Szilagyi told the News in an email that “Negotiations always have one party start high and one start low, and you move together in some way. We are asking for an increase significantly below the inflationary pressures that we all are experiencing.”

Still, Dallas-Fort Worth is the most expensive healthcare market in the country, according to the Health Care Cost Institute. Prices here are much higher than in the rest of the state, and in-patient care at Dallas-Fort Worth hospitals was 13 percent higher than the nation’s median in 2020.

Dallas-Fort Worth is home to some of the highest earning health systems and the worst medical debt in the country. A Kaiser Health News story found between 2018 and 2021, Texas Health Resources had an operating margin of almost 6 percent. Baylor Scott and White Health, Children’s Health, and Medical City Healthcare did even better. Most Fortune 500 companies in North Texas saw a smaller margin than the health systems.

Meanwhile, Tarrant and Dallas counties have the highest concentrations of medical debt in the nation’s most populous counties, according to credit bureau data. In Tarrant County, 27 percent of residents with credit reports have medical debt on their records. The rate is 22.5 percent in Dallas County. Those are more than five times the rate in New York, the report found.

If the contract expires, BCBSTX members’ care would be liable for higher, out of network rates at SWHR. Some patients (such as pregnant women) may be eligible to keep their providers in network but should contact BCBSTX to see if they qualify. You can learn more at SWHR’s website.

McClure says BCBSTX is in touch with all stakeholders, including self-funded employer members that subsidize their employees’ healthcare. These payers include school districts and municipalities covering firefighters, police officers, and teachers. “It’s clear to us that any increases that we offer or that we agree on have to be in line with the budgets of these local businesses,” McClure says.

Despite the continued dispute, McClure is remaining positive. “We’re hopeful that we will be able to come to terms, and we’re putting effort into it.”


Will Maddox

Will Maddox

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Will is the senior writer for D CEO magazine and the editor of D CEO Healthcare. He's written about healthcare…

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