The pages of D CEO Healthcare said it would likely never happen, but we were wrong. Southwestern Health Resources is officially out of network with Blue Cross Blue Shield of Texas, as the state’s largest insurer and region’s top hospital failed to agree to a contract by the April 1 deadline. And no, this isn’t (as far as we know) an April Fool’s joke.
This iteration of contract negotiations has been rumbling with trouble brewing between the two entities since the end of last year, when members were contacted by Blue Cross Blue Shield of Texas and told that its negotiations with Southwestern Health resources were not going well and that members would be out of network with SWHR on April 1. SWHR is an accountable care organization that includes the health systems of UT Southwestern and Texas Health Resources.
Today, the contract expired. “SWHR hospitals, facilities, doctors, and health care professionals are currently no longer in our networks,” a statement from BCBSTX said. “We understand and are sensitive to the difficulties hospitals are facing with labor, supply, and other cost pressures. Unfortunately, we couldn’t reach an agreement that protects the interests of our members and customers, who are facing those same pressures.”
Contract negotiations often continue until the 11th hour, but rarely do the organizations allow the contract to expire. Patients with scheduled appointments, new procedures, and regular care will all be pushed to out-of-network or cash pay rates, skyrocketing patient costs. Emergency services for commercial networks will still be in-network.”The affected plans include ParPlan, Blue Choice PPO, Blue Essentials, Blue Advantage HMO, Medicaid, Blue Cross Medicare Advantage (PPO), and Blue Cross Medicare Advantage (HMO). Patients who are pregnant, have ongoing illness, disability, or life-threatening illness may qualify to stay in the network for the time being.
The negotiations are a battle of Goliath and Goliath. The Southwestern Health Resources network includes 31 hospitals, more than 7,000 physicians, and other providers who provide care for more than 750,000 individuals across 16 counties in North Texas. According to the Kaiser Family Foundation, BCBSTX is the largest insurer in the state, with a 52 percent market share. United Health Group is the second largest at 30 percent of the market. BCBSTX says it provides coverage to 5.1 million Texans.
According to the Texas Health Market Review, both organizations remain profitable. Texas Health Resources saw an 11 percent profit margin on $5.4 billion in patient revenues in 2023, and the University of Texas system had a 9.8 percent margin on more than $10 billion in revenue across the state. The review found that BCBSTX’s HMO plan had the healthiest profit margin of 4.5 percent on more than $308 million in revenue in 2023. But according to research firm Mark Farrah and Associates, BCBSTX’s parent company Health Care Services Corp., which covers 26 million lives nationwide, saw a significant decline in profitability between 2023 and 2024. Between the third quarter of 2023 and the third quarter of 2024, HCSC’s profit margin dropped from 3.9 percent to 1 percent.
In December, BCBSTX set up a website to update the progress of the negotiations, but today it shares the bad news. “During the past several months, we worked closely with SWHR to try to negotiate new contracts. Unfortunately, we couldn’t reach agreements that protect the interests of our members and customers.” The website also directs people where to go to find physicians who are still in-network for their plan.
Ironically, UTSW employees have BCBSTX for their health insurance, meaning the lack of a contract would make them and their families out-of-network with their colleagues. Fortunately for UTSW employees, the UT System allows those on UTSW’s health plan to see other UTSW physicians at UTSW facilities. Others aren’t so fortunate.
SWHR responded to D CEO Healthcare’s inquiry with a statement. “Despite months of negotiations, BCBSTX remained unwilling to accept Southwestern Health Resources’ requests for equitable reimbursement to cover the rising costs of providing quality care,” the statement read.”Our goal is to minimize any disruption to patient care and help guide patients affected by this transition to in-network providers.”
SWHR also said negotiations were ongoing. “We are committed to finding a resolution in the best interests of our patients and providers.”
Contract negotiations passing the deadline are extremely rare in Dallas and elsewhere. Though both hospitals and insurers often posture and make strong statements as the deadline approaches, a deal is almost always reached. BCBSTX closed its statement with a statement of hope as well. “We value SWHR’s services and remain committed to reaching an agreement that appropriately balances the concern with affordability and access for our members.”
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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…
