The insurance company says the hospital is price gouging; the hospital says the insurance company is stiffing them. The result could put lives in danger.
Almost 90,000 people — including many Kitsap County patients — are caught in the middle of contract negotiations between hospital system Virginia Mason Franciscan Health and insurance provider United Healthcare. Talks have been ongoing since late November, and while both say they are “bargaining in good faith,” neither is budging ahead of the New Year’s Day deadline.
If the companies cannot agree on a new contract by Jan. 1, 2025, all Virginia Mason facilities will be out-of-network for United members, which would leave many Kitsap residents who are already slim on options for healthcare without a hospital in a region.
Lee Nathan and his family have lived on Bainbridge Island for about four years since moving from the United Kingdom. They’re all in good health, mainly visiting family practitioners for check-ups, and Nathan and his wife Amanda wanted to find doctors nearby with whom they could build long-term relationships.
But it took a year to find an in-network primary care physician on BI, and Nathan said emergency care is still tricky. Nathan and his young daughter have visited the Franciscan Urgent Care on Wintergreen Lane twice in the last six months. That’s fine for a few stitches, but concerning for a life-threatening situation, as the family pays out of pocket for a subscription to a helicopter ambulance service.
“Just knowing the duration it takes to get from Bainbridge Island to St Michael (Medical Center in Silverdale), if seconds do matter, I don’t want to be dependent on a long-distance ambulance trip,” Nathan said.
By the time the Nathans got news of the expiring contract between their insurance and main healthcare provider, the enrollment period for their employer-funded healthcare plan had closed. They received a letter from United explaining that should negotiations fall through, their coverage would be void at Virginia Mason clinics by Jan. 1, 2025, with little recourse available. They received no correspondence from Virginia Mason.
“We enrolled in another year of insurance, not knowing that this was happening. And then this letter arrives, and here we are possibly about to lose a good chunk of our already-established care and our potential care in case of emergency,” Nathan said. He looked into switching insurance options mid-year, but no luck.
“I didn’t see anything in the listing of all the ‘potential qualifying loss events’ that refer to a loss of care, or a loss of facility, which is kind of surprising. Maybe I didn’t read the fine print finely enough, but you would think that if your options for medical care dry up in the middle of the year, you would have something,” he added.
‘Misleading’ numbers
As part of its proposal, United wants to drop St Michael from its network, due to what it cites as excessive expenses at the centers, along with reducing its rate of reimbursement for healthcare.
United contends that Virginia Mason has proposed “unreasonable price hikes” — $75 million over three years — that will drive up out-of-pocket costs for members and push employers to reduce coverage for employees.
“Our employer group customers have charged us with the responsibility of providing their employees access to quality, affordable health care. We pass any savings from negotiating more competitive rates directly to our self-funded customers, which they could in turn use to hold premiums steady for employees, or to lower them in some cases,” United officials wrote in a statement. “As the prices for health care continue to rise, employers have less money available to help grow the business through things like investments in new technologies or salary increases for hard-working employees.”
The VMFH hospitals are among the most expensive in the region, United says, and St. Michael stands out. There, routine services like labor and delivery are about $20,000 more than average; emergency room visits are $6,500 more, and are 80% more than other Virginia Mason hospitals; a colonoscopy, $8,200 more; and MRIs, about 25% more.
VMFH says those numbers are “misleading.” The hospital system loses $110 million annually caring for United patients, over 80% of whom are on Medicare or Medicaid, which reimburse hospitals “far below the actual cost of care.”
Additionally, demand and prices for healthcare services have skyrocketed since the COVID-19 pandemic. Only one of the VMFH eight hospitals received a rate increase from United in the last four years, while the insurance provider’s parent company saw profits of over $331 billion, hospital officials noted. A study by the Healthcare Cost Transparency Board found that VMFH’s rate increases have remained less than half the state average over a five-year period.
“United claims VMFH rates are driving up healthcare costs in the region. This is false. The truth is the overall reimbursement we receive from United does not cover the cost of providing care,” VMFH officials wrote. “Not only is United unwilling to help address these continued losses, their proposals would only make the problem worse.”
In an initial offer, VMFH provided a discounted rate for St. Michael to keep it in-network, but then United moved to sever the contract, hospital officials added.
BI nutritionist Anita Bermann said she has seen the issues that arise from United’s low reimbursement rates firsthand. She has lived and practiced on BI for about 10 years, and her family has been with United for two, but getting medical care has become a significant financial and time burden.
With United, a procedure as simple as an eye exam and glasses prescription is an ordeal for Bainbridge residents. The nearest vision providers who accept UHC’s vision plan, of which there are few, are 45 minutes away in Silverdale or Bremerton. None of BI’s or Poulsbo’s eye doctors work with United because of the low reimbursement rates.
And that’s just one hurdle, Bermann said. “To make matters worse, the eyeglass shops at these vision providers don’t actually accept the UHC insurance for the glasses themselves, so you can get a glasses prescription, but can only fill it at online retailers with low-quality glasses,” she said.
There is only one UHC in-network eyeglass shop locally, and it’s in North Seattle. Even there, the UHC reimbursement only covers a very small percentage of the cost, “so we’ve been spending more time and much more money on eyecare in recent years,” she added.
Bermann also noted that the services her family has received at Virginia Mason do seem to cost more than equivalent services at other facilities. For example, a 15-minute visit with a specialist at the University of Washington cost $186.88; a 15-minute visit with another equivalent specialist cost $408.09 at VMFH.
Bermann doesn’t even accept United at her nutrition practice due to the low reimbursement rates, it often inappropriately denies claims and its bad reputation, she claimed. Her family, like the Nathans, also found out about the contract conflict after open enrollment closed.
“If negotiations break down, we would have to seek out all our care in Seattle. This would not only be costly, due to the ferry charges, and time-consuming, but also dangerous, as it would delay the time to care,” she said. “I’m not sure how long this could be sustained — we might have to consider leaving the area.”
Kitsap’s healthcare crisis
In July 2023, the Kitsap Public Health District declared a healthcare crisis in the county. Data shows Kitsap trailed state and national averages for access to nearly all kinds of medical care. All residents—but particularly those with disabilities, racial and ethnic minorities, and lower-income residents—faced barriers like high and unpredictable costs, inadequate insurance coverage, and shortages of healthcare services.
Kitsap officials said gaps in services have been widened by healthcare workforce shortages and paid for an audit of the county healthcare system led by Johns Hopkins to form a plan of action.
“We do have a healthcare crisis. We all know it,” said Poulsbo Mayor Becky Erickson, then chair of the health board. “We need to push those resources toward this as deliberately, as accurately, and as thoroughly as we possibly can in order to improve the conditions in this county, period.”
The review catalyzed a series of actions for KPHD to pursue in 2025, including a nursing school recruitment strategy, but conditions continued to worsen as the study transpired.
Kaiser Permanente closed clinics in Poulsbo and Gig Harbor Dec. 13 and reduced hours to 7 a.m. to 8 p.m. at its Silverdale urgent care. The closest Kaiser medical facility is now in Tacoma, and Kaiser won’t cover out-of-network care, so any visits to local urgent care offices will be billed in full to the patient.
“This is really disappointing, considering Kaiser raised their premiums [in] January, citing rising doctors’ costs and so on. Now they are offering less services,” BI resident Theresa Nakagawa said of the announcement.
Kaiser cited increased competition, new technologies and high consumer expectations as its reasons for pulling out of Kitsap. “It is critical that we continue to adapt by allocating our people and resources where they provide the greatest value to our patients, members and customers,” said Jessica Knapp, a Kaiser communications specialist.
There’s trouble brewing nearby outside of Kitsap, too. Virginia Mason closed its only birth center and women’s health clinic in Seattle Nov. 15.
Cascade PBS reported that after Virginia Mason merged with Catholic Health Initiatives in 2021, becoming the VMFH system, natal and reproductive health care options have been steadily drained. Family planning services like abortion and some contraception were cut from employees’ benefits or were limited to “life-threatening situations where intervention is required.”
St. Michael is the only hospital in Kitsap that offers reproductive health services. It does not provide abortions, but does offer emergency contraception and other forms of birth control. If United drops the hospital from coverage, the next closest birthing center in-network will be in Tacoma.
Bermann is concerned that there seems to be little action from local government to support residents on healthcare.
“It seems like a major crisis for Kitsap County, and specifically for Bainbridge, where we have shrunk in the past ten years from three medical systems operating primary care clinics to just one—that might soon be zero—at least for a large chunk of the population,” she said.
Doctor who?
When asked for comment, the companies both issued statements expressing commitment to “resolving their differences,” but neither responded to specific questions.
If the contract does lapse, United stated that its members enrolled in Medicare Advantage and Group Retiree plans will still be able to receive care from VMFH physicians. There are exceptions. Those in the middle of care, such as pregnant women and patients with newly diagnosed or relapsed cancer in active cancer treatment, may qualify for in-network benefits for an unspecified period of time after the contract expires.
Everyone else, including the Nathans and Bermann, must seek new healthcare options.
Bermann anticipates many more ferry rides. The Nathans are considering a private health insurance provider.
This is a far cry from the experience that the Nathans had while living in the United Kingdom. When their daughter was born, they “never saw a single bill for her birth,” Lee Nathan said.
“Comparing that personal experience with what we have to contend with—with insurance and open enrollment and figure out who’s in-network and who’s out-of-network—having to factor that into choosing doctors, is just really frustrating,” Nathan added.
