Memorial Health Care System announced Thursday that it is restructuring the organization "to better meet the needs of patients." It involves laying off 70 employees.

At the same time, Memorial officials said talks with BlueCross BlueShield on a new contract have "stalled."

Memorial President and CEO James M. Hobson said of the restructuring, “Since the economic recession of 2008 and reform spurred by the passage of the Patient Protection and Affordable Care Act, health care has undergone a period of transformational change. Hospitals across the nation are faced with decreasing reimbursement from commercial payers while the number of Medicare enrollees swells. At Memorial we’ve implemented initiatives to sharpen our focus on the core competencies of the health system and achieve best in class in quality, cost, and the patient experience.

“Just as we adopt national quality benchmarks for the delivery of clinical care, we acknowledge that being a best in class hospital means we must continually evaluate how we deliver that care to ensure our workforce meets evolving patient need. As medicine advances, how care is delivered is changing. Some procedures have moved to an outpatient setting while other conditions have transitioned to observation status. How people seek care has changed as well. As other industries reduce expenses by engaging high deductible health plans, more people are delaying medical care or forgoing elective procedures. Those shifts in the care delivery call us to refine our staffing structure so resources are appropriately allocated for optimum service to our patients.”

Memorial will reduce its workforce by approximately 70 or less than two percent. “Our highest priority is to maintain a culture of excellence in clinical care and patient safety while positioning the organization to respond to the pressures of healthcare reform.” said Mr. Hobson.

He said, “We have many achievements to celebrate: the area’s only 100 Top Hospital, recognition by LeapFrog and Consumer Reports for quality and patient safety, opening new ORs and the area’s first hybrid operating suite, being the area’s first hospital to perform advanced heart techniques, among others.

“As a major employer in the Chattanooga region, we remain committed to our mission of building healthier communities. Appropriately aligning our workforce to respond to new care delivery models in a transformational era will well-position Memorial as we move forward on long-range projects such as the Future Memorial master facility plan at Memorial and Memorial Hixson, implementing the Cerner electronic medical record platform, developing our lung program, advancing our heart and vascular center, and expanding the capability of our Ooltewah facility.”

On the BlueCross talks,  Memorial said in a statement, "Over the last several months, Memorial officials have made some progress in negotiations with BlueCross Blue Shield of Tennessee, but unfortunately there is still more work to do and BlueCross is unwilling to extend the contract for another 30 days."

Mr. Hobson said,  “We had hoped they would accept this 30-day extension so we could finalize the details of the contract while remaining in-network. As a result, on Aug. 1st Memorial will be out-of-network with BlueCross.  Memorial physicians, The Chattanooga Heart Institute physicians, and Memorial Mission Surgery Center are not affected by these negotiations and will remain in-network.

"Memorial has taken steps to protect its patients with BlueCross health insurance from additional financial burden. “In a typical situation where patients receive out-of-network services from us, we would collect additional copayment and/or coinsurance amounts from patients because their health plan would pay less of our charges. However, we are extending our discounted in-network rates to patient and to their plan, even though we are now out-of-network, and we will not need to collect such additional amounts from our patients, even though Tennessee law would otherwise allow it.  We will take care of our patients no matter what."

Memorial says its last proposal  – a long-term contract "with annual rate adjustments well below Blue Cross premium increases" – is on the table for BlueCross to consider.

“We remain open to discussions, and we hope BlueCross will do the same,” said Mr. Hobson.  Yet, as it stands, Memorial will be out of network on Aug. 1st."  

He added, “We are committed to protecting our patients and this community and patients can contact us at 423-495-2286 or visit www.memorial.org with questions.”

BlueCross officials said, "After months of negotiations, BlueCross BlueShield of Tennessee now expects Memorial Health Care System to withdraw from its Network “P.” BlueCross has worked diligently to reach mutually agreeable terms for a new contract and remains open to conversations with the hospital."

“After several months with very little movement on Memorial’s part, we made the difficult decision to accept their decision to terminate the contract,” said Roy Vaughn, vice president of corporate communications for BlueCross. “We are now moving forward to ensure our members get the care they need during this transition.”

“Memorial’s request for a 30-day contract extension was linked to ever-increasing financial demands and other terms we cannot accept in the best interest of our members,” Mr. Vaughn said.

BlueCross officials said, "According to publicly-available data reported by hospitals, BlueCross already pays Memorial rates that are in the competitive range for the Chattanooga marketplace. The same data also shows Memorial to be the most profitable hospital system in the region. BlueCross has an independent, third-party analysis which estimates Memorial earns a 30 percent profit margin from the rates the insurer currently pays."

“For BlueCross, the disagreement with Memorial is about keeping health care affordable,” Mr. Vaughn said. “With Memorial, or any health care provider, we seek to pay reasonable rates that provide a fair margin for them while at the same time keeping coverage affordable for members. What we pay for medical care directly impacts what we charge in premiums.”

BlueCross officials said, "BlueCross rates are subject to regulatory reviews and approvals, and they reflect the trust cost of care premiums must cover. BlueCross is subject to regulations that define exactly how much of its premiums are required to be spent on direct medical costs. The same does not hold true for Memorial."