Prime Healthcare, a health system that operates several hospitals in New Jersey, is ending its contracts with the nation’s largest health insurer, saying it has been “significantly underpaid” for years compared to neighboring hospitals.

The move will force thousands of Garden State patients to choose other hospitals or go without health coverage if they patronize facilities run by Prime, an Ontario, California-based health network.

UnitedHealthcare has been paying the health system much lower rates than its competitors, according to Prime. New disclosure mandates by the Centers for Medicare & Medicaid Services — which now require hospitals to reveal their contracted rates — allowed the health system to learn what its rivals were being paid.

“United has continuously underpaid Prime — significantly underpaid Prime — almost as much as 50{44affb6c5789133b77de981cb308c1480316fee51f5fd5f1575b130f48379a33} compared to our competitors,” said Dr. Sonia Mehta, regional CEO and chief medical officer of Prime Healthcare New Jersey.

Prime and UnitedHealthcare — a subsidiary of Minnetonka, Minnesota-based UnitedHealth Group — have been negotiating for months with no success. Mehta said she could not elaborate on the talks because of confidentiality concerns.

“For months, we have been negotiating, and basically United has taken their stand, and we have decided not to continue because we cannot continue to provide such great care at such low reimbursement,” Mehta said.

Prime operates Saint Clare’s Health in Denville, Dover and Boonton; St. Mary’s General Hospital in Passaic; and Saint Michael’s Medical Center in Newark. Mehta said the most immediate risk is to patients at Saint Clare’s, which will be the first to end their contracts. The others will follow in the near future, she said.

What will it mean for patients covered by UnitedHealthcare? Their health insurance will no longer be accepted at the health system’s facilities. While emergency care will still be provided, elective surgeries will be considered out of network.

UnitedHealthcare is the largest health insurer in the United States, covering 70 million Americans, according to data research company ValuePenguin. Forbes ranks UnitedHealth Group the second-largest insurer in the world, with $262 billion in revenue and $16.8 billion in profit in 2020.

While Mehta held UnitedHealthcare responsible for taking away patient choice, the health insurer called Prime’s demand for a 14{44affb6c5789133b77de981cb308c1480316fee51f5fd5f1575b130f48379a33} rate increase “unsustainable.”

“Prime is demanding a 14{44affb6c5789133b77de981cb308c1480316fee51f5fd5f1575b130f48379a33} price hike in just one year for our employer-sponsored and individual plans, which is unsustainable and would increase health care costs for New Jersey residents and employers,” a UnitedHealthcare spokesman said in an email. “We hope Prime will work with us to ensure the people we serve have continued access to Prime’s hospitals at an affordable cost.”

But Mehta said it has been so underpaid that 14{44affb6c5789133b77de981cb308c1480316fee51f5fd5f1575b130f48379a33} is hardly a dent to bring it to baseline compared with other hospital networks.

“We’re not asking (for a) 50{44affb6c5789133b77de981cb308c1480316fee51f5fd5f1575b130f48379a33} increase,” she said.

There is a phase-out period in which Prime will continue to offer rates and services. It will accept UnitedHealth Group’s Medicaid coverage until Dec. 16 and commercial and Medicare insurance through Dec. 31, according to a statement.

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Spencer Kent may be reached at [email protected].