With a key contract deadline less than a month away, thousands of patients at Children’s Hospitals and Clinics of Minnesota are being told they should start making backup plans to see new doctors if they get their health insurance from Blue Cross and Blue Shield of Minnesota.

Blue Cross and Children’s Minnesota are embroiled in heated contract talks that will determine whether the dozen hospitals and clinics run by the pediatric health care provider will be included in the Blue Cross network.

About 66,000 Children’s Minnesota patients who have Blue Cross insurance would face dramatically higher medical bills to be treated by doctors who would be out-of-network, which could force families to seek care elsewhere.

Earlier this week, Blue Cross Senior Vice President Garrett Black said in a blog post that although the insurer will keep working toward a new network contract, the company is advising its members at Minnesota Children’s to talk with their doctors now about “how best to maintain their child’s treatment or, if necessary, about a referral to another in-network physician.” The hospital warned patients about a potential network disruption months ago.

The existing network agreement is set to expire July 5. While contract negotiations are routine, it’s relatively uncommon for talks to spill over into public view. That happened in March, when Children’s Minnesota issued a news release announcing that it was canceling its contract with Blue Cross and Blue Shield effective July 5. The cancellation included commercial Blue Cross plans and also Blue Plus plans, which are supported by Minnesota’s Medicaid program, Medical Assistance.

The hospital cited Blue Cross’ proposal to reduce Medicaid payment rates as potentially “financially crippling.”

No expiration on contract

Blue Cross, in its blog post this week, said the hospital’s decision was both “unilateral” and “shocking” — the latter because the existing contract had no expiration date. “Children’s could have continued to serve Blue Cross members at existing in-network payment rates indefinitely,” Blue Cross’ Black wrote.

Black’s post said Children’s Minnesota sought to increase its charges for both patients on Medicaid and patients under employer-sponsored and individual plans. Black said the insurer offered “above-market rates” for Medicaid patients plus a “modest price increase” on employer-sponsored and individual plans.

“That’s the offer Children’s rejected, putting thousands of Children’s patients at risk of losing access to their doctor,” Black wrote.

Dr. Marc Gorelick, president and chief operating officer of Children’s Minnesota, said Friday in an e-mail to the Star Tribune that Blue Cross was well aware that even contracts without expiration dates need to be renegotiated regularly “because costs do change and therefore rates need to be adjusted as well.”

“We were effectively forced out of our contract, driven by Blue Cross’ ultimatum that we accept a 31 percent cut to our Medicaid rates or receive no commercial rate increases indefinitely,” Gorelick’s e-mail said. “They believe paying 50 cents for a dollar of actual cost incurred to care for sick kids insured through Medicaid is a fair proposition, which is disappointing.”

Gorelick said Children’s cares for some of the sickest pediatric patients in the state, yet it has per-patient operating costs that are 2.5 percent lower per patient day than other free-standing children’s hospitals.

Although Black said Blue Cross is working diligently with the hospital on transition-of-care plans for thousands of patients, Gorelick criticized the insurer for being “unprepared to safely manage the transition of care for many of those who are very sick.”