Providence Health & Services in Oregon has been dropped from Aetna’s health insurance network after the two sides failed to reach a new agreement by the end of 2024. The impact will be delayed for providers in Southern Oregon until Feb. 17.

Providence’s contract with Aetna expired Dec. 31, both the not-for-profit Catholic health system and insurance giant said.

That means patients of Providence hospitals, clinics and doctors who are insured with Aetna’s employer-based and Medicare Advantage plans will now have to pay steep out-of-network fees — driving up their out-of-pocket costs — or seek care from a different provider.

Providence said about 9,000 patients with Aetna plans across Oregon would be impacted.

“While our discussions continue, we have been unable to renew our network agreement because Providence is demanding unreasonable rate increases that would raise health plan costs for local employers and out-of-pocket costs for members,” Aetna said in a statement.

Providence, meanwhile, accused Aetna of refusing to shoulder its share of rising health care costs, saying that “other insurers have agreed to step up … but Aetna has not been willing to do so.”

While the impasse will impact customers in much of Oregon, Providence providers in Jackson and Josephine counties will stay in-network until Feb. 17, both Providence and Aetna said. The Renton, Washington-based health giant has yet to finalize a new deal with Aetna for its Southern Oregon facilities, which have a separate contract with the insurance provider than Providence facilities elsewhere in the state.

The fallout comes even as Providence has moved their employees to plans administered by Aetna for 2025. But Providence said this change does not impact employees’ benefits, noting that the health system is self-insured and Aetna’s role is limited to plan administration. In a self-insured plan, the employer covers health care costs instead of buying insurance, while the administrator handles claims and networks.

Contract disputes between insurers and health care providers have become increasingly common nationwide, driven by a central conflict: payment. Both sides agree that compensation for services needs to increase, but they remain deeply divided over just how much. These high-stakes negotiations have turned into a recurring battleground, with each side fighting to protect its financial interests.

Last year, Providence came close to severing ties with Regence BlueCross/BlueShield over reimbursement disputes but managed to strike a deal just before the deadline. Similarly, Oregon Health & Science University faced a similar standoff with Aetna but secured a new contract just in time to avoid disruption.

Hospitals contend that higher payments from insurers are essential to cover rising operating costs and to compensate for the financial strain of serving Medicare and Medicaid patients, whose reimbursement rates often fall far short of actual expenses.

Meanwhile, Providence is also amid contentious negotiations with its nurses and other health care providers over new labor contracts. About 5,000 nurses, doctors and other frontline workers at Providence facilities across Oregon.