What’s Behind the University of Michigan Health System Contract Dispute with Blue Cross?

Today | 4 min read

Key Takeaways

The University of Michigan Health System has chosen to leave Blue Cross Blue Shield of Michigan’s network in Southeast Michigan on July 1, 2026.
Blue Cross has been negotiating new payment terms with the University of Michigan Health System, also known as Michigan Medicine, for many months. Michigan Medicine is demanding payment increases of 44% over the term of a new contract.
Payment for hospital services constitutes 47 cents of every health insurance premium dollar for Blue Cross Blue Shield of Michigan members.
Blue Cross is committed to working toward a fair agreement with Michigan Medicine — one that supports patients, protects employers and ensures a more affordable, sustainable future for health care in Michigan.

Every hospital that is part of the Blue Cross Blue Shield of Michigan provider network has a contract that determines how much your insurance pays for each service provided there. These contracts are routinely negotiated and Blue Cross’ role is to represent you – serving as your negotiator to keep the cost of hospital services from growing too fast.

Payment for hospital services constitutes nearly half of the health insurance premium, and these costs have been growing because of many factors, including hospital system consolidation as big systems like Michigan Medicine get bigger and leverage their scale to gain a greater share of each dollar.

Blue Cross has been negotiating new payment terms with the University of Michigan Health System, also known as Michigan Medicine, for many months. Michigan Medicine is demanding payment increases of 44% over the term of a new contract. This level of cost increase is unacceptable to us. While we want our members to receive excellent care that the doctors, nurses and staff of Michigan Medicine provide, those services must be affordable. Each health insurance dollar spent in a hospital ultimately flows downstream into your health insurance premiums. In this time when many Michigan families and employers are finding it hard to pay for health insurance and all their other rising costs, we must balance access with affordability.

Our proposals have been fair and responsible. They pay Michigan Medicine more, not less. They account for the same rising costs every business is facing, while also directing additional payments toward quality outcomes and better patient care. This approach of paying for better results is the heart of a payment reform movement toward value-based care. It’s recently been embraced by two other leading hospital systems – Corewell Health and Henry Ford Health – in new payment contracts signed over the last 12 months. We hope Michigan Medicine joins us in a similar arrangement in this new contract.

Michigan Medicine Chooses to Terminate In-Network Status with Blue Cross

While we continue to negotiate, Michigan Medicine has informed Blue Cross that it will terminate the in-network status of its southeast Michigan provider network of hospitals, outpatient facilities and physicians on July 1, 2026. This unilateral action by Michigan Medicine puts patients in the middle of our negotiations. It affects Blue Cross and Blue Care Network commercial health plan members – not Medicare or Medicaid members. Commercial plan members will have in-network access until June 30. Please find more information here.

The Cost of Care at Michigan Medicine Is Already High

We want our members to have access to high-quality, affordable care across the state — including from the skilled doctors, nurses and providers at Michigan Medicine. But as stewards of our members’ health care dollars, we must balance access with affordability.

Care at Michigan Medicine already costs significantly more than at other leading hospitals in Michigan. Knee replacement surgery costs an average of 100% more and a colonoscopy with biopsy costs an average of 146% more than at other hospitals.

Our Commitment to Affordability

Health care affordability is one of the most urgent issues facing Michigan families and employers.

In 2025, Blue Cross paid $107 million per day for patient care. In both 2024 and 2025, we paid out more in care than we collected in premiums – $19 million more per day than just two years ago.

The old way of paying for health care — paying more for doing more, regardless of outcomes — is not sustainable. That’s why Blue Cross is leading the shift to value-based care, where providers are rewarded for keeping patients healthy, managing chronic conditions and delivering quality outcomes — not simply increasing the volume of services. At the same time, we are doing our part. We are reducing our own administrative costs by $600 million over three years and continuing to innovate to lower our members’ drug costs.

Health care transformation requires partnership. Over the past year, we have successfully reached agreements with eight other major Michigan hospital systems that protect access while putting affordability and quality first.

We remain committed to working toward a fair agreement with Michigan Medicine — one that supports patients, protects employers and ensures a more affordable, sustainable future for health care in Michigan.

Learn more about how Blue Cross is addressing health care affordability at mibluedaily.com/affordability.

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