Thousands of low-income patients may have to scramble to find new doctors this month after University of Chicago Medicine became the latest major health system to break up with IlliniCare Health, an insurer that administers benefits for the state's Medicaid program.

U. of C. Medicine follows Northwestern Medicine and Advocate Health Care in walking away from IlliniCare Health, one of 12 Medicaid managed care organizations in the state. Medicaid managed care organizations are insurers that handle benefits for Medicaid, a state- and federally funded health insurance program for the poor.

When the contract ends next month, about 8,000 IlliniCare members will no longer be able to get in-network services from U. of C. Medicine or University of Chicago Physicians Group, according to U. of C. Medicine. IlliniCare pegs that number closer to 4,000 patients.

That includes members who are part of a program serving women, children and adults who gained coverage as part of Medicaid expansion under the federal Affordable Care Act as well as a program serving older adults, people who are blind, and people who are disabled.

"After nearly two years of working to resolve payment issues, we are disappointed to announce that our current contract with IlliniCare Medicaid is scheduled to end Sept. 3," U. of C. Medicine spokeswoman Lorna Wong said in a statement.

But Michael Marrah, IlliniCare plan president and CEO, disputes the allegation of "payment issues" between it and the health system.

"There is a challenge with being reimbursed by the state but IlliniCare has continued to pay all of its providers in well under 30 days and with 99.9 percent accuracy," Marrah said.

He said it's not totally clear to IlliniCare why U. of C. Medicine is terminating its partnership with the insurer, though both parties say they're open to further talks.

Jennifer Smith Richards, Annie Sweeney and Jason Meisner

Both IlliniCare and U. of C. Medicine say they're working to help affected patients as they transition to new care. The health system has been getting about 100 to 200 calls a day from patients concerned about the termination after sending out notice last month.

Representatives from Northwestern and Advocate didn't elaborate on the reasons their systems no longer contract with IlliniCare.

Though it's unclear how large a role payment problems played in the U. of C. dispute, other Medicaid managed care organizations have struggled to pay their bills because of the state's budget problems. It's a situation that is "dramatically reducing the Medicaid recipients' access to health care," according to a June court order forcing the state to pay the insurers more money.

About 2 million Illinois residents get coverage through Medicaid managed care organizations.

Another Medicaid managed care organization, Family Health Network, had paid "virtually none of its providers since February," according to the June court order. Three large hospital systems and four hospitals left Family Health Network's provider network as a result. A spokeswoman for Family Health Network declined to comment.

Yet another Medicaid managed care organization, Aetna Better Health of Illinois, has threatened to leave the program if it doesn't receive more state payments.

Since lawmakers approved a budget last month, the state has started to pay the insurers more, but it still owes Medicaid managed care organizations about $3.5 billion.

Gov. Bruce Rauner announced in February that he planned to overhaul the state's Medicaid managed care program partly by narrowing the number of insurers that participate. Advocates of the change have said that would save money, streamline the program and improve health care.

The idea behind Medicaid managed care, in general, is to improve patients' health and spend money more efficiently.

Eight of the current 12 insurers responded to a request for proposals to participate. The state has not yet announced which insurers will be part of the revamped program.

lschencker@chicagotribune.com

Twitter @lschencker

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University of Chicago Medicine severs ties with Medicaid insurer IlliniCare - Chicago Tribune