By Caroline Humer

NEW YORK (Reuters) – UnitedHealth Group Inc will treat emergency room and other hospital services performed by Envision Healthcare as out-of-network claims beginning next year after failing to reach a new contract agreement with the staffing company, UnitedHealth said on Monday.

The health insurer sent a letter seen by Reuters to 300 hospitals informing them of the decision on Friday.

The letter comes 90 days ahead of the Jan. 1 date for the out-of-network switch, and after months of negotiations between the two companies to solve disagreements over payment rates and other financial incentives, UnitedHealth spokesman Stephen Shivinsky said.

Envision spokeswomen Kim Warth, in an emailed statement, said the company has been negotiating in good faith with UnitedHealth, which is making “egregious demands” for price cuts “that will force all of our physicians out of network.”

The letters contain data for one group in one market, not for overall markets, she said, describing the information sent to hospitals as misleading.

UnitedHealth first said it was considering terminating its contract with Envision in April.

Envision also sued UnitedHealth earlier this year, saying it was not paying its bills. That ended up in court-ordered arbitration, which is ongoing.

Envision has agreed to be bought by KKR & Co for more than $5.5 billion in a deal expected to close in the fourth quarter.

UnitedHealth said in the letter that Envision is asking for payment rates that are nearly 600 percent of the rates in the Medicare program for seniors and the disabled and twice the average amount paid for ER physicians according to the National Bureau of Economic Research.

Envision said its goal is to have in-network relationships with partner insurers “so that patients don’t have to worry about surprise bills caused by surprise gaps in coverage.”

(Reporting by Caroline Humer; Editing by Bill Berkrot)