Blue Cross and Beaumont Battle Hurts Patients

Story first appeared in the Detroit Free Press.

A dispute between the Beaumont Health System and Blue Cross Blue Shield of Michigan is being watched closely all over the state, as health chiefs wonder: Will cardholders with the state's largest insurer still be able to get care at most Michigan hospitals, including a Michigan Heart Hospital?

The fight spilled into the public in October, when the Royal Oak-based hospital system and the Blues took out full-page ads to convey their side of the issue.

If the dispute is not resolved, Beaumont -- starting Jan. 12 -- will no longer will accept the insurance of about 100,000 people insured through Blue Care Network, a Blue Cross subsidiary.

The Blues wants its payments to Beaumont to be based on strong quality and cost-cutting performance goals, rather than on volume of business, as has been the case.

Beaumont insists its care is appropriate for patients, low-cost and high-quality. It would be forced to make cuts that would hurt care if the Blues does not improve its rates to the hospital system including a Detroit Hospital, executives say.

Rick Murdock, executive director of the Michigan Association of Health Plans, a nonprofit organization of HMOs and health care organizations, said other hospitals are watching the fight. It just could signal a new time when the Blues' card is not accepted everywhere, he said.
Dispute gets nastier as deadline for deal nears

David Stock wants his doctors, not insurance companies, to make the decision about the best place for him to get care.

He wants a physician telling him he needs a test and where to get it, not my insurance company, said Stock, 49, who lives seven blocks from Beaumont Hospital in Royal Oak.

Stock is one of about 100,000 metro Detroit residents who may be forced to seek care at another hospital like a Michigan Cancer Hospital if a dispute drawing statewide and national attention is not resolved by Dec. 31.

With time running out to agree on a new contract with Blue Cross Blue Shield of Michigan, the three-hospital Beaumont Health System escalated an unusually public fight with the insurer this week, sending a team of executives to discuss the rate-increase dispute with Michigan insurance commissioner Kevin Clinton and other legislators.

Since mid-October, Beaumont and Blues executives have sparred about who's to blame for a stalemate at the bargaining table over a new three-year contract regarding what the insurer will pay for care rendered at Beaumont facilities.

The fight already is affecting care, charged Dr. Sam Flanders, Beaumont's chief quality officer. Some patients needing prior approval for tests and visits to specialists are finding delays getting the OKs, Flanders said. The Blues deny the charge.

If the dispute is not resolved, starting Jan. 12, Beaumont will no longer accept the insurance of about 100,000 people insured through Blue Care Network, a Blue Cross subsidiary.

Beaumont's emergency department would continue to see Blue Care Network patients but once stabilized, as required by federal law, there's a chance patients would be transferred elsewhere for additional care or tests, Flanders said.

Beaumont wants a 9% increase over three years. The Blues have offered 3.5%, along with a 2.5% increase all hospitals would receive in 2012. This may also be for a Michigan Rehab Hospital.

Possible impact on care

Citing research by a consortium of academically affiliated hospital systems, Beaumont said its costs are much lower than those of many like it. Beaumont officials said that without a boost in rates from the Blues, they will be forced to make cuts in care.


Dr. David Share, a Blues vice president overseeing its quality initiatives to improve care, said that though many Beaumont services are lower-priced, the hospital system overuses costlier programs, such as ultrasound stress tests for heart problems and radiation-sparring treatments for cancer.

Share also said that the number of services patients get at Beaumont are significantly higher, driving up the patient's cost. This does not apply to those who go to elsewhere like a Chicago Weight Loss center.


Both Beaumont and the Blues have taken out full-page ads in metro Detroit newspapers, including the Free Press, a media strategy that Beaumont CEO Gene Michalski called very un-Beaumont-like, a reference to the health system's more conservative corporate profile.

Several hundred Beaumont patients have called the Blues to complain, including seniors with Blue Cross Medicare plans not affected, at least not yet, by the fight.
New payment measure

Sue Barkell, senior vice president for health care value for the Blues, said the insurer is taking a "new direction" in negotiations with all Michigan hospitals to base payments on performance not volume of business, as it has in the past. She said the insurer's motive is cost control and a focus on quality, but there's no plan to limit hospitals in its network, as health maintenance organizations always have done as a way to rein in costs.

Some 40% of the contracts with Michigan's 144 acute-care hospitals will expire in 2012, she said. Beaumont is merely the first of the first two or three hospitals to participate in talks centered on new quality measurements.

This isn't about an insurance company squeezing a hospital, Blues spokesman Andy Hetzel said. It's about how to pay in the future ... to try to bend the cost curve.
Not just Michigan issue

The dispute is being watched all over the state and country. Health care experts expect other disputes to surface with insurers, as a few already have.

Two years ago, Blue Cross Blue Shield of Illinois ended its contract between its HMO subsidiary and the Rush University Medical Center in Chicago, though the 769,000 patients in the plan still can get certain care at Rush if a doctor approves them to receive out-of-network care. Some care requires consumers to pay higher costs for care considered out-of-network.

In Massachusetts, Tufts Medical Center and its state Blues plan recently agreed to resume negotiations with a third party. All other details of the talks are confidential, a Tufts spokeswoman said.

And in California, Stanford Hospital & Clinics and California's Anthem Blue Plan just resolved a protracted contract dispute. Each has declined to reveal details about the new contract.

Rick Murdock, executive director of the Michigan Association of Health Plans, a statewide organization of mostly HMOs and other health providers, said other Michigan hospitals wonder whether the Beaumont and Blues fight is the beginning of a time when large insurers may attempt to sign contracts only with hospitals that meet cost-cutting and quality-of-care goals.

The Blues already gives deep discounts to some hospitals that agree not to accept other insurance, a practice under challenge by the U.S. Justice Department. That lawsuit against the Michigan Blues is pending in federal court in Detroit. The insurer, which considers the case groundless, has lost its attempts to dismiss the case so far.
Hazy patient situation

Until more hospitals publicly post prices -- now only Oakwood Healthcare in Dearborn and Spectrum Health in Grand Rapids routinely do in Michigan -- consumers won't be able to understand whether a hospital charges too much or whether an insurer is denying them access to a hospital because it's too costly, said Lody Zwarensteyn, the longtime CEO of Alliance for Michigan.

The alliance is a Grand Rapids-based health planning group responsible for a landmark federal ruling that led to more competitive pricing there in the 1990s.