The Minneapolis Star Tribune is highlighting the stalemate of a contract dispute between the local Blue Cross and Blue Shield and the regional tertiary pediatrics hospital, Childrens Minnesota.
Thousands of subscribers at Blue Cross and Blue Shield of Minnesota now face the likelihood of higher costs for care at Children’s Minnesota after the largest health plan in the state and Minnesota’s biggest pediatric hospital failed to agree on a new contract….
Blue Cross, which is the largest health insurer for Minnesota residents, says about 66,000 subscribers have received care at Children’s during the past year….
During the past several weeks, Blue Cross granted coverage extensions for more than 4,000 patients in the middle of complicated treatments who could not be easily transferred to other health care providers. Those patients don’t face an immediate decision about going elsewhere for care, since Blue Cross is extending in-network coverage for 120 days.
This is the interesting nugget for me. There are 66,000 individuals with a claim at Childrens in the past year. 4,000 current individuals are in the middle of a complex and presumably unique course of treatment provided by Childrens. BCBS-MN is paying out of network rates for those 4,000 individuals. The technical term for out of network rates for a tertiary care treatment center is “A lot”. BCBS-MN thinks that it is a better deal for them to provide medically necessary care at out of network rates under a continuity of care aggreement instead of transitioning care to the next best, in-network alternative. This is important.
BCBS-MN is willing to pay a lot for unique and specialized services. They aren’t willing to pay those high rates for general care where there are near substitutes available. Of the 62,000 people who have a Children’s claim but are not on a continuity of care waiver, there are some who previously had complex episodic care at Children’s and some who had a single ER visit. The rest of the population and the services that they receive are the services that are fundamentally in dispute. BCBS-MN thinks that they are paying too high a rate for these people and their services.
We saw this play out in Seattle on Exchange in 2014:
Ideally, the insurance companies that want to minimize their claims pay-outs want to have Seattle Children’s or any other high cost specialty hospital in network for a la carte services such as organ transplant and regional trauma centers of excellence, but out of network for pneumonia or routine elective surgery or setting broken ankles. Most of the specialty hosptials don’t want to go to a la carte contracting as that cuts the cross subsidization that they need to cover fixed costs.
The key problem in US healthcare policy is that prices are expensive. Narrowing networks to avoid very high cost providers is one of the most straight forward ways to have some downward pressure on prices. The locally dominant sub-specialty providers will fight back and this puts the patients with deferable or transferable care needs in the center of the fight.
mjg
I don’t have your inside knowledge of the industry, but wonder if an insurer’s choice to exclude providers like Children’s Hospital isn’t also a way to deter some high cost families from signing up with that insurance plan in the first place, i.e. cherry-picking. By dropping Children’s Hospital from its network, an insurer discourages families who know their kids need ongoing specialized care for chronic conditions from joining their rolls — and that is a predictably expensive demographic.
This happened in my area about 15 years ago. The Blue Cross serving the DC and suburban MD/DE/VA was trying to go from non-profit to for-profit status and sell itself to Anthem. Coincidentally (?) the company found itself in a contract dispute with Children’s Hospital in DC that year. If they had the option, families like mine — knowing we needed to maintain our ongoing relationships with Children’s Hospital — switched plans, undoubtedly helping the insurer’s bottom line. (BTW, the Maryland insurance commissioner rejected the Blue’s application to convert to for-profit status and the insurer found a way to resolve its contract dispute with Children’s Hospital . . . )
David Anderson
@mjg: Yes.
Mark Shepard up at Harvard is looking at the Massachusetts data (they are wicked good about making their deep data sets available to health policy researchers) and he is finding networks as a major source of insurer controlled selection mechanisms:
https://scholar.harvard.edu/mshepard/publications/hospital-network-competition-and-adverse-selectionevidence-massachusetts
Barbara
@mjg: The adverse selection issue that you are describing could clearly result from excluding subspecialty providers like CNMC from an insurance network. However, at least in the DC Metropolitan Area, there are actually very few services where CNMC is the ONLY provider available. There are three medical schools with academic medical centers and affiliations, and one of the very best truly comprehensive non-academic medical centers in the nation, Fairfax INOVA Hospital. And then, there is Johns Hopkins and its own Childrens’ Hospital “right up the street” in Baltimore. CNMC has a hard time dealing with this, but the reality is that many childrens’ hospitals are no longer “essential” in the way they used to be. The sense of being entitled to whatever they want in the way of reimbursement simply has to end, no matter what their history taught them about their role as a provider of unique care.
ETA: The cross subsidies in American health care are simply insane, and this isn’t the only or even the worst among them, but overall they make our system obscure and hard to reform.
japa21
Minnesota is an unusual state. Most of the hospitals and large groups will only negotiate on a % discount from billed charges basis, even with the biggies. Children’s gives one of the smallest discounts (only Mayo is worse). MN is also strange in that only insurance companies based in MN can sell policies there unless an employer is self-insured. Aetna, for example, has to rent a network from a company in MN to cover those employees that it covers. Most of those companies are based elsewhere.
Villago Delenda Est
All this does is further illustrate how totally perverse our entire health care financing system is. I don’t know, much like Bernie Sanders, how we’re going to get out of this mess, but we need to.
Arclite
@David,
1. What’s the best solution to the standoff in MN?
2. What do you think is actually going to happen?
Christopher Snowbeck
David: Could I trouble you with an email chat? I’m the reporter at the Star Tribune who wrote the story, so I’m interested in your thoughts. As a bonus, I used to cover UPMC when I worked at the Pittsburgh Post Gazette! [email protected]
David Anderson
@Arclite: 1 ) I don’t know
2) I don’t know but I guess an agreement will be reached in the next couple of weeks.