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The Blue Cross-Tufts Medical Fight: Who Wins?

Posted by John McDonough  November 17, 2011 11:20 PM

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In today's Globe, we learned that Massachusetts' leading health insurer, Blue Cross Blue Shield, and a major academic hospital, Tufts Medical Center, are locked in a contract dispute which may disrupt care as soon as January for as many as 55,000 employers and 88,000 Blue Cross members.  Why do these things keep happening, and who is likely to emerge the winner?

These things keep happening because, like it or not, our state's hospital payment system is designed to ensure that these events occur. And the likely winner?  Governor Deval Patrick.

First, some background.  Between 1975 and 1991, Massachusetts state government tightly regulated payments between hospitals and health insurers.  For the first decade, the system held down the rate of hospital spending, though the process was messy, political, and controversial.  For the final six years or so, rate regulation lost its effectiveness and the Legislature worked with Gov. Bill Weld to deregulate in 1991 (the 20th anniversary comes next month). 

Under the post-1991 rules, hospitals and insurers negotiate in private with no public accountability.  When one party feels disadvantaged, they might open up to the media to change the negotiating dynamic.  Hospitals seem to have had a better track record winning these showdowns (eg, a 1997 showdown between Harvard Pilgrim Health Care and Tufts New England Medical Center; and a 2000 showdown between Tufts Health Plan and Partners Healthcare).  Throughout the 1990s, health plans mostly held the upper hand over hospitals; during the past decade, the reverse was true and hospitals prevailed.

Blue Cross Blue Shield, under intense pressure to hold down premiums, is trying to change the game, even as their bottom line grows at a healthy clip.  Tufts Medical Center, under pressure to catch up with their more advantaged academic medical center competitors, is hoping it can win this new showdown.

Meanwhile, many thousands of businesses and patients/enrollees are pawns in this latest power struggle as competing and contradictory claims emerge from both sides. In these private negotiations, there is no transparency, and not much accountability.

Enter Gov. Deval Patrick who is proposing a new set of payment rules, not a full return to the 1975-91 framework, but new standards to take the private negotiations out of the back room.  Right now, the House of Representatives and the Senate are getting ready to issue their own payment reform proposals to move system toward greater public accountability.

Hospitals and insurers don't like the Governor's proposals.  The Blue Cross/Tufts Medical Center fracas shows why this time they just might lose.  Whichever party prevails in this maneuvering, both have handed the Governor's agenda a win.

Department of Clarification: I ran into BCBS CEO Andrew Dreyfuss who clarified that BCBS stood with Governor Patrick to support his cost control legislation; insurance industry opposition to the Governor's scheme comes primarily from the Massachusetts Association of Health Plans (MAHP) which includes all major insurance carriers in Massachusetts except for BCBS.
This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About the author

John E. McDonough is a professor of practice at the Harvard School of Public Health. He is the author of the book “Inside National Health Reform”, published in 2011 by More »

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