Payers & Providers Midwest Edition – April 12, 2011

8/7/2019 Payers & Providers Midwest Edition April 12, 2011

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The Department of Justice has expanded itsinvestigation into the contracting practices ofBlue Cross and Blue Shield plans, looking atwhether their terms for dominant provider

networks effectively shut downcompetition from otherinsurance companies.

The Wall Street Journalreported that Blues plans inMissouri, Kansas, Ohio, WestVirginia, North Carolina, SouthCarolina, and the District ofColumbia have received civilsubpoenas. The investigationfocuses on contracts that featuremost-favored-nation clauses,or MFN, by which dominantpayers obligate providers to give

preferential rates for medicalservices. Other insurers withless market share wouldpresumably have to pay more forthe same thing.

MFN clauses may beconsidered anticompetitive if theyprohibit fair price competition, and can beregulated under antitrust laws.

Meanwhile, the governments case againstBlue Cross Blue Shield of Michigan, led Oct.18, will come under scrutiny in a courthearing next week. The Department of Justiceand the state attorney general alleged that the

Blues plan required 70 Michigan hospitals toguarantee it favorable pricing over competitorsusing MFN contracts.

In December the Michigan Blues led amotion to dismiss that will be heard in U.S.District Court in Detroit on April 19. Weconduct our business under a comprehensiveregulatory system enabled by a 30-year-oldMichigan statute that was written solely togovern Blue Cross Blue Shield of Michigan,Blues General Counsel Jeffrey Rumley saidin the motion. Blue Cross Blue Shield ofMichigan has unique responsibilities under

state law.!These responsibilities are establishedto fulll specic state policy objectives ofaccess to health care and controlling its cost.

Rumley further said the government did no

provide any evidence that theMFN contracts caused economicharm, as the antitrust lawsrequire. Blue Cross said it hasbeen more successful than mostother plans in managing thegrowth of health care costs, inpart because of its contractingpractices.

BCBSM covers 4.3 millionlives in Michigan and is by far thestates dominant insurer, withrevenues of $19 billion a year.

It is that dominance that calls

the MFN contracts into question,said Richard D. Raskin, a health-care antitrust expert in the

Chicago ofce ofSidley AustinLLP, a large law rm.

Unless a payer has adominant position in the market,

the use of an MFN is unlikely to raisesignicant antitrust concerns, Raskin said.!In the Michigan complaint, DOJ specicallynames the local markets in which it believesBCBSs use of an MFN provision isproblematic.

He suspects that the DOJ is probably

looking for inhibition of price competition inindividual local markets among the otherBlues plans its investigating.!

MFNs are bad because it ensures theincumbent will get the best discounts andseals off the ability of others to compete, saidRobert Laszewski, a Washington consultant, ina comment to the Wall Street Journal.Practically, the dominant insurer will get less

9/:3/5(4!;


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In Brief

Mayo Clinic ShuttersCommunity Hospital

in Arcadia, Wis.The Mayo Clinic has closed a smallcommunity hospital in Arcadia,

Wis., saying it was no longereconomical to keep it open.Emergency, inpatient, and

maternity services at FranciscanSkemp Healthcare - ArcadiaHospital were terminated at the endof March, as announced by Mayolate last year.

The parent company said lowpatient census and little populationgrowth forced them to look at thehospitals long-term prospects.Around five patients a day wereseen in the emergency department,and only seven babies weredelivered each month.

This is a loss, to the community

and to the dedicated staff, said TimJohnson, M.D., Franciscan Skemppresident.

About 20 jobs were lost at thehospital, which served about 7,000people in the surrounding area ofsouthwest Wisconsin.

The town no longer has around-the-clock health services. A nursinghome and clinic will continue tooperate.

The closest town with a fullservice hospital would be Winona,Minn., just across the MississippiRiver.

St. Lukes in KCMOOpens New Facilityfor Wright Memorial

Wright Memorial Hospital in Trenton,Mo., about 60 miles northeast ofKansas City, is moving patients into anew building on April 12. The new 25-bed facility includes about 60,000square feet of hospital space and a12,000 square foot medical ofce

Continued on Page 3

NEWS

Blue Plans Antitrust Investigation (Continued from Page One)

discounts and the difference would narrow,but the Blue plan would still have asubstantial price advantage.

WellPoint Inc., the for-prot parentcompany ofAnthem Blue Cross and Blue

Shield in Missouri and Anthem Blue Crossand Blue Shield in Ohio, said it usescomparable rate, equal rate, or modiedrate protection clauses in its contracts,which are sometimes described as MFNclauses. We believe that comparable rateclauses are pro-consumer and can beadvantageous to both parties in anegotiation by allowing for a longer-termcontract, which leads to more networkstability and value, the company said. Blue Cross Blue Shield of Kansas is a

mutual company serving all parts of the stateexcept the two counties near Kansas City,Mo. Its network includes 96% of allproviders in its service area, notably 99% ofall medical doctors and 100% of all medicalfacilities, it says on its web site. Mary BethChambers, spokesman for BCBSK, said theplan is cooperating fully and preparing theinformation the government requested.

In general, hospital discounts are one toolthat Blue Cross and Blue Shield companiesmay use to keep costs down for members,said Brett Lieberman, a spokesman for theBlue Cross and Blue Shield Association, the

umbrella group for the 39 independent Bluesplans. It hurts consumers to remove toolsthat help obtain the lowest possible costs, hesaid. It doesnt make sense for BCBScompanies to reimburse at higher rates thanthey could otherwise negotiate.

The federal government dictates MFNterms in its contracts all the time, he added,for the exact same reasons that plans do: toguarantee low prices. Medicare, Medicaid,and the federal employee health benetprogram all use variations on a requirementthat contractors provide the government theirlowest rates.

National health plans that compete withthe Blues were wary about commenting onthe Michigan case or the other stateinvestigations. Any time payer, hospital orphysician pricing is signicantly out of line,it can create an uncompetitive market, andconsequently, a burden to employers andconsumers, said Bill Berenson, Aetnasmarket head for Michigan, in a statement. Itshould be the goal of everyone to ensurecompetitiveness. That, in turn, will delivervalue to the consumer. Berenson declinedto be interviewed.

Likewise, Cigna said: Were going todecline to participate in this article.

The Michigan case and the subsequent

investigations are a really important dealfrom the perspective of the JusticeDepartment and health care reform ingeneral, said Tim Greaney, a law professorat St. Louis University. You can trace this tothe debate over the public option.

The ACA provides for the creation ofinsurance exchanges, where individuals andsmall groups may choose among competinginsurance plans in their area. For exchangesto work properly, there has to be robustcompetition and a variety of plans. If Bluesplans tie up the local providers in MFNcontracts, it will be extremely difcult for

new entrants to come into those markets.If you tell the hospital in town that it has

to charge (the other plans) more than itcharges you, the dominant insurer, then nonew rival can offer an attractive package toconsumers or employers, Greaney said. Itscosts are going to be higher, and it cantcompete. Its just going to be Blue Crosscharging high prices.

DOJ has looked closely at concentratedinsurance markets and has wondered why afew companies continue to dominate in somany areas of the country. If theresmonopoly prots, someone should enter the

market, Greaney said.Instead, with MFN contracting, both the

hospital and the insurer lock in their marketdominance, and effectively join hands tokeep costs high, at the consumers expense.This is one of the reasons that somereformers wanted a public option, Greaneyexplained: to shake up too-cozy marketrelationships.

BC of Michigan is asserting that they areso heavily regulated by the state that they arenot subject to federal antitrust law. If the statetells you to x prices, you cant be prosecutedby the feds for anticompetitive conduct,

Greaney said. As a legal argument, itssomething of a stretch, he added.

From a hospitals perspective, Raskin said,these cases are a mixed bag at best.! On theone hand, a hospital would want to keep itsnegotiating freedom and not have to give apreference to any particular payer. ! On the other hand, the Michigancomplaint at least suggests that in someinstances there may have been a quid pro quoand that locally dominant hospital systemswere given preferred rates in exchange foragreeing to an MFN provision.!


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NEWS

In Brief

building.The hospital cost $30 million, said

St. Lukes Health System in KansasCity, Mo., the hospitals parentorganization. The hospital includestwo labor and delivery suites and anemergency department staffed aroundthe clock with physicians. It also

features an electronic intensive-careunit that has automated warning anddecision-support software. Anelectronic medical records system willbe installed in 2012.

Wright Memorial is considered acritical access hospital, meaning itmeets Medicare reimbursementcriteria designed to improve access tohealth care in underserved rural areas.

The St. Lukes system now includes11 hospitals and numerous primarycare clinics and other ancillary healthfacilities.

HHS Gives 129Dollar-Limit Waivers to

Health Plans in March

The Department of Health andHuman Services granted 129 newapprovals in March for waivers tohealth plans that cannot meet theannual dollar limit on benetsspecied in the Affordable Care Act.The total of waivers was 1,168 byMarch 31.

The ACA forbids plans fromimposing dollar limits on benets by2014. Between now and then, insurersmay gradually phase out their annuallimits. Between September 2010 andSeptember 2011, plans must provide

at least $750,000 in coverage.HHS said that about 95% of its

waivers went to plans sponsored byemployers. Usually, they are limitedbenet plans, often referred to asmini-med plans, favored by retailersand employers of low-income people.There are 2.93 million peopleenrolled in plans with annual-limitswaivers, covering fewer than 2% ofpeople with private health insurance,HHS said.

Many Republicans have takenissue with the waivers, saying theydemonstrate another of the intrinsicaws in the health reform law.

The proposed merger ofResurrection HealthCare and Provena Health, two large RomanCatholic hospital systems in Illinois, isproceeding slowly and probably wont closebefore the fall, Resurrection said last week.

In a letter to afliated physicians on April6, Sandra Bruce, president and CEO ofResurrection, said the systems were workingthrough complex issues of integration. Theproposed merger must yet be approved by thesystems boards and state regulators. A closingof the merger would likely come in the fall,she said.

Provena Health comprises six hospitals, 36

clinics, and various other afliated entities,outside the Chicago region. It is sponsored bythree orders of Roman Catholic sisters and isbased in Mokena.

Chicago-based Resurrection includes sixhospitals with 2,336 staffed beds, as well aseight nursing and rehabilitation centers, veretirement communities, and other services.

Combined, the systems had 2010 revenues onearly $3 billion. They will have a medicalstaff of 5,000 physicians and 22,000employees, and almost 100 locations of care

A non-binding letter of intent wasannounced on Feb. 3. By working together,we not only increase access to outstandingcare and compassionate service to ourpatients and community residents, butleverage the benets of our advancedcontinuums of care within the new healthreform law, said Guy R. Wiebking, presidenand CEO of Provena, in a statement.

The merger doesnt have a denitive

timetable. It would depend on the duediligence, said Brian Crawford, spokesmanfor Resurrection. If all goes well, I wouldexpect sometime in the fall we would have aclosing.

Its probably a little slower than expecteAn enormous amount of work goes into duediligence; we thought we could do it quicke

Gov. Mark Dayton of Minnesota has been tryingto place a prot cap on earnings to HMOs fromstate healthcare programs. He achieved a partialvictory last week with the announcement thatfour not-for-prot health plans Blue Cross BlueShield of Minnesota, HealthPartners, Medica,and UCare will make only a 1% prot marginon their 500,000 state-insured patients in 2011,under a voluntary agreement with the governorsofce. If they make more than that amount, theywill pay it into a fund that supports a state careplan for the working poor.

Health plans had prots of 3.8% on statmanaged-care contracts in 2010 and 2.6% 2009. The health plans said the states pro-jected budget of $5 billion played a role intheir decision to voluntarily restrict theirearnings. A spokesman for Medica said thegiveback was consistent with the plans notfor-prot orientation. UCare gave $30 millioback to the state in March.

Dayton, a Democrat, has introducedcompetitive bidding for next years contractwith managed care companies.

Minnesota HMOs To Limit EarningsState Contracts Voluntarily Set at 1% Profit Margin

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Catholic Merger Proceeding SlowlyResurrection, Provena Taking Longer on Diligence
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A few weeks ago, I was mining a trove ofpublicly available data for a presentation I wasto give looking at quality of care at some of theChicago regions marquee hospitals. Idiscovered there were warning ags at severalinstitutions, including the University ofChicago Medical Center.

Imagine my regret to hear, just a few dayslater, that one of the citysleading business gures andphilanthropists, James Tyree,was killed by a medical error inthat same hospital a hospital

on whose board he had served.The cause was an air embolismin a dialysis catheter, during ahospitalization to treat hiscancer. (Payers & Providers, 22March 2011, p. 3)

Great doctoring and greatmedical safety are not the samething. The University of Chicagohas a reputation for outstandingcancer care. That's why Tyreehad a good prognosis when heentered the hospital and why hisdeath was so disturbing to his

family and friends.How likely is the average patient to beharmed at Chicago-area hospitals? If nationalgures apply to our area, at least 10 people diefrom preventable medical mistakes in localhospitals every day and another 100 areinjured. Few of these deaths make news. ButTyree was a prominent citizen, his death wasreviewed by the medical examiner and theresults were released by his family.

To nd out more about preventable medicalmistakes, I went to a site intended for health-care professionals, whynotthebest.org. Itssponsor, the Commonwealth Fund, wants to

motivate hospitals to improve care.I looked at one set of measures for eight ofthe area's best-known hospitals LutheranGeneral (agship of the Advocate system);Evanston (agship ofNorthShore University);the academic medical centers ofLoyola,Northwestern, Rush, the U. of C. and theUniversity of Illinois; and Stroger, CookCounty's public hospital.

The problem areas I picked out weredecubitous ulcers, catheter and IV lineinfections, and post-operative sepsis. Loyolahad nine times the rate of bedsores than the

state average. It was the single hospital describas signicantly worse on that metric. Loyolathe U of C, and the U of I were signicantlyworse on the infections. The U of C rankedsignicantly worse on sepsis, where Stroger,incidentally, came out signicantly better.

These statistics demonstrate how seriously hospital's managers and clinicians are workin

together to reduce serious safproblems. The best efforts ofcaring and hardworkingindividuals won't be successunless systematic error

prevention is built into ahospitals processes as part oculture. A government studyshowed nearly one-third ofhospitalized Medicare patiensuffer some sort of adverse evIts possible that the hospitalsapparently had safety issues i2009, when these data weregathered, have completely sothem. If so, there's nothingstopping those institutions fro

sharing detailed clinicalinformation with the public.

Most important, there's nothing preventinghospitals, with the consent of an individualpatient's family, from opening up the results oerror investigations instead of hiding behind lbarriers. Most patients don't want to sue. Theyonly want fair compensation, compassion andknowledge that someone else won't be harmeagain in the same way. That's why local hospishould invite patient representatives to serve ohospital safety committees, as has becomecommon in Massachusetts and elsewhere.

Tyree was a blue-collar guy who worked hto become the much-admired CEO of a succeChicago nancial company. It's impossible fo

outsider to know whether his death waspreventable, even if many air embolisms are. healthcare insiders need to start sharing the kof information that will help prevent people lJim Tyree from dying too young. We are allvulnerable to medical error, and we must all sto demand accountability from our hospitals adoctors.

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DNOOG"ENH"PQ#?

OPINION

Hospitals Should Open Up on ErrorsA Closed Attitude Ensures They Will Stubbornly Persi

By Michael Millenson

Michael Millenson is president of Health

Quality Advisers in Highland Park, Ill. He is a

member of the Payers & Providers editorial

board.


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Payers & Providers Midwest Edition – April 12, 2011

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