Philadelphia-based Independence Blue Cross says it's welcoming scrutiny of a new money-saving provision in its hospital contracts that's become the target of a federal antitrust probe.
The Philadelphia-based Blue Cross plan learned of the U.S. Justice Department's civil investigation last month. In a letter to G. Fred DiBona Jr., president and chief executive officer of the 2.25 million-member plan, Steven Kramer, a Justice Department attorney, said the inquiry will focus on "the purpose and effect" of the plan's so-called "prudent buyer" clause.
Independence Blue Cross began including the clause in contracts with hospitals last year after the state Insurance Department approved it. Under the clause, if Independence Blue Cross is the largest private purchaser of care at a hospital, the hospital must offer the plan its best price.
"We're not asking for a better price," said Dick Doran, a spokesman for the plan. "They can give others the same rate."
So far, Independence Blue Cross has signed contracts containing the clause with 56 hospitals and reached agreements in principle with 11 others, Mr. Doran said. Negotiations with another 13 hospitals are continuing, he said.
Independence Blue Cross estimates that the prudent-buyer clause will save $75 million annually through lower hospital rates. The policy's expected to help cut subscribers' premiums. No estimates of savings are available yet because the clauses are "just beginning to take effect," Mr. Doran said.
"We welcome any opportunity to let the public and the Justice Department and the insurance department know how we're saving our subscribers money," he said.
The Blue Cross and Blue Shield Association doesn't keep track of the number of plans that use prudent-buyer clauses or similar requirements. "The general feeling is if a plan and a provider, through arms-length negotiations, concluded that that's an acceptable arrangement, then we're all for it," said Cheryl van Tilburg, a spokeswoman for the Chicago-based association.
However, the Pennsylvania Insurance Department recently required a similar clause sought by Blue Cross of Western Pennsylvania to be altered.
The only complaints about Independence Blue Cross' contracting practices "originate with interests that will not benefit from the cost savings resulting from our prudent-buyer provision," Mr. DiBona said.
In a recent article, the Philadelphia Business Journal reported that U.S. Healthcare had contacted the Justice Department about the policy but didn't know if its comments sparked the probe.
The Justice Department expects to complete its investigation in two to five months.-