Blue Cross and Blue Shield of Ohio has agreed to a joint venture with the Cleveland area's biggest hospital group, Meridia Health System, as part of a Blues strategy to link with providers across the state.
And in a related development last week, 474-bed Saint Luke's Medical Center in Cleveland agreed to affiliate with Blue Cross, allowing the insurer to become directly involved in the hospital's management and appoint board members after four years. Terms of that agreement weren't announced.
The medical center also is discussing possible participation in the venture with Meridia.
Blue Cross will have at least 51% interest in the for-profit venture with Meridia, said David Eden of William Silverman & Co., a public relations firm that represents Blue Cross.
The venture will pair clinical services with "many new healthcare insurance offerings," including a Super Blue HMO to be introduced this fall, according to a news release.
Neither Blue Cross nor Meridia would be barred from contracts with other organizations, but market observers said the deal further signals a trend toward exclusive ties between insurers and providers.
Recently, the Cleveland-area University Mednet physician group, which has its own insurance plan, announced it would no longer refer patients to Meridia Euclid Hospital after a 45-year relationship (July 11, p. 34).
Blue Cross sees both deals as streamlining healthcare delivery by reducing paperwork and clinical duplication.
"This system will fill only hospital beds that need to be filled and redirect emphasis on physician services," Mr. Eden said of the joint venture.
Blue Cross said it needs majority control to settle conflicts if other hospitals join.
Mr. Eden said hospitals across the state contacted Blue Cross after it announced a similar venture with Riverside Hospital in Toledo last December. "We expect those types of major vertical systems will be created throughout Ohio in every major metro area," he said.
Final agreements on both Cleveland deals are expected in 60 to 90 days, pending federal and state approval.
Meridia serves Cleveland's eastern suburbs with four hospitals: Meridia Euclid, Hillcrest, Huron and Suburban. Its 1993 net patient revenues were $296 million.
Independent Saint Luke's is an acute-care hospital and teaching facility with clinics and satellite facilities in Solon, Beachwood and Shaker Heights. It had operating revenues of $123 million in 1993 and total assets of $154 million.