A failed initiative by three of the Detroit area's biggest healthcare players shows lofty integration plans don't always work.
In February 1993, Mercy Health Services, Blue Cross and Blue Shield of Michigan, and Henry Ford Health System unveiled a "community-
The joint venture would market new managed-care products to major employers, particularly auto companies, using the Blues' managed-care subsidiary, Blue Care Network of Southeast Michigan (Feb. 15, 1993, p. 6).
Mercy and Henry Ford were to be paid on a capitated basis for hospital and physician services. William Beaumont Hospital in Royal Oak later joined as a provider.
The selling point was a promise to limit premium rate increases to 5% a year for at least two years.
At the time, Richard E. Whitmer, president and chief executive officer of the Michigan Blues, called the partnership the "cutting edge of the national healthcare policy debate."
The announcement was followed by lengthy accounts in the mainstream and healthcare press, including MODERN HEALTHCARE, heralding it as an innovative step in the integration of insurers and providers.
But the venture flopped.
Blues spokesman Rude Difazio said point-of-service plans were created but never marketed. Few if any enrollees signed up.
"I don't know if there's been any formal termination," he said.
Its demise was a byproduct of contract negotiations between the United Auto Workers union and the auto companies that year, Difazio and others said. Workers did not want to give up the choice offered by the Blues' traditional indemnity plan.
Meanwhile, the Blues announced a 3% premium cut for its indemnity plan, undermining the price guarantee offered by the community-care partnership.
"It was a product ahead of its time," Judith Pelham, Mercy's president and CEO, said. "Essentially, (the auto companies) and the unions decided they did not want to tackle that issue" of changing coverage, she said.
But Difazio said it was more than a marketing miscue. He said there was difficulty integrating an insurer and health systems that compete on some levels. "There were a lot of cross currents in that situation," he said.
Despite its problems, a common belief among local industry figures is that the partnership of three healthcare giants jolted other providers into affiliations, mergers and networks, lest they be left in the cold.