Welcome to healthcare market reform, California style.
Blue Cross of California has kicked off a brouhaha with its announcement that it's redoing hospital contracts and will institute a ranking system that gives preferred status to low-cost hospitals participating in its network.
Not surprisingly, the request for price information has set off a firestorm of controversy among California hospital executives. The incident is an indication of the hurdles that market-style reform will face.
Last year, when Washington was the focus of comprehensive reform efforts, many dangers were evident in the Clinton administration's proposed bureaucratic and complicated reform scheme. Because of high public and media attention, alarms were sounded.
Today many administrators may have been lulled into a false sense of security because comprehensive reform seems to have slipped into the shroudlike mists of history. The reality is that many local and market-driven initiatives may amount to bombshells for those affected.
Blue Cross, which contracts with about 350 of the 520 hospitals in the Golden State, wants to know how much below current prices hospitals will discount charges to the giant insurer. For providing the lowest prices, hospitals will get such preferred treatment as prominent display in Blue Cross directories and reduced patient copayments.
Providers believe themselves to be at the mercy of the insurer because the merger of Blue Cross' WellPoint Health Networks subsidiary and Health Systems International means the organization will have a customer base of nearly one-third of the privately insured residents in the state.
So executives may be forced to swallow Blue Cross' directive and provide the confidential cost information that may ultimately be used against them by competitors. What's most galling is that Blue Cross has the audacity to call this a partnering arrangement. In the new healthcare environment, hospitals and insurers must move beyond buyer-seller relationships to strategic affiliations. But Blue Cross needs to remember the common meaning of the term partner: one who has a share or part in an arrangement, or players on the same side or team.