A push by the Big Three automakers to eliminate capital payments to hospitals by Blue Cross and Blue Shield of Michigan has ended in compromise.
The state's largest insurer decided to modify its controversial-and unusual-practice of paying its "fair share" of each hospital's expenditures for buildings, computer systems and major equipment. But it won't scrap the payments entirely.
The change is expected to throttle back capital payments, which have been increasing about 10% a year. The payments total $178 million for fiscal 1996, or about 10% of the Blues' payments to hospitals.
The plan will reduce total capital payments by $8.9 million, or 5%, in fiscal 1997, which starts July 1.
Since at least the 1960s, the Blues plan has reimbursed hospitals the full cost of their capital expenditures, based on their portion of Blues patients, Blues spokesman Rude Difazio said.
The Blues plan covers 45% of Michigan residents, or 4.3 million people.
The state's certificate-of-need law is supposed to keep hospitals in check. Employers complain that the pass-through payments encourage unnecessary expenditures anyway, not to mention spending on staff, equipment and upkeep for new facilities.
In March 1995, the chief executive officers of Ford, Chrysler and General Motors wrote to Blues CEO Richard Whitmer asking for "total elimination of capital reimbursement."
Michigan Gov. John Engler drafted a similar letter last May, suggesting that hospitals be paid in a way that encourages efficient spending.
The Blues plan, which said it had been considering changes anyway, approved a new payment model this month.
Starting July 1, capital payments will continue, but at fixed rates per diagnosis-related group or per day. Over eight years, the rates gradually will be pegged to a peer group average.
The pass-through for outpatient capital costs will be eliminated for most services.
Chuck Ellstein, group vice president for policy for the Michigan Health and Hospital Association, said the policy strikes an "equitable balance," although some hospitals with long-range capital commitments might be squeezed.
Hospitals that approved significant projects before Aug. 1, 1995, may request an extra money, the Blues plan said.
Jim Cubbin, GM's executive director of healthcare initiatives, called the move "probably not as aggressive as we'd like to see, but it's still a step in the right direction."
The governor's office would have preferred a system in which capital expenses are folded into the price of hospital services, said Dennis Schornack, an adviser to the governor.