A controversial contracting initiative by Blue Cross and Blue Shield of Massachusetts has become a rallying point for hospitals concerned about erosion of their ability to handle a $500 million uncompensated-care burden.
The Massachusetts Hospital Association has been publicly scolding the state Blues since March for allegedly backing away from a commitment to share with hospitals the responsibility for financing a state uncompensated-care pool.
That's led to recent counterattacks by the Massachusetts Blues, saying the insurer doesn't deserve the rap for financial pressures on hospitals and on free-care funding.
The conflict revolves around a 10-year-old levy on the healthcare costs of patients and insured businesses, paid to the providers of healthcare services and forwarded to the state.
The levy was created during a period of state-regulated healthcare charges and was added to indemnity-insurance bills to assure care for indigent patients under the revenue restrictions of that system, said Andrew Dreyfus, an MHA spokesman.
But since healthcare's deregulation in the state in 1992, HMOs have become the dominant contracting player and have popularized negotiated rates in which payments to the pool are considered included, Dreyfus said.
The Massachusetts Blues, the state's largest insurer, with 30% of the market and operator of the second-largest HMO, continued to identify a portion of its total rates as payment to the uncompensated-care fund. But as part of a comprehensive contract restructuring this year, the Blues no longer specified a contribution.
That was the last straw for MHA officials and became "a catalyst for raising an issue that's been emerging over the last few years," Dreyfus said.
Despite pronouncements by HMOs and other insurers that pool payments are reflected in their total payments to providers, the MHA's position is that the increasingly deep discounts demanded by contract negotiators cannot account for uncompensated-care costs.
(r)ˆ»Hospitals are caught in a double squeeze, Dreyfus said. Because of discounted reimbursements, they have to foot much of the bill for the state pool. And though they get money back in payments from the pool, a rise in the state's uninsured population has outstripped the pool's capacity to cover free care, leaving hospitals with the difference.
The levy finances the state uncompensated-care pool to the tune of $350 million, which the MHA said is about $150 million short of covering the annual free-care load. The state's uninsured population is estimated at 700,000, an increase of about 100,000 during the past two years.
Now that Massachusetts' biggest insurer is writing pool payments out of its contracts, some hospitals may be faced with reducing services in order to meet the annual assessment, Dreyfus said.
But the Blues can't be faulted for trying to compete under the same terms as other healthcare insurers, said Joe Macrum, vice president of public affairs. The company has been stuck with "negotiated rates generally higher than our competition, in some cases significantly higher," he said.
In addition, old contracts still were not structured to emphasize outpatient care over inpatient care as demanded by the current market.
New contracts are switching to fee schedules for outpatient services instead of the previous discounts from charges, which amounts to reduced payments for many hospitals, Macrum said. Contracts also are being consolidated to include all Blues managed-care and indemnity plans instead of allowing for separate contracts.
Macrum said the Blues "took offense" with the MHA's implication "that we alone, singly and solely, were responsible" for threatening the viability of the uncompensated-care fund.
"We acknowledge that the system is not working the way it should." But the Blues' new method of contributing to the fund is the same as other HMOs and insurers, he said.
"We really don't disagree with the case they make," Dreyfus said. But he added, "We don't want HMOs to hide behind this issue of, `Well, we have to be competitive.'*"
Viability of the state's uncompensated-care program will take broad commitment, he said. "We want to know that HMOs are going to play a role."