Although most Blues plans seek change, many struggle with "old cliques, rivalries and the drag of bureaucracy," said Walter McNerney, president and chief executive officer of the Blue Cross and Blue Shield Association from 1977 to 1981, in a speech last November.
"There's no magic bullet" to becoming more agile-whether it's by merging or going for-profit-added Tom Prchal, a partner at Andersen Consulting's health management practice. Whichever structure they choose, plans have to find ways to get new products to the market fast, he said.
One way Blues plans are going to market is through consortia, which link individual plans into larger "virtual" companies. Prchal believes it's these linkages that will form the healthcare plans of the future.
The largest consortium is HMO-USA, a national HMO network comprising 82 HMOs owned by 59 of the nation's 62 Blues plans.
HMO-USA serves 200 national accounts. Formed in 1983, it's been criticized as dormant. But last year, the network picked up 65 new national companies, an 81% increase in new accounts from 1994.
The jump came in part because HMO-USA lowered its minimum account size from 1,000 employees to 250 and because the group beefed up its sales effort, said Judy Wilson, the Blues association's vice president for managed-care services.
The network also improved its information system capabilities, allowing one-third of the plan's HMOs to be linked for electronic transfer of enrollee records and billing information. The remaining plans will be hooked up this year.
Andersen's Prchal said Blues plans have a higher likelihood of working together once they understand the common enemy is competition from consolidation among rival HMOs.
While the Blues network is accessible to 90% of the U.S. population, the challenge is to offer national employers a common benefits package for their workers no matter where they're located, Wilson said.
"That's really difficult, though it sounds so simple," she said. The problem, ironically, stems from each plan's strength: deep roots in the community. "But the more a product is based on the norms of the community, the harder it is to get national uniformity."
By November, Wilson said she hopes HMOs in the network will have taken what she calls a giant step and agreed on a national product. "Whether all 82 will agree is another story," she said.
Meanwhile, nine Blues plans are participating in the National Accounts Consortium, an alliance formed in 1995. Six more are expected to join in the next three months, a Blues spokesman said.
The consortium helps the Blues plans market to national employers through a standardized proposal system. It also has established a nationwide set of medical guidelines, forming the basis of consistent claims-payment decisions from state to state.
Besides aligning with other Blues, plans have been forging alliances with providers in integrated delivery systems. These relationships, which give each party a stake in the venture, soften the inevitable friction caused by the plans' need to squeeze provider costs.
Blue Cross and Blue Shield of Georgia's Community Health Partnership Networks are a prime example. The Blues planned their first integrated systems in Atlanta, Columbus and Savannah in 1993. Among other things, the need for capital to improve the networks' information systems convinced the plan to convert to for-profit-status, said Neil Vannoy, the Georgia Blues executive vice president for community operations.
Healthcare Partners of Southeast Georgia in Savannah, an HMO serving 12,400 enrollees, is one such partnership that is serving as a model for the state, said Paul P. Hinchey, CEO and president of 305-bed St. Joseph's Hospital in Savannah.
Healthcare Partners is co-owned by the hospital, two independent practice associations comprising 145 physicians, and the Georgia Blues, Hinchey said. A business coalition is represented on the board in an advisory role, and employers are responsible for conducting outcomes studies of the HMO's performance, Hinchey said.
Although the relationship among all the parties has been "bumpy," the partnership has made great strides in overcoming historical mistrust between the players and getting infrastructure in place, Hinchey said. Since information systems are critical to the success of the partnership, Hinchey views the Georgia Blues for-profit conversion as a positive step. The plan "will have access to capital in the equity market to facilitate funding this concept," he said.
"I would not want to go back to the traditional model" of providers simply contracting with an insurer to provide services, he said. In the old model, each player focused on maximizing its individual income, which he said is "strictly price-driven . . . . You ratchet down the prices as low as you can get."
In the partnership, all players' incentives are aligned toward providing the best care to enrollees, he said. "The hospital is doing very well under this model," Hinchey added. It's now paid on a per-diem basis, but it's moving toward capitation. Primary physicians in the partnership are capitated, he said.
Outside the integrated delivery systems, most healthcare in the state has been "a cottage industry," Vannoy said, with "tremendous lack of coordination" of services and duplication of resources.
For its partnerships, the Blues sought providers who shared the vision of best value based on price and quality. Each partnership, which serves a defined population, is based on a negotiated global budget. Increasingly, providers are being paid through capitation, Vannoy said.
The Georgia plan is setting up three more community partnerships, Vannoy said.
In another affiliation, Blue Shield of Idaho; King County (Wash.) Medical Blue Shield; Blue Cross and Blue Shield of Oregon; Pierce County (Wash.) Medical Bureau; and Blue Cross and Blue Shield of Utah formed a freestanding company, called the Benchmark Group, with its own corporate structure. In May, the group launched a regional managed-care program.
Other alliances proliferate, some that aren't regionally oriented: For instance, Blue Cross and Blue Shield of Minnesota earlier this year said it was expanding its business alliance with the Maine Blue Cross and Blue Shield plan. The deal with the Maine plan, considered the highest-rated claims administrator within the Blues system, is expected to cut the Minnesota plan's claims costs by 20%.
Meanwhile, New York's five Blues plans are gearing up to offer statewide managed-care products-including an HMO-with a single premium bill to medium and large groups.
Plans in Massachusetts and New Hampshire have established a jointly owned regional managed-care company that will span state borders. Along with four other plans, they have created the New England Managed Care Initiative to serve employers in multiple states.
Plans also have come together to offer specialty-care networks, including services for pediatric cancer, rehabilitation and organ transplants.
And through a partnership with Kaiser Permanente, the national Blues association's technology assessment program is evaluating emerging healthcare technologies. Findings are provided to Blues plans and other paying customers, including non-Blues managed-care companies.
Meanwhile, observers question whether Blues alliances that span state lines will wind up competing against other Blues plans that go public, like New York's Empire, or that move into new territories, like Indianapolis-based Anthem, which is merging with Blue Cross and Blue Shield of Connecticut.