A report that Blue Cross and Blue Shield of Michigan gave Lansing's largest hospital a financial sweetener drew a sharp reaction last week from the hospital's primary competitor, which suggested the arrangement was anti-competitive.
"We're being slammed," said Dennis Litos, president and chief executive officer of Michigan Capital Medical Center.
From 1994 through 1996, the Blues paid Sparrow Hospital in Lansing an extra $600 for every patient admitted from its Blue Care Network HMO, the Detroit Free Press reported last week.
To pay for it, the insurer inflated premiums of non-HMO policyholders by at least $25 million, according to the paper. The side agreement was discovered when the insurer's three largest Lansing-area customers-General Motors Corp., Michigan State University and the state of Michigan-compared their data and learned Sparrow was receiving almost 25% more for hospital admissions from Blue Care Network than Michigan Capital.
The Detroit-based Blues, which controls 45% of Michigan's insurance market, agreed to end the deal and give rebates on future premiums to those customers.
Blue Care Network is Lansing's No. 2 HMO behind Sparrow's Physicians Health Plan. Together, Physicians Health and the Blues control about 75% of the local insurance market, Litos said.
Blues spokesman Rude DiFazio said Sparrow deserved higher payments because it's preferred by many Lansing consumers.
A Sparrow spokesman said the payments were meant to help Sparrow meet its costs, which have since dropped.
Sparrow has agreed to merge with St. Lawrence Hospital in Lansing, which would give it about two-thirds of the inpatient services market. That deal is expected to be completed this year pending state and federal antitrust approval.