At least one Blues plan has tried to run its own hospitals in the past but with little success. Blue Cross and Blue Shield of Minnesota hopes that history doesn't repeat itself.
The Minnesota plan is part owner of the new 74-bed Innovis Health that opened in Fargo, N.D., on Nov. 1. The other owner of the new $90 million acute-care facility is the Dakota Clinic, a 175-member multispecialty group practice. The hospital is the first-ever Blues-owned hospital built from the ground up.
MODERN HEALTHCARE recently chronicled how a dispute between the clinic and another hospital in Fargo dovetailed with the Blues plan's desire to pay what it considered more reasonable prices for healthcare services. The result was the opening of Innovis (Oct. 30, p. 34).
Whether the unusual project ultimately makes both owners happy remains to be seen, but several attempts by a Blues plan in Ohio at owning its own hospitals resulted in nothing but frowns.
In late 1993 and 1994, the former Blue Cross and Blue Shield of Ohio went on an integration spree, pairing with six hospitals across the state in a variety of ownership models. But by 1997, all of the partnerships had dissolved, and the Cleveland-based insurer had been stripped of its Blues licenses and renamed Medical Mutual of Ohio.
"We're talking about 1993-1994, when the popular concept was integrated medical systems, getting the doctors, the hospitals and the insurance companies on the same page at the same time," said Richard McCann, who led a joint venture between the Ohio Blues and Meridia Health System, a four-hospital system in suburban Cleveland. "Subsequently, it was not as popular."
McCann was president and chief executive officer of Meridia when he moved to head the joint venture with Ohio Blues. The new organization, known as Northeast Ohio Community Health Plan, was designed to run the hospitals and offer Blues managed- care products in the Cleveland area, but the two sides couldn't agree on how to structure the hospital management arrangements, McCann said.
"The problem of getting insurers together with providers is you naturally run into conflicts as to how the money is going to be spent and what the reimbursements are going to be," said McCann, who now works as a consultant to physician practices and health-related Internet businesses. "I don't think you're seeing a lot of the insurance-hospital-physician relationships succeed."
In the case of Ohio Blues, the relationships were complicated by its jaw-dropping announcement in March 1996 that it had agreed to sell the plan's assets to Nashville-based HCA-The Healthcare Co., known then as Columbia/HCA Healthcare Corp. The national Blue Cross and Blue Shield Association revoked the Ohio Blues' licenses in September 1996 because of the planned asset sale to HCA, which state insurance regulators later blocked.
The Ohio Blues formed its ill-fated venture with Meridia, the Northeast Ohio Community Health Plan, in July 1994. The Meridia-Blues partnership fell apart in late February 1997.
Meridia directly pinned the breakup on the proposed Blues-HCA deal, saying the hospital system didn't want to give up its not-for-profit status. Ohio Blues said Meridia wanted to limit the providers available to the venture's managed-care clients to the Meridia system, while the insurer wanted policyholders to have more choices.
The Ohio Blues inked their first provider deal through a joint venture with Riverside Hospital, a 162-bed not-for-profit hospital in Toledo. It fell apart in 1997. Its third deal was an affiliation with 474-bed Saint Luke's Medical Center in Cleveland in 1994. It ended in 1996.
The partners in Fargo's Innovis, Dakota Clinic and Minnesota Blues deal had to work hard to overcome the inherent conflicts between physicians and insurers, said Greg Hart, a consultant on the project and principal in charge of the healthcare group at Larson, Allen, Weishair & Co. in Minneapolis.
"You're starting with two organizations that have different missions that are migrating to a common point," Hart said. "A physician practice has a mission to take care of patients, but provider systems are migrating to assuming risk for a population."
Observers of health plans and physician practices said the relationships between the two are cyclical.
Starting with Kaiser Permanente's formation in the 1930s, business partnerships between health plans and physicians were not common, but they weren't unheard of either, said William Jessee, M.D., president and CEO of the Medical Group Management Association in Englewood, Colo. Those partnerships were cozy until healthcare costs began to spiral upward in the 1980s, and health plans reacted by pushing a managed-care model based on contracts and confrontation, Jessee said.
Charles Cutler, M.D., the chief medical officer for the American Association of Health Plans, agreed that cost-cutting put health plans "in conflict with providers," but Cutler said the tide has changed. "I think everyone understands that in order to make significant improvements in healthcare, we all have to work together as much as possible."