Blue Cross and Blue Shield

Providers Are Irked by Transparency Data From Highmark, Texas Blues Plan

Reprinted from the July 2007 issue of The AIS Report on Blue Cross and Blue Shield Plans, a hard-hitting independent monthly newsletter on business strategies, products and markets, mergers and alliances, and financing of BC/BS plans.

Highmark, Inc. recently came under fire for the disparity of reimbursements for the same procedure at different regional hospitals as reported by Pennsylvania's Health Care Cost Containment Council (PHC4). It is not the first time a Blue Cross and Blue Shield plan has been criticized over published transparency information, but it might be the first time the outcry was spawned from state-issued cost information. One hospital system said the disparity in payments could affect its future negotiations with the health plan. And some other Blues plans, most recently Blue Cross and Blue Shield of Texas, have faced provider criticism, which forced the plans to change their transparency initiatives.

West Penn Allegheny Health System CEO Jerry Fedele calls the reimbursement disparity among western Pennsylvania hospitals "shocking." Highmark has between 55% and 60% of the regional market's membership, and Fedele, who just resigned, asserts that the report confirmed his suspicions that Highmark was paying other local hospitals more than his.

West Penn's main competitor, University of Pennsylvania Medical Center's (UPMC's) Presbyterian and Shadyside hospitals, received an average of $34,803 for coronary artery bypass surgery, according to PCH4 data. However, Allegheny General Hospital received an average of $23,715 for the same surgery, $10,000 less per event than UPMC hospitals. And Allegheny's sister hospital, West Penn Hospital in Bloomfield, received an average payment from commercial plans of $25,184 for the surgery.

Fedele says he has discussed the disparity with Highmark and maintains that the reimbursement inequality could affect the hospital system's June 2008 contract negotiations with the plan.

Highmark spokesperson Michael Weinstein responds that Highmark does not expect contract negotiations with West Penn next year to be affected by PCH4's report. "In advance of the expiration date, Highmark presented a fair and reasonable proposal reflecting payment increases and contract terms that are consistent with those at other comparable institutions," he contends.

"Highmark strives to provide fair and appropriate reimbursements to all hospitals for the medical care provided to its members," Weinstein tells The AIS Report. He says varying factors could account for the difference in reimbursement. "Academic medical centers that combine medical research, medical education and a clinical component are a unique provider category that may explain payment differences," he says.

In addition, Highmark's senior vice president of provider services, Sandra Tomlinson, disputes PCH4's results. She argues that the reported cost data do not reflect differences in the severity of illness of patients treated for cardiac surgeries. She also contends that the report may have included complex and high-cost heart cases, which could be treated only at advanced health care institutions, because they may require the use of "expensive heart-assisted devices." And she adds that there could be inconsistencies in how the data were reported by different health plans. The company says it has notified the council of its reservations about the report.

In light of PCH4's published information, Highmark also says it is accelerating its own transparency program. "In mid-July, Highmark will provide its members with information on the relative cost of hospital inpatient services using symbolic dollar indicators," the company says. Weinstein adds that the plan's Web site already allows "individual consumers to compare health care providers on objective measures: hospital mortality rates, hospital volume by procedure, hospital complication rates and physician surgical volumes," and also offers information on the average cost of procedures and tests.

Texas Blues Change Transparency Tool

Blue Cross and Blue Shield of Texas planned to offer public access to comparative provider cost and quality information in January 2007. But the plan delayed implementation of its Blue Compare tool until April 2007 to address concerns raised by the Texas Medical Association, spokesperson Margaret Jarvis tells AIS. She says providers were concerned that the Texas Blues plan's rating of "neutral" was too ambiguous. Jarvis contends that the designation was used when there was not enough information to rate a provider on certain services or he or she did not perform certain services. And she insists that the designation denoted only that the provider "didn't meet all the criteria" to be ranked with regard to certain measures of care. "Doctors did not see that to be neutral," she says.

The plan responded by removing the neutral distinction and adding a "mechanism for doctors to offer us feedback" on the rankings, she says. The Texas Blues plan now uses two distinctions, "outstanding" and "commendable," to recognize providers whose performance exceeds that of their peers, she says.

Don Liss, M.D. regional medical director for Aetna's mid-Atlantic region and member of the PHC4 council, says other states likely will require reporting similar to that of PHC4 "I think this has really sparked an interest" in such information, he says. He adds, "I think it could change the dynamics of how rates are established. It is definitely information that heretofore was not available to either [the insurer or hospital]," he says. "It will cause people to ask the tough questions; Why are you paid more or less? And to the extent that that dialogue is happening is nothing but good things," says Liss.

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