Insurer pressures providers to drop fee-for-service model

The CEO of Massachusetts' largest health insurer is pressuring hospitals and doctors to shrink healthcare costs. Andrew Dreyfus, CEO of Blue Cross Blue Shield of Massachusetts, has said that providers that cling to traditional fee-for-service contracts could face lower payments from his company, the Boston Globe reports.

In a letter sent last week to 400 leaders of hospitals and physician practices, Dreyfus urged moving to a global payment plan, which would put providers on an annual budget and give them incentives to cut costs and improve care. It would be a significant departure from being paid based on volume, whether of doctors visits or procedures.

"Fee-for-service payment rates cannot continue to rise if we are to meet the community's goal of affordable care,'' he wrote. "Ultimately, we must continue our work to identify ways to reduce the level of payments."

Hospital officials see the letter as a wake-up call. "What Blue Cross is basically saying is it's not going to be about [market power] any more," said Ken Hanover, chief executive of Northeast Hospital Corp., which owns Beverly Hospital and Addison Gilbert Hospital in Gloucester. "It's going to be about quality and managing the cost of care."

To learn more:
- read the Boston Globe article
- read the UPI article