Blues, Beaumont dispute contract rates, risk value-based care

Blue Cross Blue Shield of Michigan's attempt to lower costs by incentivizing quality is hitting a roadblock as contract negotiations with Beaumont Health System continue to break down.

The outcome of this dispute could impact other contracts because Blue Cross plans to negotiate similar deals during the next two years with most of Michigan's 144 hospitals and health systems, reports Crain's Detroit Business. The Blue Cross-Beaumont contract expires at the end of the year.

The bigger picture that Blue Cross is trying to focus on is cutting future medical costs by, for example, getting hospitals and doctors to practice proactive medicine instead of reactive medicine. That's why the insurance company proposed value-based incentives that could add millions of dollars in reimbursement and also achieve better outcomes, according to the Daily Tribune.

"We have simple goals. We are asking hospitals to collaborate with others in the care process. Our approach is to move toward population management to improve quality and lower costs," said Tom Simmer, Blue Cross chief medical officer.

Blue Cross already provides Beaumont incentives for in-hospital treatment outcomes; now it wants to offer incentives when the hospital decreases costs overall through methods such as controlling treatments and medicines doctors prescribe, regardless of whether they are Beaumont employees.

However, Beaumont wants to negotiate an overall price increase before discussing the new Blue Cross incentive plan. The hospital system wants a 6 percent increase for 2012 and 1.5 percent increases each year in 2013 and 2014, claiming that Blue Cross pays Beaumont 20 percent less than other hospitals in the Detroit area.

Blue Cross countered with less than a 5 percent increase next year and zero percent increases in 2013 and 2014. Andy Hetzel, Blue Cross' director of corporate communications, said Beaumont's price increase requests are on top of a base pay increase of 2.6 per year that all Michigan hospitals receive as part of a larger contract. Plus, Beaumont already earns a 15 percent profit margin on Blue Cross business, so the hospital system could earn a 30 percent profit margin if it gets its requested increase, he said.

To learn more:
- read the Crain's Detroit Business article
- see the Daily Tribune article