The Dallas area has some of the nation’s highest health care spending, and the state’s largest insurer, Blue Cross Blue Shield of Texas, has been pushing back.
Among other things, it’s calling for more “value-based” care that rewards providers for keeping people healthy, rather than for providing more services. So it wants to steer more patients to providers with a record of low-cost, high-quality treatment.
But Blue Cross faces resistance from some hospital systems and doctors groups, and several contract fights have erupted in recent years. In March, Blue Cross had to warn local members to look for other in-network providers, although it eventually reached an agreement — as happens in most cases.
Surprisingly, the conflict wasn’t over reimbursement rates, said Dr. Paul Hain, president of the insurer's North Texas market.
"You know what it was actually about?" Hain said at an industry forum last week. "It was a single paragraph they wanted in the contract" to prevent Blue Cross from steering patients to lower-cost providers.
Under those terms, the hospital system could have imposed higher charges for all members of the health plan “every time someone walks in the door,” Hain said.
"Blue Cross has drawn a big, bright line in the sand and said, 'We will never sign that contract,' " Hain told about 500 people at the annual forum for the Dallas-Fort Worth Business Group on Health.
The business group includes many large employers that together provide health coverage for about 800,000 workers and their dependents. Hain was speaking to those companies and others, urging them to back their insurer.
For the majority of its members, Blue Cross provides administrative services for self-insured employers. It negotiates with providers and handles other duties, and uses employer money to pay employee claims, he said.
His advice, which he said could not be emphasized enough: “Stand with your carrier during negotiations.”
“If you cut and run, you’re essentially saying, ‘I don’t care how much hospitals and doctors raise prices. My budget is gonna take it,’ ” Hain said. “I don’t think anybody has that luxury anymore.”
Hain did not name names, but he appeared to be referring to Texas Health Resources, a large not-for-profit health system that had a contract stalemate with Blue Cross in March and in late 2016. Both times, the contracts were settled as the deadline approached.
For many years, health care costs have been growing faster than inflation. For a family of four with a PPO through an employer, the annual price tag topped $28,000 this year, up $10,000 since 2010, according to the Milliman Medical Index.
Employers have responded, in part, by shifting more of the expense to workers with higher premiums, deductibles and copayments. This year, companies still paid over half the costs of health care for workers, but the employee share has grown faster.
In 2015, D-FW ranked at the top of a select list of metros in per capita spending on health and was about $1,000 higher than the national average, according to the Health Care Cost Institute.
This is probably a reflection of both high prices and high utilization, said Amanda Frost, senior researcher at the nonprofit institute. In D-FW, prices for medical treatment are higher than the national average, she said, and a lot of people have chronic conditions such as diabetes.
Hain attributes the higher costs to consolidation in hospital systems and doctors groups. As those providers grow larger, they have more leverage with insurers. That not only helps negotiate higher payments. Some insist on all-or-none contracts that require a health plan to include all their providers in the top-tier network. They also may penalize employers that steer patients to lower-cost options.
“This is happening all around the country,” Hain told the audience last week.
Indeed, last month the Justice Department agreed to settle an antitrust lawsuit with the dominant hospital system in Charlotte, N.C.
Atrium Health, formerly known as Carolinas HealthCare, “used its market power to restrict health insurers from encouraging consumers to choose health care providers that offer better overall value,” the government said.
That “interfered with the competitive process, resulting in fewer choices and higher costs for consumers,” said Assistant Attorney General Makan Delrahim.
The proposed settlement would prevent Atrium from stopping such patient-steering in the future.
In September, The Wall Street Journal identified dozens of contracts with terms that limit how insurers can design their health plans. Those contracts helped prevent employers from adopting new ways to lower costs, the Journal reported.
The movement toward value-based care, in which providers take on some financial risk, has shown promise in lowering costs, especially among patients with high claims. In an industry op-ed, Hain and co-authors wrote that medical partnerships had improved outcomes and lowered costs.
In some cases, the savings per member reached $45,000, driven by decreases in hospital admissions, emergency room visits and expensive medications.
Quality care is not correlated to cost or reputation, Hain said. And many employers could send members to lower-cost providers that measure up on quality.
It won’t be easy, but what’s the option?
“If you’re not getting ready for some pretty ugly fights with large health care systems, then you’re saying to me, ‘My company makes too much money and I want to spend it on health care,’ ” Hain told the crowd.
