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Grand Itasca hopes fade for agreement with Blue Cross
by Beth Bily
GRAND RAPIDS— Grand Itasca Clinic & Hospital is attempting to take its very public negotiations with the state’s largest insurer to the level of a full court press.
In a letter sent to patients dated July 9, Chief Medical Officer Tim Pehl, MD, and Chief of Medical Affairs Deb Nyquist, MD, asserted to Blue Cross Blue Shield of Minnesota policy holders: “If we reach the end of July without having made any substantive progress, it's unlikely we will have a contract at all.”
That letter was followed in many cases by a telephone call from Grand Itasca that attempted to enlist help from members of the community in the campaign to negotiate a better deal for the clinic and hospital from Blue Cross. Patients were asked to write or call Blue Cross in support of Grand Itasca.
Grand Itasca CEO Dan McCormick said the intent behind the letter and telephone follow-up was to let Blue Cross policy holders know the status of negotiations prior to the upcoming open enrollment period in the fall. That’s when those who have other insurance options available can elect to switch to another insurer, and prior to when employers review their health plan options for 2008. The communication was designed to inform patients of the issues, gauge community support for Grand Itasca, and finally, encourage letter writing and/or phone calls to Blue Cross, he said. Grand Itasca also has notified employers and insurance brokers of the situation.
The two sides have squared off in difficult contract renewal negotiations over the past nine months. Healthcare providers and insurance companies routinely negotiate contract agreements for mutual benefits: rate discounts for the insurer and predictible patient volume for the provider. Grand Itasca issued a letter of intent to terminate its status as a Blue Cross “in-network” provider on Feb. 16. The contract has been extended to the end of this year to allow more time for negotiations.
Clinic and hospital officials assert its Blue Cross contract doesn’t provide adequate and fair payments — as much as a 25 to 30 percent lower for some services — as other big insurance companies pay, including HealthPartners, Medica and Preferred One.
Blue Cross maintains it provides Grand Itasca with the same or higher reimbursements than it pays in similar markets and in the region.
Each side has dug in. The stakes are high for Blue Cross, and huge for Grand Itasca.
Nyquist said accepting the current Blue Cross offer would significantly impact service delivery. It would slow Grand Itasca's planned transition to an electronic medical records system, an initiative with an estimated cost of $3 million to $4 million, she said.
The Blue Cross proposal also would inhibit the health system's ability to attract physicians and other healthcare professionals. McCormick said accepting the Blue Cross contract terms would force a 5 percent reduction in the health system's workforce.
“Their discount is bigger than for the other payers,” said Nyquist. “It’s intimately connected with the healthcare services we provide.”
Michael Morrow, Blue Cross senior vice president of business development and network management, categorically denies that. “There are five big hospitals in the Arrowhead region. Blue Cross pays 10 percent more to Grand Itasca than all but one.”
With their current positions, the two organizations are about $1 million apart in projected annual revenues. Blue Cross accounts for about 25 of 30 percent of total revenues at Grand Itasca, which generated about $62 million in 2006. Blue Cross provides about 90 percent of its employer group business.
Each also claims the other is shutting it out.
In the July 9 letter, Grand Itasca executives said Blue Cross hadn’t responded to an offer made more than a month earlier. “After months of working on a new contract, it now appears that Blue Cross may be more interested in maintaining the current payment structure than reaching a new agreement,” it states.
Blue Cross counters Grand Itasca executives orally rejected its offer on July 9 to take the disagreement to a professional mediator.
“I don’t see why they don’t want to go the extra mile and go to mediation to try to work this out,” said Morrow. “We think it is the right thing to do for the community.”
For about 12,000 Grand Itasca patients covered through Blue Cross, a failed negotiation would result in higher out of pocket expenses for those continuing to utilize the provider system. Patients would have the option of choosing another healthcare system Blue Cross has designated as an “in-network” provider.
Area employers have mixed reactions over what an impasse might mean to their organization and employees, other than it appears both Grand Itasca and Blue Cross would suffer financially.
With about 600 employees, Grand Itasca itself is Grand Rapids’ largest employer. Failed negotiations is certain to hurt Blue Cross, currently Grand Itasca’s sole insurer for its employees.
“We're covered by Blue Cross, too,” said McCormick, adding “we will not be part of plan that does not include us as part of the network."
McCormick asserts Blue Cross would lose about 1,500 to 2,000 covered lives including employees’ family dependents.
Grand Itasca would shop for another insurer if contract negotiations fail.
Some other large area employers have no immediate plans to make a switch.
UPM-Blandin self-insures its 500 employees but has a long-standing third party administrator relationship with Blue Cross. That relationship will continue, regardless of the network status of Grand Itasca, said Joe Maher, senior vice president and general manager at the paper mill. Maher also is a Grand Itasca board director and member of its finance committee.
“We’re self-insured and we contract with Blue Cross to administer clams processing and then we get access to their network,” said Maher. “We’ve got union contracts, we can’t make (insurance) changes without opening the union contracts.”
Itasca County also offers Blue Cross-only options to its 400 employees.
Robert Olson, Itasca County coordinator, there has been no discussion about changing providers so far. The county is a member of Arrowhead ProCare Pool, a consortium of 21 political subdivisions managed through a joint powers agreement that negotiates insurance agreements.
“The county can’t switch unless the pool switches,” said Olson.
Some area employees offering Blue Cross coverage, however, will have other options.
Itasca Community College and its 100 employees are part of the Minnesota State Colleges and Universities (MnSCU) system. MnSCU and other state agencies offer employees more than one insurance option, and ICC and other state employees can switch plans during the next open enrollment period, said Provost Michael Johnson.
As employees begin to sort out alternative insurance options, the negotiation process has another five months to reach a resolution. Meanwhile, Grand Itasca and Blue Cross exectives offer decidedly different views on the likely outcome.
“If we haven't made progress after nine months, it’s unlikely we will,” said McCormick, adding Grand Itasca sent its best and last offer to Blue Cross in mid-July.
“I think there’s plenty of time to come to an agreement,” said Morrow.
Beth Bily is a freelance writer based out of southern Itasca County.
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