Expert: Children’s, Blue Cross both under pressure

MINNEAPOLIS — Both Children’s Hospitals and Blue Cross Blue Shield of Minnesota have strong incentives to settle their contract dispute and agree on a set of reimbursement rates both can live with, according to a leading expert on health markets.

“Both sides have incentives to settle, and both sides have incentives to try negotiate the best bargain they can get,” Allan Baumgarten told KARE.

“And both of them apparently made a calculation that waiting it out a few more weeks, or even months, is their best interest.”

Baumgarten spoke Wednesday, the day Children’s officially became an out-of-network provider for Blue Cross customers after the current contract ended between the two sides without an agreement on a new one.

He noted that Blue Cross customers are a large percentage of patients at Children’s Hospitals and Clinics, and that Blue Cross is under pressure by the State because the insurer has a state contract to provide coverage for Medicaid clients.

“I think the two of them will still come together at some point. The bottom line is they both need each other very much,” Baumgarten remarked.

According the Minn. Dept. of Human Services 340,000 Medicaid patients are enrolled in the Blue Cross Blue Plus HMO.  Over half of them — 183,000 as of July 2017 — are children.

Minnesota insurers have had mixed results handling Medicaid patients, at times losing money on those programs but at other times making a profit.

“Blue Cross decided to stay in that line of businesses, and presumably they think they can turn this around, and part of their strategy is to negotiate better prices from their major providers,” Baumgarten explained.

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But most health providers, including Children’s loses money treating Medicaid patients and tries to offset those losses by negotiating better reimbursement rates on commercial plans and HMOs.

“Some have apparently agreed to those prices. Children’s is saying for our specialized, high quality care, we can’t accept a price like that because we can deliver care of that quality for that amount of money.”

Blue Cross may also feel the heat from large group plans.

“The Children’s Hospitals have something of a must-have status that a lot of employers have employees who say our plan has to include access to the Children’s Hospital, because if it doesn’t because they have children with very special medical needs and they’ve been seeing doctors at Children’s for many years.”

Blue Cross ran a full page ad in the Minneapolis Star Tribune and other newspapers Wednesday informing customers that Children’s is no long an in-network provider, but listing other hospitals that still are.

Baumgarten and other experts have said those other providers combined lack the capacity to absorb all the Blue Cross patients currently in the Children’s system.

The higher out-of-network costs won’t have an immediate affect on the state government employee group plan, because that contract calls for all providers that are in-network at the beginning of the calendar year to remain so throughout the year. 

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