It was reported the week that the U.S. Justice Department and Michigan Attorney General Mike Cox has filed an antitrust lawsuit against Blue Cross and Blue Shield of Michigan alleging the insurer's contracting methods with hospitals are creating higher prices and fewer choices for health coverage in Michigan. It is interesting to note that the Blues' policies cover about 60% of the commercially insured population in the state, a portion that reflects about nine times as many residents as are covered by the next largest competitor. The lawsuit states that it contracts with 22 hospitals, representing 45% of the state's tertiary beds, hospitals and are required to charge as much as 40% more than the rates negotiated with the Blues.
Most likely we will see more of these lawsuits filed throughout the United States. There is tremendous pressure with each to allow greater competition, especially when staring at the insurance exchanges that will be coming in the near future. How this will help control the cost of healthcare is clear … it won’t. If you removed most favored nations clauses it will allow the provider groups to raise their prices, in this case, for Blue Cross Blue Shield members. Logic would say provider prices would come down since they wouldn’t have to cost shift to other payers to make up the difference for losses sustained with the Blue’s contracts. Do you think the providers are going to reduce their rates? Most likely not. The favored nation clauses will go away and prices will increase for the Blue’s members. Those in the non Blue’s program will still see higher prices and not much will change.
Trying to develop contracts based on patient volume and patient mix will no longer work in today’s environment. We must get to a rational payment system that is based on “cost up” approach that looks at benchmarking like facilities with full transparency. The providers need to make money. The employers need to control the rising cost of care. The employees can only afford so much out-of-pocket charges. These three competing dynamics can only be solved with a different approach. The past approach is not working and we continue to put lipstick on the pig in hopes that it will get better.