The price tussle between Minnesota's biggest health insurer and the No. 3 hospital clinic group might affect tens of thousands of patients.
In a little over a month, Fairview Health Services no longer will be part of the medical provider network for Blue Cross and Blue Shield of Minnesota unless they can resolve a standoff over prices.
The current contract expires Aug. 23. If a new one isn't signed, Blue Cross members then would have to pay out-of-network charges at Fairview clinics. The cut-off date for Fairview hospitals is later, Oct. 28.
After those dates, Blue Cross members who want to go to a Fairview clinic or hospital would have to pay significantly more or find another medical provider.
It's rare for contract negotiations to come down to the wire, and the stakes are particularly high because of the players involved. Blue Cross is Minnesota's biggest health insurer, with 2.9 million members. Fairview is the third-biggest hospital and clinic group and owns the University of Minnesota Medical Center.
The price tussle has percolated behind the scenes in recent months and is bursting into public view as both groups prepare letters to members and patients warning of the change. They've also put information on their websites.
Blue Shield said Fairview demanded prices out of whack with the rest of the market.
"We were just too far apart," said Jim Eppel, Blue Cross network management vice president. "The reimbursement Fairview wanted was significantly above the reimbursement we provide to any other provider."
Fairview said it sought the same prices paid by HealthPartners, Medica and PreferredOne.
"What we are asking of Blue Cross is completely consistent with what we are asking from other health plans," said Dr. Loie Lenarz, chief medical officer of Fairview. Lenarz declined to quantify the rate increases requested by Fairview.
The contract involves Blue Cross' Aware PPO (preferred provider) network, which includes every hospital in the state and more than 90 percent of physicians.
Aware PPO is the network used by almost all Blue Cross members, whether they're Medicare and Medicaid beneficiaries, in large group plans or members who buy individual coverage.
Any change to the network would be unsettling because Minnesotans long have expected to be able to go to any doctor they want.
With just a handful of dominant insurers and provider groups, Minnesota's health plan networks historically have been wider than elsewhere around the country.
Blue Cross estimates that 30,000 to 50,000 Blue Cross members went to a Fairview Clinic in the last 12 months; those people will be receiving letters in the next few days.
"We are confident we can transition care to other clinics and hospitals as smoothly and seamlessly as possible," Eppel said.
Another round of letters will go out before the Oct. 28 deadline to those who have used Fairview hospitals.
Minnesota spent almost $30 billion on medical care in 2005, the most recent numbers available from the Minnesota Department of Health.
While drug-cost increases have moderated in recent years as more people switch to generics, hospital outpatient and inpatient expenses have continued to soar.
Looking at just the privately insured market (minus large employers who are self-insured), the cost of inpatient care was up by 11 percent between 2004 and 2006 while the cost of physician care rose at the same rate. In contrast, drug costs fell 0.2 percent.
Those in the industry say that's increased the pressure at contract negotiations between insurers and providers. Earlier this year, Blue Cross broke briefly with Grand Itasca Clinic and Hospital in Grand Rapids, Minn., after contract talks failed. Grand Itasca was reinstated in Blue Cross' network in the spring.
"First of all, there's more dollars on the table," said Rob Longendyke, vice president of marketing for Medica. "[Cost] has become such a big issue that there's very little tolerance on every side. The opportunity for common ground has gotten narrower and narrower."
However, Longendyke said Medica's negotiations with Fairview went well. They signed a contract this week.
Mark Bilderback, lead health care benefits consultant for Watson Wyatt in the Twin Cities, said he has talked with clients about the Blue Cross/Fairview standoff and the response has been "frustration."
"So many people would be affected by this," Bilderback said.
"However, if you look at other big cities, there are plans that don't have big hospital groups in them."
Chen May Yee • 612 - 673-7434