Hospital calls foul on BCBS decision
By Matthew Whittle
Published in News on September 10, 2013 1:46 PM
That was how Wayne Memorial Hospital President Bill Paugh summed up Blue Cross and Blue Shield of North Carolina's public announcement Thursday that it would cut ties with the hospital.
"I really find it offensive that Blue Cross and Blue Shield would come in and disrupt the negotiations we were having about a new contract ... sharing half-truths," Paugh said. "There's been debate across the state about these kinds of methods used by Blue Cross."
In the announcement, the insurance provider said negotiations for a new contract with the hospital had failed after more than a year of efforts.
However, hospital officials said, they had an offer on the table to Blue Cross when they receive a voicemail and then a letter from the insurance company ending the negotiations.
The reasons, Blue Cross said in its announcement, were the desire of the hospital to unilaterally raise rates, an increase in costs for outpatient services and tests and the fact that WMH only meets the company's Tier 2 quality standards.
But, hospital officials countered, each one of those charges is misleading, if not outright false.
"It's the half-truths that bother me," Paugh said, adding that at the top of the list is the implication that WMH's quality of care is lower than surrounding hospitals.
When Blue Cross determines its tier rankings, it begins with data from the federal Centers for Medicare and Medicaid Services, but then uses its own formula to determine what hospitals fall into which tiers, he said.
However, according to hospital comparison data from CMS, Wayne Memorial scores within a few points of the state average -- some above, some below -- in most areas of both patient satisfaction and timeliness and effectiveness of care surveys.
"They use CMS as a seed of legitimacy," Paugh said. "Blue Cross then takes that and has a proprietary algorithm for efficiency and whatever else. It's interesting the results they come up with."
In fact, he pointed out, according to Blue Cross, other Tier 2 hospitals include Duke, WakeMed, Rex, Johnston, Sampson, Lenoir and Vidant Duplin. Nearby Tier 1 hospitals are Wilson and Vidant Greenville.
"I don't know who Blue Cross has the best deals with, but I'd say their tiers are heavily influenced by that," Paugh said.
In terms of costs, hospital officials acknowledged that there are some that are higher than surrounding hospitals -- some even significantly. But they said, when they realize those costs are too far out of line, they often work to bring them closer to the median level.
Furthermore, they said, because Wayne Memorial went through a period in the late 1990s when rates didn't increase at all, many are actually below those of surrounding hospitals.
According to the North Carolina Hospital Association, for fiscal year 2012, of the top 35 most common categories of diagnosis/procedure -- joint replacement, renal failure, heart failure, birth, etc. -- WMH averages the lowest charges in all but three.
According to CMS, of the 18 of 30 selected outpatient procedures that WMH performs, the hospital charges above the state average in 11 categories -- putting it 3 percent higher overall than the state average. However, while that's more than Johnston Memorial and Wilson Medical Center, it's less than Vidant Medical Center in Greenville, WakeMed Cary and WakeMed Raleigh.
The point is, Paugh said, they do not feel Wayne Memorial's costs are out of line with others in the state, and that Blue Cross is simply "cherry picking" which costs it is highlighting to the public.
The real issue, he said, is that Blue Cross is seeking to do exactly what it charges Wayne Memorial of doing -- unilaterally deciding how much should be paid for each procedure, just like Medicare.
In fact, he explained, the hospital is contractually obligated to notify Blue Cross whenever it is making rate changes, giving it 30 days to respond.
"And in the 13 years I've been here, they've never done that," Paugh said. "They want that unilateral ability."
But, he said, for the hospital to give Blue Cross that ability would not be in its or the community's best interests.
"No businessman would enter into a contract that gives the other side the ability to make unilateral changes," he said, acknowledging, though, that if Blue Cross does cut WMH out of its network, it will hurt the hospital's bottom line.
About 10 percent of the claims filed at the hospital are with Blue Cross, with another 5 percent involving plans in which Blue Cross is the third-party administrator.
But as to exactly how much the hospital could be impacted, Paugh says they don't know yet as they have not reached the point of running those numbers.
Furthermore, Paugh said, local employers with Blue Cross and those with plans administered by it could try to influence the company's decision or find other providers -- unless they want employees having to travel out of the area for care.
Still, while he is hopeful that an agreement can be reached by Dec. 5, he voiced displeasure with Blue Cross' decision to go public.
"This is a well-known tactic for them," Paugh said. "They come in and try to get the community agitated to drive a better deal for them, and that troubles me.
"We're trying to be the best community hospital that we can be. We've enjoyed a positive relationship with Blue Cross, and we have been trying to negotiate in good faith to make sure that doesn't end. We're not trying to pick a fight, but it'll take two sides to resolve this."
If it cannot be resolved, Blue Cross has told its customers that it will, for a time, honor in-network rates for those who have already made arrangements for care, such as pregnancy and chronic illness, as well as for visits to the emergency department. For others, Blue Cross will pay the out-of-network rate directly to the customer, leaving it up to WMH to collect any further bills.
Surrounding hospitals that will be in network after Dec. 5 are Lenoir Memorial, Wilson Medical Center, Johnston Memorial, Duplin General and Vidant Medical Center.