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Fairview Could Leave Blue Cross Network Over Price Tussle

Tens of Thousands of Patients Potentially Affected

In a little over a month current Fairview Blue Cross/Blue Shield contract expires.

Executive Summary

Fairview seeks rate increase from Blue Cross. (BC)

BC: "We are confident we can transition care to other clinics and hospitals as smoothly and seamlessly as possible,"

Fairview owns University of Minnesota Medical Center.

--> The U of M Medical Center may lose some patients if this can't be worked out.

The battle over health care revenue continues between insurance companies and health care providers. Providers continue to be squeezed and try to increase revenue but insurance companies can divert patients elsewhere if providers demand higher rates.

Surplus capacity, e.g. children's hospital facilities, put suppliers in a bad bargaining position.

The Strib reports on a classic example of this chess match. It has implications for the cash cow that University administrators would like Fairview University Medical Center to be.

From the Star-Tribune:

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."

"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.

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.

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."

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