12 April 2011
Midwest Edition
Calendar
April 26-28
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E-Mail
info@payersandproviders.com with
the details of your event, or call
(877) 248-2360, ext. 3. It will be
published in the Calendar section,
space permitting.
Blues Probe Expands Into Midwest
Michigan Case On “Most-Favored” Contracting
The Department of Justice has expanded its
investigation into the contracting practices of
Blue Cross and Blue Shield plans, looking at
whether their terms for dominant provider
networks effectively shut down
competition from other
insurance companies.
The Wall Street Journal
reported that Blues plans in
Missouri, Kansas, Ohio, West
Virginia, North Carolina, South
Carolina, and the District of
Columbia have received civil
subpoenas. The investigation
focuses on contracts that feature
“most-favored-nation” clauses,
or MFN, by which dominant
payers obligate providers to give
preferential rates for medical
services. Other insurers with
less market share would
presumably have to pay more for Richard D. Raskin
the same thing. Sidley Austin LLP
MFN clauses may be
considered anticompetitive if they
prohibit fair price competition, and can be
regulated under antitrust laws.
Meanwhile, the government’s case against
Blue Cross Blue Shield of Michigan, led Oct.
18, will come under scrutiny in a court
hearing next week. The Department of Justice
and the state attorney general alleged that the
Blues plan required 70 Michigan hospitals to
guarantee it favorable pricing over competitors
using MFN contracts.
In December the Michigan Blues led a
motion to dismiss that will be heard in U.S.
District Court in Detroit on April 19. “We
conduct our business under a comprehensive
regulatory system enabled by a 30-year-old
Michigan statute that was written solely to
govern Blue Cross Blue Shield of Michigan,”
Blues General Counsel Jeffrey Rumley said
in the motion. “Blue Cross Blue Shield of
Michigan has unique responsibilities under
!!!"#$$!%&!'(&)*+!,!'*-./0)*+!'1%2/+3/456!778
state law.!These responsibilities are established
to fulll specic state policy objectives of
access to health care and controlling its cost.”
Rumley further said the government did not
provide any evidence that the
MFN contracts caused economic
harm, as the antitrust laws
require. Blue Cross said it has
been more successful than most
other plans in managing the
growth of health care costs, in
part because of its contracting
practices.
BCBSM covers 4.3 million
lives in Michigan and is by far the
state’s dominant insurer, with
revenues of $19 billion a year.
It is that dominance that calls
the MFN contracts into question,
said Richard D. Raskin, a health-
care antitrust expert in the
Chicago ofce of Sidley Austin
LLP, a large law rm.
“Unless a payer has a
dominant position in the market,
the use of an MFN is unlikely to raise
signicant antitrust concerns,” Raskin said.!
“In the Michigan complaint, DOJ specically
names the local markets in which it believes
BCBS’s use of an MFN provision is
problematic.”
He suspects that the DOJ is probably
looking for inhibition of price competition in
individual local markets among the other
Blues plans it’s investigating.!
MFNs are bad “because it ensures the
incumbent will get the best discounts and
seals off the ability of others to compete,” said
Robert Laszewski, a Washington consultant, in
a comment to the Wall Street Journal.
“Practically, the dominant insurer will get less
Continued on Next Page
 Payers & Providers
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In Brief
Mayo Clinic Shutters
Community Hospital
in Arcadia, Wis.
The Mayo Clinic has closed a small
community hospital in Arcadia,
Wis., saying it was no longer
economical to keep it open.
Emergency, inpatient, and
maternity services at Franciscan
Skemp Healthcare - Arcadia
Hospital were terminated at the end
of March, as announced by Mayo
late last year.
The parent company said low
patient census and little population
growth forced them to look at the
hospital’s long-term prospects.
Around five patients a day were
seen in the emergency department,
and only seven babies were
delivered each month.
“This is a loss, to the community
and to the dedicated staff,” said Tim
Johnson, M.D., Franciscan Skemp
president.
About 20 jobs were lost at the
hospital, which served about 7,000
people in the surrounding area of
southwest Wisconsin.
The town no longer has around-
the-clock health services. A nursing
home and clinic will continue to
operate.
The closest town with a full
service hospital would be Winona,
Minn., just across the Mississippi
River.
St. Luke’s in KCMO
Opens New Facility
for Wright Memorial
Wright Memorial Hospital in Trenton,
Mo., about 60 miles northeast of
Kansas City, is moving patients into a
new building on April 12. The new 25-
bed facility includes about 60,000
square feet of hospital space and a
12,000 square foot medical ofce
Continued on Page 3
NEWS
Blue Plans Antitrust Investigation (Continued from Page One)
discounts and the difference would narrow,
but the Blue plan would still have a
substantial price advantage.”
WellPoint Inc., the for-prot parent
company of Anthem Blue Cross and Blue
Shield in Missouri and Anthem Blue Cross
and Blue Shield in Ohio, said it uses
“comparable rate, equal rate, or modied
rate protection clauses” in its contracts,
which are sometimes described as MFN
clauses. “We believe that comparable rate
clauses are pro-consumer and can be
advantageous to both parties in a
negotiation by allowing for a longer-term
contract,” which leads to more network
stability and value, the company said.
Blue Cross Blue Shield of Kansas is a
mutual company serving all parts of the state
except the two counties near Kansas City,
Mo. Its network includes 96% of all
providers in its service area, notably 99% of
all medical doctors and 100% of all medical
facilities, it says on its web site. Mary Beth
Chambers, spokesman for BCBSK, said the
plan is “cooperating fully” and preparing the
information the government requested.
In general, hospital discounts are one tool
that Blue Cross and Blue Shield companies
may use to keep costs down for members,
said Brett Lieberman, a spokesman for the
Blue Cross and Blue Shield Association, the
umbrella group for the 39 independent Blues
plans. “It hurts consumers to remove tools
that help obtain the lowest possible costs,” he
said. “It doesn’t make sense for BCBS
companies to reimburse at higher rates than
they could otherwise negotiate.”
The federal government dictates MFN
terms in its contracts all the time, he added,
“for the exact same reasons that plans do: to
guarantee low prices.” Medicare, Medicaid,
and the federal employee health benet
program all use variations on a requirement
that contractors provide the government their
lowest rates.
National health plans that compete with
the Blues were wary about commenting on
the Michigan case or the other state
investigations. “Any time payer, hospital or
physician pricing is signicantly out of line,
it can create an uncompetitive market, and
consequently, a burden to employers and
consumers,” said Bill Berenson, Aetna’s
market head for Michigan, in a statement. “It
should be the goal of everyone to ensure
competitiveness. That, in turn, will deliver
value to the consumer.” Berenson declined
to be interviewed.
!!!"#$$!%&!'(&)*+!,!'*-./0)*+!'1%2/+3/456!778
Page 2
Likewise, Cigna said: “We’re going to
decline to participate in this article.”
The Michigan case and the subsequent
investigations are “a really important deal
from the perspective of the Justice
Department and health care reform in
general,” said Tim Greaney, a law professor
at St. Louis University. “You can trace this to
the debate over the public option.”
The ACA provides for the creation of
insurance exchanges, where individuals and
small groups may choose among competing
insurance plans in their area. For exchanges
to work properly, there has to be robust
competition and a variety of plans. If Blues
plans tie up the local providers in MFN
contracts, it will be extremely difcult for
new entrants to come into those markets.
“If you tell the hospital in town that it has
to charge (the other plans) more than it
charges you, the dominant insurer, then no
new rival can offer an attractive package to
consumers or employers,” Greaney said. “Its
costs are going to be higher, and it can’t
compete. It’s just going to be Blue Cross
charging high prices.”
DOJ has looked closely at concentrated
insurance markets and has wondered why a
few companies continue to dominate in so
many areas of the country. “If there’s
monopoly prots, someone should enter the
market,” Greaney said.
Instead, with MFN contracting, both the
hospital and the insurer lock in their market
dominance, and effectively join hands to
keep costs high, at the consumer’s expense.
This is one of the reasons that some
reformers wanted a public option, Greaney
explained: to shake up too-cozy market
relationships.
BC of Michigan “is asserting that they are
so heavily regulated by the state” that they are
not subject to federal antitrust law. “If the state
tells you to x prices, you can’t be prosecuted
by the feds for anticompetitive conduct,”
Greaney said. As a legal argument, “it’s
something of a stretch,” he added.
From a hospital’s perspective, Raskin said,
these cases are a mixed bag at best.! “On the
one hand, a hospital would want to keep its
negotiating freedom and not have to give a
preference to any particular payer.
! “On the other hand, the Michigan
complaint at least suggests that in some
instances there may have been a quid pro quo,
and that locally dominant hospital systems
were given preferred rates in exchange for
agreeing to an MFN provision.”!
Payers & Providers
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In Brief
building.
The hospital cost $30 million, said
St. Luke’s Health System in Kansas
City, Mo., the hospital’s parent
organization. The hospital includes
two labor and delivery suites and an
emergency department staffed around
the clock with physicians. It also
features an electronic intensive-care
unit that has automated warning and
decision-support software. An
electronic medical records system will
be installed in 2012.
Wright Memorial is considered a
“critical access hospital”, meaning it
meets Medicare reimbursement
criteria designed to improve access to
health care in underserved rural areas.
The St. Luke’s system now includes
11 hospitals and numerous primary
care clinics and other ancillary health
facilities.
HHS Gives 129
Dollar-Limit Waivers to
Health Plans in March
The Department of Health and
Human Services granted 129 new
approvals in March for waivers to
health plans that cannot meet the
annual dollar limit on benets
specied in the Affordable Care Act.
The total of waivers was 1,168 by
March 31.
The ACA forbids plans from
imposing dollar limits on benets by
2014. Between now and then, insurers
may gradually phase out their annual
limits. Between September 2010 and
September 2011, plans must provide
at least $750,000 in coverage.
HHS said that about 95% of its
waivers went to plans sponsored by
employers. Usually, they are limited
benet plans, often referred to as
mini-med plans, favored by retailers
and employers of low-income people.
There are 2.93 million people
enrolled in plans with annual-limits
waivers, covering fewer than 2% of
people with private health insurance,
HHS said.
Many Republicans have taken
issue with the waivers, saying they
demonstrate another of the intrinsic
aws in the health reform law.
NEWS
Catholic Merger Proceeding Slowly
Resurrection, Provena Taking Longer on Diligence
The proposed merger of Resurrection Health
Care and Provena Health, two large Roman
Catholic hospital systems in Illinois, is
proceeding slowly and probably won’t close
before the fall, Resurrection said last week.
In a letter to afliated physicians on April
6, Sandra Bruce, president and CEO of
Resurrection, said the systems were working
through complex issues of integration. The
proposed merger must yet be approved by the
systems’ boards and state regulators. A closing
of the merger would likely come in the fall,
she said.
Provena Health comprises six hospitals, 36
clinics, and various other afliated entities,
outside the Chicago region. It is sponsored by
three orders of Roman Catholic sisters and is
based in Mokena.
Chicago-based Resurrection includes six
hospitals with 2,336 staffed beds, as well as
eight nursing and rehabilitation centers, ve
retirement communities, and other services.
Minnesota HMOs To Limit Earnings
State Contracts Voluntarily Set at 1% Profit Margin
Gov. Mark Dayton of Minnesota has been trying
to place a prot cap on earnings to HMOs from
state healthcare programs. He achieved a partial
victory last week with the announcement that
four not-for-prot health plans – Blue Cross Blue
Shield of Minnesota, HealthPartners, Medica,
and UCare – will make only a 1% prot margin
on their 500,000 state-insured patients in 2011,
under a voluntary agreement with the governor’s
ofce. If they make more than that amount, they
will pay it into a fund that supports a state care
plan for the working poor.
HEALTHCARE’S BEST ADVERTISING VALUE
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Page 3
Combined, the systems had 2010 revenues of
nearly $3 billion. They will have a medical
staff of 5,000 physicians and 22,000
employees, and almost 100 locations of care.
A non-binding letter of intent was
announced on Feb. 3. “By working together,
we not only increase access to outstanding
care and compassionate service to our
patients and community residents, but
leverage the benets of our advanced
continuums of care within the new health
reform law,” said Guy R. Wiebking, president
and CEO of Provena, in a statement.
The merger doesn’t have a denitive
timetable. “It would depend on the due
diligence,” said Brian Crawford, spokesman
for Resurrection. “If all goes well, I would
expect sometime in the fall we would have a
closing.
“It’s probably a little slower than expected.
An enormous amount of work goes into due
diligence; we thought we could do it quicker,”
Health plans had prots of 3.8% on state
managed-care contracts in 2010 and 2.6% in
2009. The health plans said the state’s pro-
jected budget of $5 billion played a role in
their decision to voluntarily restrict their
earnings. A spokesman for Medica said the
giveback was consistent with the plan’s not-
for-prot orientation. UCare gave $30 million
back to the state in March.
Dayton, a Democrat, has introduced
competitive bidding for next year’s contracts
with managed care companies.
Payers & Providers
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OPINION Page 4
Hospitals Should Open Up on Errors
A Closed Attitude Ensures They Will Stubbornly Persist
A few weeks ago, I was mining a trove of state average. It was the single hospital described
publicly available data for a presentation I was as “signicantly worse” on that metric. Loyola,
to give looking at quality of care at some of the the U of C, and the U of I were “signicantly
Chicago region’s marquee hospitals. I worse” on the infections. The U of C ranked
discovered there were warning ags at several signicantly worse on sepsis, where Stroger,
institutions, including the University of incidentally, came out “signicantly better.”
Chicago Medical Center. These statistics demonstrate how seriously a
Imagine my regret to hear, just a few days hospital's managers and clinicians are working
later, that one of the city’s together to reduce serious safety
leading business gures and problems. The best efforts of
philanthropists, James Tyree, caring and hardworking
was killed by a medical error in individuals won't be successful
that same hospital – a hospital unless systematic error
on whose board he had served. prevention is built into a
The cause was an air embolism hospital’s processes as part of its
in a dialysis catheter, during a culture. A government study
hospitalization to treat his showed nearly one-third of
cancer. (Payers & Providers, 22 hospitalized Medicare patients
March 2011, p. 3) suffer some sort of adverse event.
Great doctoring and great It’s possible that the hospitals that
medical safety are not the same apparently had safety issues in
thing. The University of Chicago 2009, when these data were
has a reputation for outstanding gathered, have completely solved
cancer care. That's why Tyree them. If so, there's nothing
had a good prognosis when he stopping those institutions from
entered the hospital and why his By Michael Millenson sharing detailed clinical
death was so disturbing to his information with the public.
family and friends. Most important, there's nothing preventing
How likely is the average patient to be hospitals, with the consent of an individual
harmed at Chicago-area hospitals? If national patient's family, from opening up the results of
gures apply to our area, at least 10 people die error investigations instead of hiding behind legal
from preventable medical mistakes in local barriers. Most patients don't want to sue. They
hospitals every day and another 100 are only want fair compensation, compassion and the
injured. Few of these deaths make news. But knowledge that someone else won't be harmed
Tyree was a prominent citizen, his death was again in the same way. That's why local hospitals
reviewed by the medical examiner and the should invite patient representatives to serve on
results were released by his family. hospital safety committees, as has become
To nd out more about preventable medical common in Massachusetts and elsewhere.
mistakes, I went to a site intended for health- Tyree was a blue-collar guy who worked hard
care professionals, whynotthebest.org. Its to become the much-admired CEO of a successful
sponsor, the Commonwealth Fund, wants to Chicago nancial company. It's impossible for an
motivate hospitals to improve care. outsider to know whether his death was
I looked at one set of measures for eight of preventable, even if many air embolisms are. But
the area's best-known hospitals — Lutheran healthcare insiders need to start sharing the kind
General (agship of the Advocate system); of information that will help prevent people like
Evanston (agship of NorthShore University); Jim Tyree from dying too young. We are all
the academic medical centers of Loyola, vulnerable to medical error, and we must all start
Northwestern, Rush, the U. of C. and the to demand accountability from our hospitals and
University of Illinois; and Stroger, Cook doctors.
County's public hospital.
The problem areas I picked out were Michael Millenson is president of Health
decubitous ulcers, catheter and IV line Quality Advisers in Highland Park, Ill. He is a
infections, and post-operative sepsis. Loyola member of the Payers & Providers editorial
had nine times the rate of bedsores than the board.
!!!"#$$!%&!'(&)*+!,!'*-./0)*+!'1%2/+3/456!778
Payers & Providers MARKETPLACE/EMPLOYMENT Page 5

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*New England Journal of Medicine, 2004.

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Payers & Providers MARKETPLACE/EMPLOYMENT Page 6

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