Dive Brief:
- Executives at Advocate Health Care told Crain's Chicago Business that Blue Cross Blue Shield won't be jointly negotiating reimbursement rates with health systems that are clinically affiliated but not under common ownership. This decision will make it more difficult for smaller organizations to remain independent through affiliations like the one earlier this year that linked Advocate with Silver Cross Hospital.
- Blue Cross has notified other Illinois hospitals of its decision. The payer said it supports clinical integration affiliations to improve care quality, but does not believe joint fee negotiation is necessary to achieve this result. This decision could also impact an agreement announced this past summer between Adventist Midwest Health and Alexian Brothers Health.
- The decision is likely motivated by the potential for losses by insurers when hospital systems create an affiliation. When smaller hospitals affiliate with larger ones, they often take on the rates of the larger institutions, meaning higher reimbursements for insurers.
Dive Insight:
It is not surprising that a large insurer like Blue Cross is beginning to fight against affiliations, which are becoming increasingly popular in the industry. Just this year, five hospitals in Connecticut and two in North Carolina also announced similar affiliations. AllSpire Health Partners was also created through an alliance of 30 hospitals in the Northeast worth more than $10 billion. These kinds of collaborations could put huge pressure on insurers and increase their costs dramatically.
Another threat from these alliances is the potential competition in the insurance market. The Connecticut hospitals announced that they may be venturing into the insurance market, offering a product that would guide beneficiaries to hospitals in the affiliation. According to the Washington Post, in 2013 28% of hospitals were expecting to launch their own plans over the next five years and nearly one-fifth of respondents had already created their own plans. These insurance plans typically work best with larger systems, which affiliations can create.