Once again, Blue Cross Blue Shield of Louisiana and Our Lady of Lourdes’ parent company wrangle publicly over rates. The national health care debate has fueled so much anxiety over coverage and access that it seems downright unprofessional, at the very least unfair, for the state’s largest health insurer and largest provider to once again air their financial dirty laundry in the media. Less than two years ago, a similar ploy unfolded in much the same manner, ending in an 11th hour deal that renewed the affiliation — until Wednesday of last week.
In what the Franciscan Missionaries of Our Lady Health System, parent of Our Lady of Lourdes and Heart Hospital of Lafayette, claims caught it off guard, Blue Cross Blue Shield of Louisiana issued a Dec. 9 press release titled “Franciscan Missionaries of Our Lady Health System Leaves Blue Cross and Blue Shield of Louisiana Network.” The release intimated that the Franciscan health system had decided not to renew its contracts with the insurer, stating, “Effective Feb. 1, 2010, the FMOL System’s hospitals and certain affiliated providers will no longer be contracted as in-network providers for the state’s largest health care insurer.”
Nothing like a little extra holiday angst for the more than 100,000 Acadiana residents, including the Lafayette Parish School System, with Blue Cross Blue Shield coverage.
“Did nobody learn a lesson two years ago [from] the uproar that it caused?” That’s the pressing question from insurance executives like Jimmy Mallia, president of the Employee Benefits Division at Dwight Andrus Insurance. Mallia also wonders why the two are negotiating a Feb. 1 contract. “What they ought to do is make it a Dec. 1 or Jan. 1 [contract] ... and come to a resolution in October, because the larger clients all have Jan. 1 renewals. Somebody could have renewed with Blue Cross already. A lot of my clients, I’d say a minimum of 5,000 covered lives in this area that are self-funded, made their decision a month ago. And now let’s say that Lourdes pulls out, that’s not the same deal that I showed my clients,” adds Mallia, who has 100 group clients (employers) for a total of 10,551 members, which includes family members. “It is a disservice especially to the larger clients because they don’t know when they renew their contract with Blue Cross that there’s a chance Lourdes won’t be in it. It’s not good for Lourdes, and it’s not good Blue Cross. So why they don’t change the contract date? I don’t know why they don’t do that.”
Losing Blue Cross and the people it covers would be a major blow to the Franciscan health system and to Our Lady of Lourdes, which is building a new $211 million campus near the intersection of Ambassador Caffery Parkway and Verot School Road. It could be equally devastating to Blue Cross. Frankly, it’s hard to imagine how either party will fair without the other.
Lourdes President and CEO Bud Barrow isn’t happy about how the wrangling is playing out in the media. “It’s the way they negotiate, apparently,” he says, explaining that he was taken aback by the timing on the Blue Cross announcement. “I would say I was not surprised but disappointed. Several years ago we had a similar surprise release from them when we were in the middle of negotiations. The difference being this time we are 52 days away from the end of the contract and last time we were just several days, or maybe even hours away and, of course, we did conclude an arrangement at the 11th hour.”
Other hospitals in the FMOL health system include Our Lady of the Lake Regional Medical Center in Baton Rouge, The Tau Center of Baton Rouge, St. Elizabeth Hospital in Gonzales, two St. Francis campuses in Monroe, and Assumption Community Hospital in Napoleonville.
Barrow says Franciscan officials have been suggesting to Blue Cross since June it that it was their goal to conclude the negotiations about 60 days before the contract ended, “so that nobody would be left in the lurch, that there would not be unnecessary anxiety, and that there wouldn’t be concerns on the part of employers or subscribers.”
“We have tried to take a consistent, straightforward Franciscan approach and ... to keep the negotiations private and hopefully speedily and acceptably done for everybody,” Barrow continues. “As of 10:30 [Wednesday morning] when we had a conference call, we even made the issue of bringing in a neutral third party, a mediator [that] Blue Cross could help us choose. I think our feeling was we were expecting to hear within 24 hours who they thought a good mediator might be and that we could get to some conclusion fairly quickly. We were expecting conversations to take place [Thursday], probably Friday and into [this] week.”
Blue Cross spokesman John Maginnis, however, insists Blue Cross CEO Mike Reitz clearly communicated with Franciscan health system officials at the end of the Dec. 9 conference call that it would inform all concerned parties, including the public at large, that the two were too far apart to reach an agreement. “He did make that statement as he left,” Maginnis says.
Franciscan officials characterize their request as a single digit increase, but Blue Cross, which covers more than a million people, calls it a multi-million dollar increase for a system already reimbursed at the highest rate in the state. “This is on top of the $200 million we’ve paid FMOL in the last 12 months on behalf of our members,” wrote Senior Vice President and Chief Marketing Officer Brian Keller in a separate Dec. 9 statement addressed to group and individual producers. “We’ve been given no acceptable justification for this request, so we cannot in good conscience agree to the increase, since it inevitably comes from the pockets of our members.”
And many of those members have been digging deeper into their pockets and will do so again in 2010.
Some fully insured Blue Cross Blue Shield clients in the Acadiana area are seeing their premiums increase by as much as 20 percent, while some increases are much smaller.
“I can’t comment on that; I don’t know about percentages,” says Maginnis, noting that the current national trend is a 10 percent increase in premiums, though other factors could push that higher.
Blue Cross also has made it clear it’s tired of paying Franciscan facilities for treating the uninsured and for making up the difference on underpayments by Medicare and Medicaid. Blue Cross says its customers who use those facilities are paying for more than their own health care. It says for every dollar it pays Our Lady of the Lake Regional Medical Center in Baton Rouge, for example, only 55 cents goes to pay its customers’ medical costs. The Lake keeps 45 cents for other purposes such as to subsidize Medicare and Medicaid, the uninsured, its charitable giving programs and profits, Blue Cross maintains.
“We support FMOL’s mission and commitment to the community, and we have done so for years,” Blue Cross states. “We are not proposing that we end or even decrease that support. Instead we are saying that in these hard economic times, we cannot increase this support, which comes directly from our customers’ premiums. Our customers have told us loud and clear that they want their healthcare dollar to go to their healthcare.”
The Franciscan system readily acknowledges that one way it closes that gap in serving the uninsured and Medicare/Medicaid patients, which is part of its mission, is through contracts with companies like Blue Shield, along with controlling costs and improving processes.
FMOL officials point to a Kaiser Family Foundation study showing that insurance premiums have gone up 131 percent in the past decade, more than a third higher than hospital costs. “Based on the growth in Blue Cross reserves and its historic profitability, we believe Blue Cross can pay us fairly without raising your premiums,” FMOL President and CEO John Finan wrote in a Dec. 1 letter to major employers with Blue Cross insurance in each market served by its hospitals. FMOL says the warning letter was sent to some employers because they asked two years ago to be informed early on if negotiations appeared to be breaking down again. That appears to be the first written warning.
For competitive reasons, Barrow would not disclose the amount FMOL is seeking. “We’re still in the middle of negotiations. To share that kind of information could conceivable put us all at a disadvantage with the different hospitals we compete with in our local markets. Let me say this, they were offering after multiple negotiation sessions a zero percent increase. Our feeling would be this: if they were willing to keep premium increases to zero for local employers and subscribers then zero percent increase for hospitals and physicians might make sense. And we’ve told them that,” Barrow says. “We are happy to keep our increase from Blue Cross in alignment with the increases or a lack thereof that they pass on to their subscribers.”
Maginnis did not hesitate to disclose FMOL’s request. He says FMOL is asking for a 9 percent increase, which would amount to about $18 million annually — roughly 37 percent of Blue Cross’ net income in 2008. Maginnis also noted that Blue Cross is offering a 3 percent increase with some added cost sharing provisions. The alternative on the table is the continuation of the current contract for one year, which means no increase for the facilities in the FMOL health system in 2010.
In 2008 Blue Cross Blue Shield of Louisiana earned $49 million on $2.1 billion in premium income. While its net income in 2008 was down from $66 million in 2007 and $78 million in 2006, its surplus cash — which protects it from unexpectedly high claims (such as a hurricane) — was $621.1 million, a 130 percent increase over the past five years.
Blue Cross notes that it pays out 84 cents of every premium dollar to cover the costs of hospitals, physician services and prescription drugs for its customers, using only 7 cents of each premium dollar for administrative costs.
Blue Cross says its door is always open to FMOL: “We will welcome them back into the network if they choose to accept our offer,” Reitz says. “We recognize the value they bring to our provider networks.”
FMOL remains hopeful an agreement will be reached before Jan. 31.
Sooner would make a nice Christmas gift for thousands of concerned Blue Cross customers.
“In my world it throws my clients and me into complete turmoil when they do this,” Mallia says. “Without picking sides, without saying who’s right or wrong — let them decide that — it’s just the fact that the strategy and timing of even making the decision is totally disruptive.”