Spectrum And Blues Reach Accord

August 29, 2002
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GRAND RAPIDS — Spectrum Health and Blue Cross Blue Shield of Michigan have reached terms on a new participating agreement that will avoid major disruptions in how thousands of people in West Michigan access and pay for their care.

The deal, announced this morning, covers all Spectrum facilities — including Butterworth, Blodgett and DeVos hospitals in Grand Rapids and Hackley Hospital in Muskegon — that were affected by participating agreements that the health system was preparing to drop as of this Sunday and on Nov. 1.

The deal came a day after Spectrum and the Blues agreed to extend to November existing agreements on two of the insurer’s health plans as they worked to formulate a final settlement.

Executives from both Spectrum and the Blues declined to offer details of the new participating agreement, but “obviously the agreement was mutually acceptable,” according to a joint statement issued Thursday morning by Spectrum Chief Executive Officer Rick Breon and Dale Robertson, vice president in West Michigan of Blue Cross Blue Shield of Michigan.

This is good news for everybody. Good for patients and members. Good for the community,” the statement said. “The agreement meets our objectives of keeping rising health care costs in check while also giving financial support to local hospitals so they can continue to provide high quality health care to the community.”

The dispute centered around Spectrum’s demand from the Blues for major increases in reimbursement payments to help offset a $30 million annual loss in providing indigent care for Medicaid recipients and uninsured people who don’t pay their medical bills. Spectrum also claimed that the Blues paid less than other insurers and HMOs.

Blue Cross Blue Shield, as the insurer of last resort in Michigan that must provide coverage to all who apply, countered that it does pay its fair share for indigent care and that meeting Spectrum’s demands would have resulted in even larger premium increases for employers that already are seeing double-digit hikes.

Without a new participating agreement that granted payment increases, Spectrum was planning to drop participation Sept. 1 in Blue Cross Blue Shield of Michigan’s Community Blue/Blue Preferred preferred-provider organization (PPO) and the Blue Choice point-of-service (POS) health plans. Spectrum would have ended participation in the Blues’ traditional health plan as of Nov. 1 if a new agreement were not reached.

At Spectrum’s Hackley Hospital in Muskegon, participation in the traditional plan would have ended March 31, 2003, with the PPO and POS products coming to an end Sept. 1 this year. Hackley would have dropped the Blue Care Network HMO on Oct. 1.

The lack of Spectrum participation in the Blues network would have forced people going to a Spectrum facility for care to pay substantial out-of-pocket costs. In response, Blue Cross Blue Shield was preparing to direct its approximately 500,000 subscribers affected by the dispute to other hospitals around West Michigan and even pay travel and family lodging costs for any patient who needed to go elsewhere for a medical procedure or service not offered in the region.

The other hospitals and care providers also were marshaling their forces to accept increased patient volumes generated when people holding a Blues health policy steered away from Spectrum.

Lody Zwarensteyn, president of the regional health care planning organization Alliance for Health, called the new participating agreement “great news” because it averts major disruptions to the local health system. Many employers he was hearing from were quite worried about the potential problems that would have been created if Spectrum and the Blues did not work out their differences, Zwarensteyn said.

“They were just very uncomfortable with the dispute and just wanted it resolved so services could flow uninterrupted,” Zwarensteyn said.    

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