Sparrow Blues Ink Agreement

January 13, 2003
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LANSING — The latest reimbursement battle involving Blue Cross Blue Shield of Michigan has been resolved for now with an interim agreement that keeps Lansing’s Sparrow Health System in the Blues’ network at least until mid-year.

Sparrow and the Blues reached the six-month agreement Dec. 31, just hours before the health system was to drop out of the insurer’s care network. The deal gives the two until June 30 to negotiate a permanent participating agreement.

“It allows additional time to resolve primary issues and meets our objective of containing health care costs while giving financial support to local hospitals so they can continue to provide care to the community,” Blue Cross Blue Shield said in a statement.

Terms of the interim agreement were not released, although an offer from the Blues a day earlier to Sparrow would have provided the health system a 3 percent payment adjustment if it agreed to jointly retain an accountant with expertise in health care finance to examine Sparrow’s hospital costs for Blues members and the adequacy of the insurer’s payments.

Lacking a new agreement, Sparrow planned to drop out the Blues’ traditional insurance product, the Community Blue and Blue Preferred PPOs, and Blue Choice point-of-service plans as of Jan. 1.

The dispute is reminiscent of the August tussle between Blue Cross Blue Shield of Michigan and Spectrum Health in Grand Rapids that was settled without massive disruptions in the local care network.

Sparrow claims it lost money under the previous Blues contract because of insufficient payments for patient care, that Blue Cross now receives the deepest discounts of any non-government insurer, and that increased payments in recent years have not kept up with rising health care costs.

Blue Cross Blue Shield said in response that it paid Sparrow a fair reimbursement rate that covers costs and provides a margin, as well as offers a per-case payment to Sparrow that is among the highest of any hospital in the state. Paying anything higher would only add to already rapidly rising health premiums, the Blues stated.

The interim agreement assures that Blues subscribers can continue to access medical services at Sparrow without incurring significant out-of-pocket expense.

“Although we had hoped for a multiple-year agreement, we believe this is good news for and in the immediate best interest of our community, patients and Blue Cross members. The agreement is consistent with the hundreds of messages we’ve received from patients, employers and residents throughout mid-Michigan, who told us repeatedly that they wanted uninterrupted access to Sparrow’s high quality, cost-effective services,” a statement from Sparrow said.

“Sparrow remains committed to the health and well-being of our community. Our goal continues to be to attain a longer term contract that guarantees access to Sparrow’s quality, compassionate, cost-effective services for Blue Cross enrollees at a fair and equitable price,” Chief Executive Officer and President Joseph Damore said.           

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