Minnesota Hospital Association


April 24, 2013

Blue Cross reimbursement change will plunge rural hospitals into the red

Patient access to care in jeopardy

St. Paul, MN – The Minnesota Hospital Association (MHA) is opposing a payment change plan by Blue Cross and Blue Shield of Minnesota (BCBS) scheduled to take effect May 1 that will slash payments to hospitals and have a particularly devastating effect on rural health care.  

MHA President and CEO Lawrence Massa described the payment change as converting BCBS payments from a negotiated discount from a hospital's charges — a payment methodology that has been used for small hospitals for decades — to a below-cost or marginally above-cost rate unilaterally set by BCBS.   

MHA has heard from dozens of hospitals scheduled to have their payments cut on May 1 that the impacts will be “in the hundreds of thousands to millions of dollars.” Massa said that for many of these small hospitals in rural communities, the payment cuts will “put them into deep, deep red ink.”  

“To dramatically disrupt long-standing reimbursements to hospitals will, if implemented, jeopardize patients' access to care, especially in rural communities served by smaller hospitals, such as ours,” said Kimber Wraalstad, administrator of the Cook County North Shore Hospital in Grand Marais, a critical access hospital. “Because of Blue Cross’ unilateral change to the reimbursement methodology and rates, we may have no choice but to terminate our contract with Blue Cross.”  

“As a result of the Blues’ plan, we are looking for what changes we need to make to absorb the unexpected and significant cuts from the largest insurer in the state,” said Joel Beiswenger, president and CEO of Tri-County Health Care in Wadena, also a critical access hospital.   

Massa said that BCBS began contacting a portion of hospitals earlier this year about the payment changes. “Instead of contacting all hospitals and warning them about this change at once,” Massa said, “Blue Cross is communicating with only 25 or 30 percent of hospitals at a time, perhaps to avoid the inevitable statewide backlash that would be unleashed.”  

Minnesota hospitals are attempting to individually contact Blue Cross to negotiate a revised payment methodology or reimbursement rates that are less devastating. In addition, some hospitals are seeking a delay in the implementation.  

Anecdotally, Massa said he has heard of hospitals deciding to eliminate services such as home health care, which provides vulnerable and elderly patients with care in their home so they do not have to travel to appointments at greater cost and with more risk of exacerbating their health conditions.   

Massa said that he heard of one hospital where the employees collectively chose to forego a portion of their retirement benefits to help salvage access to needed care for patients. “It’s very frustrating to our members that the people who provide direct patient care are faced with the unthinkable choice between cutting off services to their patients or losing some of their retirement benefits. I don't believe for a second that Blue Cross considered such alternatives before deciding to move forward with these huge cuts.”  

MHA is also concerned that patients and communities will attribute the loss of services and access to health care reform initiatives. “The timing of this is extra troubling,” Massa said, “because some people will mistakenly conclude that they lost access to care or hospitals closed because of federal or state health care reforms when, in reality, these are decisions by a single, dominant insurer that decided to pay wholesale rates rather than discounted retail rates.”  

The Minnesota Hospital Association helps 144 hospitals and health systems provide quality care for their patients and communities.