BCBSIL Refuses to Negotiate Jointly With “Affiliated” Providers. Now What?


Tensions between health plans and care providers have taken an fascinating turn in Chicago. Blue Cross Blue Shield of Illinois (BCBSIL) is refusing to allow care providers “affiliated” through a clinical integration agreement to negotiate contracts jointly.

The ramifications for future network contracts are significant and could play out very differently in other health care markets.


In February 2014 Advocate Health Care and Silver Cross Hospital announced a clinical integration affiliation agreement. Advocate is the state’s largest hospital network and Silver Cross is an independent, suburban hospital. The Chicago Tribune reported on details:

Under terms of the affiliation, which is slated to last a minimum of five years, about 300 doctors who practice at Silver Cross will join Advocate Physician Partners, a 4,400-doctor organization jointly governed by Advocate and the physicians…

Although the hospital will retain its brand, board and balance sheet, it will enter into contracts with insurance companies and government programs under Advocate, and its physicians will fall under Advocate Physician Partners. Advocate will treat the hospital like any of its other 11 facilities financially, assigning pro-rata costs to the Silver Cross in the same way it would Advocate Christ in Oak Lawn or Lutheran General in Park Ridge.

As noted a February article in Crain’s Chicago Business,  the intent of the agreement had been to allow Silver Spring to participate in Advocate’s accountable care organization network and to negotiate contracts jointly:

For New Lenox-based Silver Cross, the deal means participation in programs in which providers and hospitals are paid in part for good outcomes rather than volume. It wouldn’t have been able to launch these on its own due to the hefty investments needed to start from scratch. “It’s a make-or-buy decision,” said Ruth Colby, Silver Cross’ senior vice president of business development and chief strategy officer. “When we saw that we could do an affiliation, we felt we could rapidly get ready for changes in reimbursement.”

However, the state’s dominant health insurer has said “Not so fast”.  The headline of an October 8 article in Crain’s Chicago Business read “Blue Cross delivers blow to small hospitals”

Blue Cross won’t negotiate reimbursement rates with affiliations created by separate health systems that clinically integrate rather than those under common ownership, Dr. Lee Sacks, chief medical officer of Downers Grove-based Advocate, said during a meeting yesterday with the Crain’s Chicago Business editorial board.

So, what we have here is a new slant on an old issue — the fight for market power among health plans and care providers. Health plans will prefer a “divide and conquer” strategy, while providers will prefer a “united we stand” strategy toward pricing and contract negotiation.

Why It Matters

The Illinois scenario is a pretty good prototype of market dynamics in many other markets across the U.S. — a dominant health plan,  a strong regional delivery system, and a smaller independent hospital. Similar affiliation scenarios are likely to play out in markets across the country, but will the results be the same?

Penguins are Jumping…Payment Reform is Leaping!

…(The) 2014 National Scorecard on Payment Reform tells us 40 percent of commercial sector payments to doctors and hospitals now flow through value-oriented payment methods, defined as payment methods designed to improve quality and reduce waste. This is a dramatic increase since 2013 when the figure was just 11 percent. Suzanne Delbanco, Executive Director of CPR, in the Health Affairs blog.

I’ve written before about what economists call “The Penguin Problem” — No one moves unless everyone moves, so no one moves.


The healthcare Payment Penguin Problem goes something like this:

Care Providers: “We’re hesitant to jump into the water. While we understand that fee-for-service payments are perverse, they ARE in our best economic interests. We won’t invest in infrastructure and processes toward value-based care until we believe payers are serious in making the transition.”

Payers: “We’re hesitant to jump into the water. While we understand that value-based payments could improve quality and reduce costs, we don’t know whether care providers are serious in making necessary investments and changes. We also question whether they can pull it off. We’d like to see that providers are serious in making the transition.”

Today’s message:

  • The 2014 CPR National Scorecard for Payment reform documents that the Payment Penguin Problem has been solved!
  • The implications are huge!

Will Apple’s Strategic Beachhead Be Doctors, Not Patients?


Last week Apple held a huge media event to announce forthcoming products, including the iPhone 6, 6+ and Apple Watch.  Many of us in the healthcare world had been sitting on the edge our seats, hopefully awaiting news detailing Apple’s broader strategy in entering healthcare.  We were disappointed — no mention of Apple HealthKit, no doctors on the main stage, only a few teasers about how the Watch might be used in fitness and health monitoring.

Apple is a consumer technology company, and it’s natural to think that their efforts in healthcare will be aimed directly at patients.  However, I’ve been pondering whether that’s looking at Apple’s opportunity through the wrong end of the telescope.

Are physicians — 85% of whom own an iPhone — a much more natural and powerful strategic beachhead for Apple to focus on?

Our focus has been to figure out how to accommodate the 5% of patients that get their peace of mind knowing that they have absolute control of every piece of their data. Our focus really should be on the 95% that get their peace of mind knowing that when they show up in the ER, all of their data will be there.

Lawrence Garber MD, Internist/Medical Director for Informatics, Reliant Medical Group. Comment at ONC JASON Task Force, July 2014.

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Swiss Cheese Health Insurance? “Benefits Adequacy” Moves To Front & Center

Swiss cheese health insurance? So, so many holes.

Swiss cheese health insurance?
So, so many holes.

Ending insurance discrimination against the sick was a central goal of the nation’s health care overhaul, but leading patient groups say that promise is being undermined by new barriers from insurers. The Washington Post

In the past year, network adequacy has been one of the hot button issues for Qualified Health Plans (QHPs) in the Federal health insurance exchange. Network adequacy has focused on access to care providers and the narrow networks used by many health plans.

In the next year, the big issue will be around benefits adequacy, i.e., lack of coverage and high out-of-pocket expenses incurred due to high deductibles, co-pays, exclusions, etc. My shorthand for this is “Swiss cheese health insurance—so, so many holes.”

The Canary in the Coal Mine Letter

The canary in the coal mine is a recent letter signed by 333 patient advocacy groups (“the Letter”) to HHS Secretary Sylvia Burwell. (When’s the last time you saw a letter endorsed by 333 organizations!)

Patient Digital Health Platforms…A First Take

This post was originally published on the HIMSS blog with the title “Patient Digital Health Platforms (PDHPs): An Epicenter of Healthcare Transformation?”

Apple’s recent announcement about its HealthKit platform is a beacon of a much bigger trend. We are at the early stages in the rise of a new business and IT ecosystem:

Patient Digital Health Platforms (PDHPs)

These new platforms should be high on the radar screens of healthcare providers. While v1.0 of PDHPs is starting fairly narrow, companies will be highly incentivized to move up the food chain into mainstream health data exchange, workflow integration, and virtual care delivery. PDHPs portend both opportunities and threats.

I’ll pose and provide some early answers to how the PDHP ecosystem might shape up. Here’s a preview:

  • What’s “The Healthcare Platform Void”?
  • Who Are Initial Players in the PDHP Ecosystem?
  • A Central Question: Will PDHPs Go Narrow or Broad?
  • What Market Pressures Incentivize PDHPs to Go Broad?
  • What Are Early Warning Signs that Some PDHPs Will Go Broad?
  • How Long Will It Take For All This to Play Out?

Consider this an introduction to PDHPs—you will discover more questions than answers. I’ll use Apple HealthKit as a case study to illustrate some examples.

MCOL Thought Leaders: Implications of Narrow Networks

Today's Topic

how far will the trend towards narrower health plan networks go – and what are the implications?”

alexander domaszewicz

 alexander domaszewicz

Alexander Domaszewicz

ACA legislation put many guardrails on health program design – premium cost sharing must be affordable based on percent of pay and cost sharing through design requires at least a 60% value plan. Narrow networks are one of the few areas that insurers and program sponsors still have left to positively impact cost and quality while staying compliant. The increased use and focus on local plans through exchanges, both public and private, will also spur greater use of narrow networks. With so many forces encouraging folks to get the right care, at the right time, for the right price, with the right outcome, narrow networks will continue to grow, evolve and add value. Despite their opportunity, there are still substantial risks around member understanding. If more efforts aren’t made to educate participants about the trade-offs they’re making when electing less expensive but narrower network insurance offerings, there could be meaningful backlash against the trend.

mark lutes

Mark Lutes
Member of the Firm,
Epstein Becker & Green, P.C.

“Narrow networks” will be with us — but their etiology will not be predominantly through payors culling their networks via economic credentialing. More often beneficiaries needing more intensive case management will “opt in” to a care path administered by providers who are paid as their “home” or through shared savings. Also, “narrow networks” will occur through default–that is through the combined effect of higher deductibles and additional price transparency. As beneficiaries continue to shoulder more of the first tier of risk for their own care, and mobile tools become increasingly available forecasting the costs of episodes, de facto narrow networks of price competitive, accessible (and telehealth friendly) providers will emerge.

Open.Epic: A (Not So Open) API


If one more person describes Epic’s new API as being “open”, I’m going to turn purple. Don’t let the URL fool you: http://open.epic.com/

Last week EHR vendor Epic unveiled it’s new API (application programming interface) targeted at developers — more specifically at remote patient monitoring companies and health/wellness apps or portals. Epic seems to have had second thoughts about the site since only remnants of the landing page are still there as of today.

Not to worry. As a public service, I kept a copy and have reproduced the text below — with personal annotations/translations added.

What’s Wrong With Epic’s API?

What’s wrong with Epic’s API from a developers POV? Data goes in. It doesn’t come out. If you are a developer, this is a great way to disintermediate yourself — you create all the value, Epic captures all the value.

Would you bank at an institution that allows you to make deposits, but not withdrawals?

Despite the chatty language that was on Epic’s website, their API is a continuing extension of Epic’s ethos of control rather than collaboration. It’s downright condescending.

What part of health information exchange do they not get over at Epic?

Enough banter. Let’s get to the meat of it.

Healthcare Transformation: Coping With the Neutral Zone

I’m being asked the same series of questions a lot lately:

Do you think the changes occurring in US healthcare are real?  Are we truly moving away from rewarding volume of care under fee-for-service (FFS) and toward value-based payment and delivery? Are the changes past the point of no return? Will the economic interests of the powers-that-be prevent real change from happening, just as they have done in the past?

The phrasing of these questions assumes a split, dichotomous view of the world — that change has/hasn’t yet happened. The questions also mask the underlying and difficult process of transition that people and organizations are going through.

There’s a different way to think about the transformation of U.S. healthcare — transition as a 3-stage process:

William Bridges 3 Stage Transition Model


Here’s a summary of where I’m going with today’s essay:

  • Think of Transition as a 3 Stage Process
  • U.S. Healthcare—Entering the Neutral Zone
  • How Long Will the Neutral Zone Last? Quite a While.
  • So What? What are Implications and Actions?