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Plans steer patients to lower-cost hospitals

Blue Cross latest to add fees for expensive care

By Liz Kowalczyk
Globe Staff / February 10, 2011

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Hundreds of small businesses have signed up in the past month for a new Blue Cross Blue Shield health insurance plan that charges employees hefty fees for seeking care at more expensive hospitals, in an effort to steer them to lower cost care.

The popularity of the plan — Blue Cross Blue Shield of Massachusetts says it is the fastest launch ever of a new product — is the latest sign that the once radical idea has been embraced as a way to control soaring health care costs, even as pricier hospitals warn of a possible backlash and cuts in services.

Other Massachusetts insurers also report brisk business in plans that offer lower premiums in exchange for limits on use of high-cost care. The plans either charge consumers extra for receiving care from popular but expensive hospitals or doctors, or bar them altogether from seeking treatment at those institutions and practices.

The Blue Cross Hospital Choice plan, which went on sale last month, charges members, for example, an extra $1,000 for an inpatient stay or outpatient surgery, and $450 more for an MRI, at 15 higher-cost hospitals, including Massachusetts General and Brigham and Women’s hospitals, Children’s Hospital Boston, and UMass Memorial Medical Center in Worcester.

Companies and workers that sign up get a significant break on their health insurance premiums: a 4.5 percent increase for the first quarter of the year instead of a 10 percent increase.

It is not known how many patients statewide are now covered by such plans, and Blue Cross declined to provide its numbers. But nearly 30 percent of Blue Cross’s small business and individual customers who renew in January enrolled, executives said.

These plans “really help the employer and the employee start to understand what is driving health care premiums higher,’’ said Paul Pietro, chairman of Mid-State Insurance Agency Inc., an insurance broker in Worcester.

“Simple things, like MRIs and CAT scans, if you’re just able to stay out of those hospital settings, that can save money. It helps everybody.’’

But executives at Partners HealthCare, the parent organization of Massachusetts General and Brigham and Women’s, said that while these new policies are making providers more sensitive to price, they have pitfalls.

Dr. Thomas Lee, head of Partners’ physician group, said some people will become seriously ill and realize they can’t go to, or can’t afford, their first-choice hospital.

“They will be mad at Blue Cross and their employer,’’ he said. “There will be some painful moments down the road.’’

Lee also cautioned that hospitals may no longer be able to use their profit margins to subsidize money-losing services such as rehabilitation and children’s mental health care, leading to fewer services.

Several other top teaching hospitals are on Blue Cross’s list of higher-priced institutions, but so are smaller hospitals that insurance executives said have been able to charge higher prices because of their geographical dominance or other factors. They include Cape Cod Hospital, Sturdy Memorial Hospital in Attleboro, and Saint Anne’s in Fall River.

Executives at Steward Health Care System, the parent company of Saint Anne’s, said they strongly disagree with Blue Cross’s designation of the hospital as more expensive, and have asked the insurer to reconsider. The hospital is the largest provider of oncology services in Southeastern Massachusetts, said Mark Rich, chief financial officer, which he believes could make it look more expensive because cancer patients require more services and more expensive care. Other comparisons of hospital costs by state officials, he said, have put Saint Anne’s close to its nearest competitor, Charlton Memorial Hospital, also in Fall River.

In Massachusetts, insurers traditionally have offered wide-open networks, meaning members can check into a pricey teaching hospital to deliver a baby rather than go to a less expensive community hospital, and can schedule MRIs in a hospital outpatient department, even when freestanding clinics provide similar service for less money. But amid intense scrutiny into why health care costs in Massachusetts are climbing 7.5 percent a year, “tiered’’ and “limited’’ networks have emerged as an immediate way to control costs.

Blue Cross, the state’s largest insurer, offers another more extensive tiered insurance product, and it said membership in that plan grew 120 percent last year, making it one of the company’s fastest-growing plans. That plan offers three copayment levels for both hospitals and physicians, depending on their quality and cost.

Tufts Health Plan sells a similar plan, which executives said has been very successful.

Limited networks, in which members are largely barred from treatment at more expensive hospitals and specialists, also are beginning to attract members.

Harvard Pilgrim Health Care launched a limited network in Worcester last month, and another for state employees in July. About 80,000 of the insurer’s 1.1 million members are now in tiered or limited networks.

“We expect that number to go up very significantly in the next 12 to 24 months,’’ said Rick Weisblatt, senior vice president for health services.

The Group Insurance Commission, which oversees health insurance for state employees, is giving workers a strong incentive to agree to limited networks. It voted last week to pay the employee’s share of the premium for three months if an employee enrolls in such a plan.

Liz Kowalczyk can be reached at kowalczyk@globe.com