A brewing health care battle

A brewing health care battle

August 4th, 2012 in Opinion Times

Memorial Hospital's chief executives predictably view their stalemated talks for a new insurance contract on reimbursements differently than do Blue Cross Blue Shield officials.

Blue Cross leaders say they are working to keep down hospital charges and reimbursements, and that Memorial is demanding excessive charges that flout the public interest in cost control. Memorial's leaders contend the hospital deserves an 8.5 percent increase in reimbursements because health care industry costs continue to rise, and because their hospital -- and its owner, Catholic Health Initiatives, a Denver-based 76-hospital chain - need to keep its profit margins healthy, and bring them up to corporate expectations.

That snapshot doesn't begin to flesh out the complex business equation that has driven Memorial and Blue Cross to a harsh divide. But it frames what is likely to become a major health care battle here over cost-control, which if not resolved will confront Memorial's patients with Blue Cross with significantly higher out-of-network costs.

It doesn't take an accountant to recognize the essential stakes of the brewing battle. This conflict pits the overriding need to contain hospital costs versus a hospital chain that operates under a religious, nonprofit, tax-exempt status, but that focuses heavily on three high-profit lines of service while providing relatively little in public health needs as compared to Erlanger and Parkridge hospitals. Erlanger, for example, had uncompensated indigent-care costs (not charges) of more than $70 million last year; Memorial had $7 million in indigent-care costs.

In 2010, Memorial earned $43 million in profits and retained earnings; in 2011, that figure rose to $49 million, though only $22 million - or 2.5 percent of profits - were from operations, Memorial officials said. Meanwhile, Erlanger dipped into the red.

Memorial officials contend they only seek the reimbursement levels they believe are provided by Blue Cross to Parkridge. Blue Cross says their reimbursement rates vary on line items, but generally reflect a range of issues, including the provision of obstetrics/gynecology, which Memorial shuns, as well as indigent care.

The larger public interest is not simply to provide ever-higher profits to profit-oriented hospitals. Rather, it lies in cost containment and fair burden-sharing of public health-care costs. That formulation favors Blue Cross' position far more than Memorial's.