NASHVILLE – The state’s largest health insurer lost $95.6 million last year managing TennCare enrollees’ health care in East and Middle Tennessee, according to a document review.
The number is more than double the $40 million BlueCross BlueShield of Tennessee expected to lose in 2009 when the Chattanooga-based insurer resumed doing business with TennCare as an “at-risk” managed care organization, according to a company report provided to some legislators.
Losses in 2010 were projected to rise even more to $135 million absent BlueCross’ current plans to cut costs, according to the company.
PDF: VSHP Rate Reduction Q&A FAST FACTTennCare, which started in 1994, is the state’s version of Medicaid, which provides coverage to 1.25 million poor and disabled people.Singing the BluesSaying it must offset anticipated losses of $135 million in its TennCare business this year, Chattanooga-based BlueCross BlueShield of Tennessee is taking these steps:* Cutting reimbursements to 12,800 specialty physicians by 14 percent* Reducing reimbursements for four East Tennessee hospitals and 15 West Tennessee hospitals by 14 percent* More medical management. Implementing emergency room diversion programs across the state, pay-for-performance programs that encourage provider quality and efficiency as well as patient-centered medical home programs. Continued efforts to reduce administrative costs.
“While we have been able to operate at a loss for a short period of time due to our financial strength, we cannot sustain significant operating losses,” the BlueCross document states.
The figures and comments provide a detailed explanation for BlueCross’ move to lower provider reimbursements in its TennCare network in East and West Tennessee by 14 percent.
Those reductions affect about 12,800 specialists as well as 19 hospitals in BlueCross’ Volunteer State Health Plan, or VSHP. The fee reductions are upsetting physicians such as pediatric surgeons. Some physicians, who complain they already lose money on TennCare, are threatening to leave BlueCross’ TennCare networks.
The briefing document for lawmakers, titled “VSHP Rate Reductions Q&As,” states the physician cuts will save BlueCross an estimated $25 million. An unspecified amount is coming in rate reductions at four hospitals in East Tennessee and 15 other facilities in West Tennessee.
But those cuts are only part of the costs BlueCross must do a better job controlling, according to BlueCross and state TennCare Bureau Director Darin Gordon. Among other focus areas: Boosting medical management, cutting durable medical equipment expenses, implementing emergency room diversion programs statewide and pushing patient-centered medical home programs.
Concerns over Blues’ network
Some fear that BlueCross’ TennCare provider network will be compromised severely if specialists leave. The insurer covers an estimated 450,000 people in East and West Tennessee.
“They claim they still have an adequate network, which I doubt very seriously because their network now is not really adequate,” said state Rep. Joey Hensley, R-Hohenwald, a Middle Tennessee physician who is chairman of the General Assembly’s TennCare Oversight Committee.
BlueCross spokeswoman Mary Thompson, who confirmed figures in the briefing document, said in an e-mail that cutting physician specialty reimbursement “is not something we want to do, but is something we have to do in order to position us so that we aren’t operating at a loss and can ensure our continued participation in the program.”
“These losses long term are not sustainable for any business,” she said.
So far, according to the VSHP document, specialty physicians’ acceptance of the reductions is running at 90-95 percent.
“Even with a 5 percent rejection rate, our network still remains 30 to 40 percent larger than our competitors,” Ms. Thompson said.
Mr.Gordon told TennCare Oversight Committee members last week that BlueCross’ provider network historically has been 40 percent larger than other TennCare insurers, known as managed care organizations.
“At this point they continue to meet network adequacy,” he said.
Rae Bond, executive director of the Chattanooga and Hamilton County Medical Society, said BlueCross’ cuts, outlined in a Dec. 31 letter to physicians, are only part of the challenges physicians face.
State lawmakers, acting on Gov. Phil Bredesen’s recommendation, last year approved 7 percent rate reductions to all TennCare providers. They take effect in July.
Ms. Bond said of BlueCross’ 14 percent reductions that “we just don’t think it’s a reasonable expectation to balance the needs of everybody’s budgets on the backs of those who ultimately are on the front line of taking care of sick folks.”
What happened
BlueCross has participated in TennCare since its 1994 inception. The losses, officials said, stem from TennCare’s transition between 2007 to January 2009 back to a “full risk” managed care Medicaid program.
TennCare shifted away from “full financial risk” to a fee-for-service plan in the 1990s as TennCare careened out of control. But now TennCare insurers accept a predetermined state “premium” or capitation rate for each enrollee they cover instead of payments based on the amount of care an enrollee receives.
TennCare put contracts in each of the state’s three grand divisions up for bid. BlueCross and AmeriChoice (United Healthcare) won competitive bids to handle TennCare enrollees in East and West Tennessee.
Mr. Gordon told the Tenncare Oversight Committee that BlueCross historically had not operated in West Tennessee. The company was faced with constructing a TennCare provider network from scratch while facing the reality that state premiums were not going up anytime soon.
Mr. Gordon said BlueCross offered specialists more on the assumption a number of other cost-cutting measures would pan out.
“Those things aren’t panning out at the level necessary to support the level of rate that they negotiated and so they’re trying to bring their expenditures in line with the premium.”
Moreover, Mr. Gordon explained in a later interview, there were other issues such as the H1N1 virus and “adverse selection” where more sick patients flocked to BlueCross’ TennCare. That was especially problematic in East Tennessee, Mr. Gordon said, noting the state increased BlueCross payments by about $9 million to help compensate.
Adverse selection also occurred in West Tennessee, Mr. Gordon said, but not to the extent it resulted in additional state payments.
Mr. Gordon said the premium is based on the anticipated cost of medical expenditures by actuaries, MCOs’ anticipated administrative costs and the cost of a premium tax on MCOs.
The MCOs must control costs through provider rates and utilization of services, he said. BlueCross enrollees’ utilization rates were also running too high, he said. Moreover, there were costs associated with having such a large provider network, he said.
Ms. Thompson said BlueCross also received a number of TennCare enrollees from the ranks of people who lost their jobs as a result of the recession.
“(T)hese individuals have tremendous pent up demand for health care,” she said.
Noting that BlueCross has been involved in TennCare since its inception – state officials said in 1994 they couldn’t have implemented the program without BlueCross – Ms. Thompson said the nonprofit insurer remains “committed” to the program.