Insurance Plans Restricting Care to Low-Cost Hospitals Well Received by Employers

Low-cost hospitals are increasingly being recognized as one strategy to cut healthcare costs, with many providers and payors unveiling new initiatives to steer patients away from high-cost hospitals and redirect them to those of lower-cost.

Blue Cross Blue Shield of Massachusetts launched the Blue Cross Hospital Choice plan last month, and it has already seen a favorable reaction from hundreds of small businesses in the area, according to a Boston Globe report. Nearly 30 percent of BCBS small business and individual customers who renewed in January enrolled in the BCHC plan.

Under the plan, members will face extra charges if they go to one of 15 higher-cost hospitals — such as an extra $1,000 for an inpatient stay or outpatient surgery and $450 more for an MRI. Companies that sign up for the BCHC plan receive a 4.5 percent increase for their first quarter premium opposed to a 10 percent increase. Several high-cost hospitals are teaching institutions, but smaller hospitals also were categorized as high-cost due to their geographical dominance or other factors. The 15 high-cost hospitals in Massachusetts, according to BCBS of Massachusetts, can be read here.

Along with the extra charges, Andrew Dreyfus, the CEO of BCBS Massachusetts recently said hospitals and physicians may face level or reduced payments if they do not better contain healthcare costs. He encouraged a shift to a global payment plan, or fixed-dollar payments for the care patients receive in a given time period, such as a month or year. This payment model places the provider at financial risk for both the occurrence and management of medical conditions.

The emphasis on low-cost care is aligned with many hospital and health system transitions into accountable care organizations. Recently, Ralph de la Torre, CEO of Massachusetts-based Steward Health Care System, discussed his ideas to stress community hospitals in Steward's ACO model. Mr. de la Torre said the for-profit parent of Boston-based Caritas Christi Health Care plans to drive down healthcare costs by encouraging patients to visit community hospitals for routine care and teaching hospitals for the most complex care.

Those hospitals deemed "high-cost" are not the only ones facing competition, however. Intensive outpatient care centers to target "hot spot" patients, or those who are chronically ill, are an emerging trend in the effort to cut costs. Such centers, however, pose a threat to hospitals, causing them to lose revenue.

The health-benefits program of AtlantiCare Medical Center in Atlantic City, for instance, started a Special Care Center in 2007 to target hospital employees' most expensive medical bills and hospitalizations, according to a New Yorker article. The hospital's health funds pay physicians a flat monthly fee to treat patients and patients are given unlimited access without co-payments. Compared to a similar, high-need group in Las Vegas, the Atlantic City employees experienced a 25 percent decrease in healthcare costs due to the Special Care Center.

Read more about initiatives to curb healthcare costs:

- Study: Lower Cost Does Not Mean Lower Quality in Hospital Care

- Blue Cross Blue Shield, Caritas Christi Sign Contract for Global Payment System

- More Than Half of Healthcare Leaders See Shared Savings as Very Effective Strategy for ACOs

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