Consultant's reports suggest Horizon BCBS added largest, priciest hospitals to Tier 1 before evaluating cost, quality: 10 things to know

Horizon Blue Cross Blue Shield of New Jersey's OMNIA Health Plans place hospitals in two tiers based on quality and cost, but documents obtained by a local news outlet suggest Horizon wanted two hospitals in its more desirable Tier 1 before a consultant was even hired to evaluate their quality and cost, according to NJ.com.

Here are 10 things to know about OMNIA Health Plans and findings from the newly uncovered reports:

1. NJ Advance Media, which provides content to NJ.com, and several other newspapers sued to obtain copies of confidential reports prepared by consulting firm McKinsey & Co. The documents contain information about how Horizon crafted its tiered insurance products, which were rolled out in 2015.

2. Hospitals face a major boon or blow depending on their tier. If policyholders want the lowest out-of-pocket costs compared to other Horizon plans, they must visit one of the 36 hospitals in Tier 1 that agree to accept lower reimbursements from Horizon in exchange for more patients. For perspective, there are 72 hospitals in New Jersey. In 2018 and under the OMNIA Gold plan, policyholders face an individual deductible of $1,000 for Tier 1 providers versus a $2,500 deductible for Tier 2 providers.

3. The newly revealed documents from McKinsey trace the consulting firm's recommendations made over 10 weeks in 2014. The payer and consultant decided on six characteristics, weighted differently, to classify hospitals as Tier 1 or 2. Those are: leadership mindset; clinical quality; consumer attractiveness; financial resources committed to population health; service offering across the care continuum; and scale. Leadership and quality each account for 25 percent of the score.

4. In 2014, before bringing on consultants to evaluate hospitals' classification to tiers, Horizon executives had discussed forming a value-based care partnership with Barnabas Health and Hackensack University Health Network. (Both of these systems have since merged with other New Jersey providers: Barnabas merged with Robert Wood Johnson Health System in 2015 to form RWJBarnabas Health, and Hackensack merged with Meridian Health in 2016 to form Hackensack Meridian Health.)

5. "They had already decided they wanted Barnabas and Hackensack to be the partner hospitals," says Michael Furey, the attorney representing two hospitals suing Horizon for relegating them to Tier 2. "They told the Legislature and the public they selected the best hospitals in the state who provided the lowest-cost care, and they said they did it on the basis of what McKinsey told them. But we uncovered they were already having these discussions in 2013 and early 2014 before they began the selection process."

6. A chart in the March 2014 draft of the McKinsey report shows Hackensack University Medical Center as the most expensive hospital in the state, 30 percent higher than average. Robert Wood Johnson University Health in New Brunswick, St. Barnabas Medical Center in Livingston and Atlantic Health System in Morristown were not far behind. All of them went in Tier 1.

7. Mr. Furey represents 451-bed Valley Hospital in Ridgewood, and 284-bed CentraState Medical Center in Freehold. They claim Horizon "breached its duty to act in good faith" by placing them in OMNIA's Tier 2, thereby costing them millions of dollars. Holy Name Medical Center in Teaneck was also a plaintiff in the case until Tuesday, when it and Horizon announced they had reached a confidential settlement.

8. Mr. Furey said that although quality and leadership account for half of the algorithm that decide a hospitals' tiering, the remaining four factors — consumer attractiveness; financial resources committed to population health; service offering across the care continuum; and scale — are skewed in favor of large hospitals. For example, consumer attractiveness favors big-name institutions with larger marketing budgets for aggressive campaigns, he said.

9. There are 400,000 members holding OMNIA policies this year, up from 238,000 in 2017, according to the NJ.com report.

10. "OMNIA members now have the power to not only choose their provider, but also the cost of their healthcare," Horizon spokesperson Tom Wilson told NJ.com. "The power of OMNIA is that its members have the option of selecting a Tier 1 provider with lower associated out-of-pocket costs or a Tier 2 provider whose out-of-pocket costs are similar to the broad-based plans that members were used to and that are still offered by Horizon. This radical shift in the healthcare paradigm is exactly what Horizon members needed to combat the ever-rising cost of healthcare."

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