Minnesota Insurer Moves to Incentivize Hospitals and Clinics

Published May 31, 2016

Minnesota health insurers are boosting incentive-based payments to hospitals and clinics that can demonstrate progress toward efficiency and cutbacks on waste.

Blue Cross and Blue Shield of Minnesota, which covers 2.7 million people, is contracting with Essentia Health, Fairview Health Services, HealthEast Care System, and Allina Hospitals, the four largest health care systems in Minnesota, to increase the use of incentive-based payments in an effort to improve care while controlling costs.

According to Patrick Geraghty, chief executive of Blue Cross and Blue Shield Minnesota, this is intended to compensate for provider losses when performing fewer procedures.

“[Providers] have said that if they become more efficient, they’re taking money out of their own pockets,” Geraghty said in a press conference. “Going forward, as the system generates lower costs, they will share savings.”

Still Third-Party-Based

Although rate increases will now be based on cost savings and quality measurements, Minnesota’s fee-for-service payment system will stay in place, notes John LaPlante, a policy fellow at the Minnesota Free Market Institute.

“Will this new approach reduce spending? Not necessarily,” LaPlante said. “It might just set off another cat-and-mouse game with reported numbers as doctors try to keep their income levels up.”

“Blue Cross says it hopes to keep medical inflation in check so that prices rise only to the extent that all prices rise,” LaPlante explains. “It’s understandable that they would say that, but the best means of keeping inflation in check in any industry is for purchasing power to be dispersed among millions of consumers. Financial decisions in health care are currently driven in large part by the decisions of a few, since the real costs are hidden from the ultimate customers—patients.”

LaPlante notes the Centers for Medicare and Medicaid Services will be following this path for some health care systems in 2012 under President Obama’s federal health care law.

“I don’t know how much the federal health reform is driving this move by Blue Cross,” LaPlante said. “But while ‘paying for value’ sounds great, it’s simply another attempt to fix our overreliance on a third-party payment system. If more and more people get squeezed into government health care, or indeed any one means of paying for health care, the definition of ‘value’ starts to become politically driven.”

Sarah McIntosh, esq. ([email protected]) is a constitutional scholar who writes from Lawrence, Kansas.