Millions of dollars at stake in Mission Health-Blue Cross battle
Cable-TV customers are used to financial disputes in which a content provider threatens to withhold favorite shows or the cable company says it will block a network. The disputes always get settled, often minutes before the final deadline.
The same thing is happening in Asheville, except this time, something much more important is at stake: health care.
Mission Health System, which has a 90% market share of hospital admissions in Buncombe County, says it won’t accept Blue Cross and Blue Shield of North Carolina insurance after Oct. 4. That means thousands of Asheville-area folks with Blue Cross coverage might pay more for out-of-network service at Mission, or drive to Hendersonville’s Pardee Hospital or elsewhere for Blue Cross-affiliated health care.
Cooler heads will inevitably prevail, because the two North Carolina health care powerhouses — both “not-for-profits” that take in billions of dollars — are so big they have to work together.
Blue Cross dominates North Carolina health insurance with a 72% market share, covering almost 4 million residents and reporting annual revenue topping $8 billion.
Mission’s revenue surged 59% from 2011-15 to $1.5 billion, aided by hospital acquisitions in Brevard, Cashiers and other towns. Western North Carolina no longer has any independent hospitals. “Given our demographics that are older, poorer, sicker and less likely to be insured than state and national averages, it is simply not possible to survive as an independent entity,” Mission noted in a statement, making the case for combinations .
The system’s “historical operating margin” has averaged 2.7%, over the last five years, below the average of hospitals with similar credit ratings, according to the statement.
Blue Cross says Mission’s pricing for births, CT scans and other procedures are the highest in western North Carolina and among the highest in the state, according to spokeswoman Darcie Dearth. Over the last three years, 43 N.C. hospitals have agreed to “help us rein in costs and make sure the increase of costs slows down. We are asking Mission to do the same.”
Blue Cross’ demands include payment rate reductions coupled with unrealistic “pay for performance incentives,” Mission’s Chief Financial Officer Charles Ayscue said in a press release. Even if the hospital met its targets, “we could at best get back to zero for three straight years,” he said.
The system is cutting $240 million in costs from 2014-18. That’s not enough for Blue Cross. “We need to hold the line for our customers,” Dearth says.
The public can’t tell who’s right, because pricing in health care isn’t transparent, notes Lynn Bailey, a health care consultant in Columbia, S.C. “You don’t know if they are a billion dollars apart, or $1.29.”
An interesting twist is Mission’s antitrust history. Its 1995 merger with St. Joseph’s Hospital created a monopoly in Asheville, prompting a state-approved rule limiting Mission’s profit margin and the number of doctors it could employ in certain categories. But in September 2015, the N.C. General Assembly repealed the rule with bipartisan support. Mission is spending $405 million to consolidate its two adjacent campuses by 2019.
Mission is the largest system to send Blue Cross a termination notice in recent years, though similar disputes have involved smaller hospitals in eastern North Carolina, Dearth says.
The dispute will get solved. Western North Carolina relies heavily on retirees, who require great health care, and Mission fills the bill: It regularly ranks atop Business North Carolina’s list of the state’s best hospitals.
Both have notable leaders: Blue Cross CEO Brad Wilson is retiring later this year after seven years in the post. Mission CEO Ronald Paulus ranks 13th on Modern Healthcare magazine’s list of 50 most influential physician executives.
But look for lots of drama because so much money is involved. “It’s always about money,” Bailey says. “These are like two dogs growling at each other, waiting to see who will be subservient first. Both sides need to go back and read their mission statements.”