A new deal between Blue Cross Blue Shield of Michigan and Spectrum Health finally brings West Michigan’s largest health system into the care network of a plan for seniors at the state’s largest health insurer.
Starting July 1, the value-based contract for Spectrum Health with Blue Cross Blue Shield’s Medicare Advantage PPO has importance for both sides as the population steadily ages and Medicare becomes a larger part of the payer mix for providers.
The deal may represent a new era of collaboration between Spectrum and Blue Cross Blue Shield. In the early 2000s the two organizations engaged in a highly public battle over reimbursement rates that nearly led to Spectrum Health dropping out of Blue Cross Blue Shield’s care network.
The contract also brings Spectrum Health into Blue Cross Blue Shield’s Medicare Advantage PPO care network after a lengthy absence. People enrolled in the Blues’ Medicare Advantage PPO can access care at Spectrum Health without incurring out-of-network costs.
Until now, the two were unable to come to terms, leaving Spectrum Health as the only health system in the state that lacked a contract for Blue Cross Blue Shield’s Medicare Advantage PPO.
“We now have all of the hospitals in Michigan under contract for the Medicare Advantage PPO, which is huge because that provides choice for the seniors,” said Jeff Connolly, Blue Cross Blue Shield’s senior vice president overseeing West Michigan and the Upper Peninsula.
The appointment of Tina Freese Decker as Spectrum Health’s CEO in 2018, plus public pressure to finally cut a deal, set the stage for the change. Connolly said Blue Cross Blue Shield more than two years ago embarked on an effort to finally work out a deal with Spectrum Health on the Medicare Advantage PPO.
“That has evolved into an understanding that health care is extremely expensive. We’re in this together, so as opposed to having opposing views, we come together and work together because we have a vested interest on behalf of the employers and members and patients,” Connolly said. “We’ve heard loud and clear for many years from the community — business leaders, community leaders, religious leaders — that Blue Cross and Spectrum need to have a collaborative relationship for the betterment of the communities at large. It makes sense.”
Spectrum Health is already a network care provider for Blue Cross Blue Shield’s commercial health plans and HMO subsidiary Blue Care Network’s Medicare Advantage plan. Under the latest contract, Spectrum’s 14 hospitals across the region and physician offices will accept the Medicare Advantage PPO.
Through the contract, Blue Cross Blue Shield and Spectrum Health agree to work together to improve quality and contain the cost of care. That type of arrangement for years has steadily gained traction in health care as the industry transitions to an economic model that compensates care providers based on quality, outcomes and costs, rather than the traditional fee-for-service models where hospitals are paid per procedure.
Some 80 percent of the hospital claims Blue Cross Blue Shield pays annually now occur under value-based contracts.
In an industry where there has always been natural tension between health systems and doctors that provide the care and insurance companies that pay the bills, the Medicare Advantage PPO contract could build momentum for a closer working relationship with Spectrum Health.
“This is not just one deal. It’s our expectation with our conversations that this will continue to evolve around a value-based relationship, which is what we’ve been aspiring to for the better part of a decade, and they’ve given us very positive feedback that directionally that makes sense,” Connolly said. “We have a complete agreement between our organizations to sit at the table together to collectively discuss and make decisions about what’s best for the community, as opposed to just what’s best independently for our organizations.”
The new arrangement between the two companies not only follows the new economic reality for health care, but also demographic trends. The population is aging, and thousands of Americans are turning 65 every day and enrolling in Medicare.
In a four-county region of West Michigan (Kent, Ottawa, Allegan and Muskegon), the percentage of the population 65 or older was about 16 percent as of 2019. That’s an increase of about five percentage points from the start of the decade, according to the latest edition of the HealthCheck report that Grand Valley State University’s Seidman College of Business publishes annually.
The demographic shift and aging population has care providers and insurers adjusting accordingly. As more Baby Boomers turn 65 each day, Blue Cross Blue Shield’s Medicare offerings will continue to evolve “to better support the provider environment,” Connolly said.
“Medicare Advantage will continue to be, and has been, increasingly a bigger part of the health care economic picture,” he said. “Given our size and our breadth in the Medicare Advantage space, there is a reason we need to come together at a minimum to provide choice for those seniors in the Medicare space.”