By Garrett Black - Senior Vice President of Health Services

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Containing health care costs: Children’s and Blue Cross

June 24, 2017

Health insurance premiums have been increasing because the cost of health care has been increasing.

On March 8, Children’s Hospitals and Clinics of Minnesota issued a surprise news release announcing its decision to cancel its contract serving children insured by Blue Cross and Blue Shield of Minnesota.

The decision was unilateral – and solely Children’s.  It was shocking, because Children’s contract with Blue Cross had no expiration date. Such contracts are designed to ensure providers and insurers can negotiate without impacting patients– and negotiations were ongoing. Children’s could have continued to serve Blue Cross members at existing in-network payment rates indefinitely.

Children’s was seeking to increase its charges to Blue Cross, both to members in the state’s Medicaid program and to those insured through an employer or who are self-employed. Blue Cross sought to reduce its payments under Medicaid, but recognizing the specialized services Children’s provides, we offered above-market rates, plus a modest price increase on all our other employer-covered and individual members. That’s the offer Children’s rejected, putting thousands of Children’s patients at risk of losing access to their doctor.

Children’s has since escalated the stakes by sending ominous letters to patients and their families. They’ve also lobbied employers and others to pressure Blue Cross. That’s where things stand, and we want you to know.

What Minnesotans should also know– and now do know– is why health care costs continue to rise. It’s because some providers take the approach of passing costs on to people who pay the premiums rather than focusing their energy on reducing the underlying costs of care. Do we want Children’s Hospitals in the Blue Cross network?  Of course.  They provide great care to children.

Should we therefore be willing to pay Children’s price– whatever the increase may be?

That answer is more complicated. Children’s is among Minnesota’s most profitable care systems. The Star Tribune reports Children’s Hospitals and Clinics of Minnesota, a non-profit network of 10 community clinics with hospital campuses in St. Paul and Minneapolis, posted 2016 operating income of $36 million on $880 million in revenue. Blue Cross and Blue Shield of Minnesota, the state’s largest non-profit health insurer, posted an operating loss of $322 million on $12 billion in revenue.

If your insurance premiums and out of pocket costs are already straining your family budget, you’re probably hoping your insurer is helping hold the line on rising health care costs– and Blue Cross is trying. But if we accept the increases Children’s proposes, your insurance premiums would continue to rise faster than the cost of other goods and services you buy every day.

Contract negotiations are part of health care. Hospitals, clinics and insurers work to negotiate mutually agreeable financial terms, and in recent years there have been great strides towards linking payments to greater value such as improving quality and managing the cost of care. That’s expected. But all parties should be expected to do so without scaring patients. Most negotiations are resolved thoughtfully and reasonably, and Blue Cross’ goal is always to work with providers of care to reach agreements. We never want to see members, patients, employees, or others dragged into the middle of a negotiation.

But sometimes there’s an impasse.

Blue Cross remains focused on getting a fair deal done.  We want Children’s as an in-network provider. But it’s possible we may not succeed. In that event, we want members and the community to know what could happen and why.

Children’s contract cancellation wouldn’t take effect until July 5, and Blue Cross is working diligently with the clinical leadership of Children’s on transition of care plans to ensure our members continue to receive the care they need. We’re also encouraging our members to speak with their pediatrician or family physician now about how best to maintain their child’s treatment or, if necessary, about a referral to another in-network physician.

As health plans and hospitals and clinics wrestle with how to make healthcare more affordable, we sometimes find ourselves on the front lines of the health care cost battle.

No matter what happens, Blue Cross remains committed to working to ensure that no member goes without the care they need.

Garrett Black is the senior vice president of health services at Blue Cross and Blue Shield of Minnesota

4 thoughts on “Containing health care costs: Children’s and Blue Cross”

  1. Rachelle says:

    So what if childrens is the only clinic that can handle my sons genetic disorder as there aren’t many clinic in the united states that are familiar with 22q deletion. How do you answer that question. Is he suppose to suffer??

    1. Rachelle, you can call our dedicated line for Children’s Minnesota questions at 855-579-7657 to discuss the ongoing care options available for your family. More information is also available on our website:

  2. Erin Margaret says:

    Hey blue cross- what is the contracted rate that Children’s has for services with other Medicaid, private pay,and commercial insurance plans.

    How have providers been receiving payments from BCBS? How many claims are rejected that shouldn’t be? – there is always more to the story.

    In the case of BCBS It’s not just the “money” but the provider service relationship –

    1. Erin, we do not disclose current rates nor rates in negotiation. Questions we can answer are on the Children’s Minnesota Updates page on our website:

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