Tufts to break with Blue Cross

Hospital takes high-risk step over doctor pay

Tufts Medical Center has begun warning thousands of patients that Tufts doctors will no longer accept Blue Cross Blue Shield HMO coverage after Jan. 31, asserting in a letter that the state's largest health insurer refuses to pay Tufts doctors at a "reasonable rate."

The medical center is asking its patients to contact Blue Cross directly to "express your frustration."

The unusual move carries enormous risks for Tufts as well as for patients, who may be faced with the difficult choice of changing insurance coverage or changing hospitals in the next few weeks. The last time a hospital took the drastic step of canceling a major insurance contract, in 2000, worried patients were caught in the middle and thousands switched insurance carriers so that they could stay with their doctors.

But Tufts officials said they had no choice but to begin phasing out Blue Cross coverage after 11 months of what Tufts described as fruitless negotiations with the company. Ellen Zane, Tufts Medical Center's chief executive, said that Blue Cross pays her doctors and hospital 20 to 40 percent less than other major teaching hospitals even though she said Blue Cross ranks Tufts among the top three teaching hospitals in Massachusetts for overall quality. Unless Blue Cross offers Tufts a major payment increase before the end of the month, the Blue Cross HMO contract with Tufts doctors will end on Feb. 1.

"We hope that Blue Cross comes to their senses," said Zane, adding that her hospital has lost $25 million treating Blue Cross patients over the past five years and is on a course to lose $10 million more this year. "The place has been grossly underfunded."

A spokesman for Blue Cross Blue Shield of Massachusetts, Jay McQuaide, called Zane's termination threat a "negotiating tactic" that puts patients in the crossfire. He said Blue Cross has offered Tufts pay increases similar to other hospitals and physician groups, but Tufts wants a much higher increase.

"We're disappointed the doctors have chosen to go in this direction," said McQuaide. He said termination of the contract would affect patients treated by about 210 Tufts doctors. However, Tufts officials said at least 475 Tufts physicians would stop accepting Blue Cross HMO coverage under Zane's plan.

Robert Laszewski, a national healthcare consultant, said such "scare-downs" will be more common as communities grapple with spiraling medical costs that now consume more than 16 percent of the national economy. Blue Cross officials have made similar predictions in the past.

"Boston is the highest healthcare cost market in the US, so something's got to give," said Laszewski, president of Health Policy and Strategy Associates LLC of Alexandria, Va., "You either keep talking about it or you start dealing with it."

But Stuart Altman, a healthcare economist at Brandeis University and a member of the Tufts board of trustees, said the dispute reflects the failure of the free market to assure high quality, affordable healthcare. He said all hospitals should be paid the same rate, adjusted for the quality of their work and the complexity of their patients' care. Instead, pay is largely determined by negotiating power.

"Tufts barely survives," he said. "Sure it could do a better job and be more efficient, but the reality is we're paid significantly less than other teaching hospitals."

Tufts Medical Center, founded in 1796 by Bostonians including Paul Revere and Sam Adams, is the principal teaching hospital for Tufts University School of Medicine. Located in Chinatown, the hospital treats a higher number of low-income patients than most other teaching hospitals in the city and, partly as a result, it has struggled financially. The hospital lost $21 million in 2004, but posted a $13.5 million profit the next year after Zane became CEO.

Tufts Medical Center has been one of the losers in the deregulation of healthcare over the last decade, lacking both the size and political clout to negotiate favorable insurance contracts that would give the hospital a financial cushion. Blue Cross rates obtained by the Globe show that Tufts Medical Center is paid about 32 percent less than Brigham and Women's and Massachusetts General hospitals in Boston and 19 percent less than Beth Israel Deaconess Medical Center. All three are Harvard Medical School teaching hospitals.

But doctors at Tufts Medical Center say that their hospital deserves more respect, noting that the hospital runs one of the region's largest heart transplant programs, trains more primary care doctors than any other hospital, and treats more low-income patients under the state Medicaid program than any other hospital except Boston Medical Center.

And they say that Blue Cross's own quality measures show Tufts performs better than many teaching hospitals that are paid much more. A Blue Cross report on hospital quality released last month ranked Tufts Medical Center along with Beth Israel Deaconess and Baystate Medical Center in Springfield at the top among 12 academic medical centers statewide, Tufts officials said. Other statistics show that, on average, Tufts cares for sicker patients than the other teaching hospitals.

Blue Cross officials say that there are a wide variety of ways to measure quality and they questioned whether Tufts should be considered part of the elite. "We have not seen data to support their contention that they are a high-quality provider," said McQuaide.

The showdown between the two sides has been building for nearly a year as Blue Cross tried to persuade Tufts to sign a new type of contract under which the doctors have to meet aggressive quality and cost-control goals to earn their full payment. Tufts officials said they embraced the idea of the contract, but needed significant claims information from Blue Cross to identify the best ways to save money - help that Tufts said was not forthcoming.

Blue Cross had hoped to keep talking, but, by yesterday morning, Zane had had enough. She phoned Blue Cross chief executive Cleve L. Killingsworth Jr. to inform him that she planned to terminate the Blue Cross HMO contract unless Blue Cross offered significantly more money. Patients covered by a type of Blue Cross insurance called "preferred provider organizations" could continue to see Tufts doctors after the termination, but might have to pay a higher copayment.

Zane acknowledged that the decision to end the Blue Cross contract was a "heavy moment," but it's one she has been through before. In 2000, as chief negotiator for Partners HealthCare, owner of Mass. General and the Brigham, Zane oversaw the cancellation of Partners' contract with another insurer, forcing the company to give Partners a big rate increase within a matter of days.

This time, Zane represents a smaller hospital without the resources of Partners. But doctors at Tufts Medical Center are hoping that Zane still has the upper hand in the battle for public support that lies ahead. As Dr. Paul Summergrad, chairman of the medical center's physician organization, said, "As far as I know, no one has ever been cured in the executive offices of Blue Cross Blue Shield."

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