Tufts Medical Vs. Blue Cross: The Hospital/Health Insurance Wars Get Nasty

Last Updated Jan 15, 2009 10:34 PM EST

As I noted in a roundup last week, Tufts Medical Center has thrown down the gauntlet to Blue Cross Blue Shield of Massachusetts by refusing to accept coverage by the state's largest health-insurance outfit unless the Blue agrees to hike reimbursement rates for Tufts doctors and the hospital itself. Tufts patients are already fretting that they'll have to find new doctors and might be shut out of the hospital if the two sides can't reach an agreement by Feb. 1.

Blue Cross Blue Shield faces a defiant Tufts Medical Center in a reimbursement standoffThe Mexican standoff is the latest in a series of increasingly acrimonious battles between insurance companies and hospitals as the latter flex their newfound clout to demand higher payments. The timing for insurers, of course, couldn't be worse, since they've already hiked premiums to unaffordable levels for many employers and individuals -- all due to rising medical costs, they say. Hospitals aren't much better off, thanks to losses on their investment portfolios and declining patient volume for minor and elective procedures.

All of which makes this one high-stakes game of chicken. Tufts is betting that a weakened Blue Cross will have to buckle or risk losing members to other insurance plans. In so doing, it hopes to emulate the much better known and powerful Partners Healthcare, a hospital chain anchored by Massachusetts General and Brigham and Women's Hospital. In 2000, Partners earned its spurs by threatening to reject coverage from the Tufts Health Plan (no relation to the medical center) unless it ponied up higher reimburserments -- which the insurer agreed to do within days after its members rebelled.

Of course, it's also a massive game of beggar-thy-neighbor. If hospitals like Tufts win higher rates, insurers like Blue Cross will simply raise premiums higher, more folks will drop their insurance or settle for skimpier coverage, unpaid medical bills will mount at places like Tufts, and hospital income will suffer -- thus kicking off another iteration of the same cycle, only with just about everyone worse off.

One other notable fact: Both Blue Cross and Tufts are nonprofit institutions. Yet they're both scrabbling for financial advantage vigorously enough to do any money-grubbing, for-profit healthcare capitalist proud.

Around the blogs: HealthBlawg's David Harlow argues that deregulation of hospital rates is one of the culprits here, and offers some additional background on the state's hospital-insurer wars. Meanwhile, Kevin Pho suggests that systems like Partners are just being savvy about marketing themselves to patients, and that Tufts Medical may have overreached because its hospital doesn't have the cachet of Mass. General and Brigham. (The trouble, of course, is that hospital reputation is only tenuously linked to quality of treatment for the majority of patients.)

More BNET Healthcare coverage on hospitals versus health-insurance companies (and each other):

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    David Hamilton is the assistant managing editor of CNET News. He has been writing and editing business and tech coverage for about two decades -- the majority of that at the Wall Street Journal in both Tokyo and San Francisco. He is a two-time winner of the Overseas Press Club award and has written for numerous magazines and blogs, including Slate, Science, VentureBeat, CBS Interactive's BNET, California Lawyer and the New Republic.