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Blue Cross, Tufts Report Progress; Dispute Highlights Market Shifts

Posted on November 17, 2011

Fundamental change is painful.

Health Care Cost ControlThe contract dispute between Blue Cross Blue Shield of Massachusetts and Tufts Medical Center may be disconcerting for the thousands of people who may need to find a new doctor, but it represents an essential growing pain for a health industry adjusting to a new economic reality that puts the emphasis on affordable care.

The ultimate significance of the dispute is that doctors and insurers are trying to hammer out a market-based response to years of pressure by employers and consumers to control the spiraling cost of health insurance.

Blue Cross and Tufts announced Friday that they will seek agreement with the help of a mediator.

“Tufts Medical Center, its community physician network and Blue Cross Blue Shield of Massachusetts are committed to reaching agreement on a new contract,” the companies wrote. “Leadership of the organizations have spoken today and agreed to continue discussions and use a third party during this process.  Both organizations are dedicated to negotiating a contract that ensures our members and patients can continue their relationships with their doctors and their health plan,” the two sides said in a statement.

Progress came three days after Blue Cross and Tufts announced that they would stop doing business with one another on January 17 because they cannot agree on a new contract. Blue Cross said it is preparing to send notices of the termination to approximately 55,000 employers after negotiations reached an impasse late Monday.

If the two sides do not have a contact in place by January, employers will have to decide whether to retain existing coverage without Tufts or provide alternative insurance plans that provide access to Tufts and its 1,500 physicians. Some 88,000 Blue Cross patients have Tufts-affiliated primary care physicians.

The dispute revolves around ongoing efforts by Blue Cross and other insurance companies to limit or reduce the amount of money they pay doctors and hospitals for patient care, which accounts for 90 percent of insurance premiums. Blue Cross says that Tufts wants a nearly 8 percent increase in the first year of its contract, but the hospital maintains in a statement that it seeks a 3 percent increase for its acute-care facility and its doctors.

Tufts said its hospital and doctors are already a low-cost alternative to other academic medical centers in Massachusetts.

Blue Cross says it has already concluded contracts with 48 hospitals that will moderate health-care costs. The insurer said that Tufts earns a 15 percent profit on every Blue Cross subscriber it treats.

Blue Cross recently concluded a three-year agreement with Partners HealthCare System that will reduce anticipated Blue Cross reimbursements to Partners by nearly a quarter of a billion dollars between 2012 and 2014. The parties renegotiated the third year of an existing contract to reduce anticipated payments by $80 million next year and agreed to similar trims in payments during the second and third year of a new contract, for a total savings

The money represents about 3 percent of the insurance reimbursements Partners could have been expected to receive – more than $2.5 billion a year. Under the deal, annual rate increases that were projected at 5 to 6 percent for the next three years will be lowered to between 2 and 3 percent.

These developments are ultimately good news for employers whose ability to grow and create jobs has been crippled by annual health insurance increases of up to 40 percent. AIM Senior Vice President Eileen McAnneny said it best in an interview with radio station WBUR:

“There are no good guys or bad guys. It’s just we have to learn to do things differently and to provide care with a finite amount of financial resources,” she said.

AIM will keep employers updated. Members with questions about the dispute between Blue Cross and Tufts may contact McAnneny, (, 617.262.1180) or Sandy Reynolds, Executive Vice President of the AIM Employers’ Resource Group (, 617.262.1180).