Blame game underway as Blue Cross, Children's fail to reach a deal

Children's Hospital
The exterior of Children's Hospitals and Clinics of Minnesota in St. Paul.
Yi-Chin Lee | MPR News 2014

Updated: 6:50 p.m. | Posted: 8:52 a.m.

People with Blue Cross insurance coverage are facing potentially higher costs for care at the state's largest pediatric hospital.

Blue Cross and Blue Shield of Minnesota and Children's Minnesota issued statements Wednesday saying they were unable to reach a new contract by Wednesday's deadline. The dispute affects more than 66,000 patients with employer-provided and individual coverage plans.

Blue Cross says more than 4,000 of those members will temporarily continue care at Children's, but will be transitioned to other pediatric hospitals when they can be safely moved.

Children's blamed the impasse on Blue Cross demands that the health system said would have resulted in a substantial Medicaid reimbursement cut and a stop to inflationary increases.

"On the Medicaid side, we already lose 30 cents on the dollar," said Marc Gorelick, president and chief operating officer for Children's Minnesota. "The reductions that they're demanding would just put us in a situation where we would be forced to make choices about cutting other vital services so we can continue to provide that care."

Bob Bonar, CEO at Children's Minnesota, said in a statement that Blue Cross gave the hospital an "impossible ultimatum."

"We're disappointed that Blue Cross has been unwilling to find common ground given the scale and scope of pediatric services that we provide in this community," he said.

Blue Cross says it's Children's that is being unreasonable. The hospital is already among the state's most profitable and wanted bigger reimbursement increases than other Minnesota hospitals and physicians, Blue Cross said.

"What we're asking for is just a fair market rate," said Glenn Pomerantz, chief medical officer at Blue Cross. "What we're trying to do is just you know strike a fair deal. So that we can keep premiums affordable and so that we can all, you know, have health insurance coverage. And the cost pressures are very significant."

Blue Cross accounts for about $300 million in Children's annual revenue. The insurer said in a statement that its nonprofit mission means it aims to get members more affordable care.

"Unfortunately, Children's has instead been focused on an expensive marketing campaign asking patient to pressure Blue Cross into allowing Children's to charge higher prices for their services," said Garrett Black, senior vice president of health services at Blue Cross.

The contract impasse involves Children's hospitals in Minneapolis and St. Paul, a special care nursery in Coon Rapids, a dozen primary care clinics, six rehabilitation facilities, the Minnetonka Ambulatory Surgical Center and home care services.

Children's said emergency departments will still provide care, but "families are encouraged to consult with their carrier to understand the impact on their out-of-pocket costs," adding that in many cases costs will be higher.

Blue Cross said it would transfer patients to the University of Minnesota Children's Masonic Hospital, Gillette Children's Specialty Healthcare, Mayo Clinic Children's Center, Sanford Children's Hospitals and Shriners Hospitals for Children. The insurer said 1,200 pediatricians and pediatric nurse practitioners remain in its in-network coverage.


University of Minnesota School of Public Health professor emeritus Dan Zismer said he is not surprised to see both sides go public.

"When there is an impasse, sometimes it spills over into the public and and usually it's initiated by one and then the other has to follow suit," he said. "Because at that point somebody's looking for the leverage of the public opinion."

Public opinion may or may not help the two sides settle their differences. But Zismer expects Children's and Blue Cross will reach an accord eventually because they are to important to each other — and the state's health care system — to remain at odds.

Both Blue Cross and Children's said they expect negotiations to continue.