Will new payment model financially ruin small hospitals?

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Although Blue Cross Blue Shield of Minnesota has already postponed the implementation of its controversial new payment model for small, rural hospitals, it is still facing strong opposition from those providers being forced away from fee-for-service reimbursements, reported AIS Health.

The new payment system lowers payments to about 50 hospitals by hundreds of thousands of dollars, FierceHealthPayer previously reported. Blue Cross says it will phase in the new model, which will "improve quality and outcomes, better coordinate care and control spending," from this fall through early next year.

What's more, the model will level out wide price variations among the small, rural hospitals that can exceed 500 percent for common procedures, says Blue Cross Spokesperson Jim McManus.

"We currently pay critical access hospitals at nearly twice the rate (187 percent) that Medicare pays for the same services," McManus said. Plus the insurer pays between $15,000 and $48,000 for knee replacements and $2,500 to more than $25,000 for appendectomies.

But the Minnesota Hospital Association continues pushing back against transitioning to the new payment model, claiming it will force rural hospitals into financial uncertainty. For example, the new payment model could make Tri-County Health Care, a 25-bed rural hospital in central Minnesota, lose $800,000 each year, amounting to 1.6 percent of its $50 million net operating budget, Joel Beiswenger, Tri-County CEO, told AIS Health.

"One of the challenges I've told Blue Cross is not every critical-access hospital is the same," Beiswenger says. "They're trying to normalize payments across the state. That tells me they want more predictable payment flow to sell to their insured populations across the state ... but there is a cost shift."

To learn more:
- read the AIS Health article

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