"The Community Health Trust of Maine"
A Bold Alternative to the Proposed Sale of Blue Cross

by

Bruce D. Cummings

Another venerable Maine institution, Blue Cross and Blue Shield (BCBSM), stands at the brink of becoming the latest casualty of change in ownership, ushering in with it: forfeiture of non-profit status, acquisition by a fast-growing Indiana firm, and further erosion of control by Mainers in their healthcare decisions.

It doesn’t have to be this way.

Blue Cross officials have contended that BCBSM needs additional capital and more flexibility to compete in the marketplace. They’re right. But rather than selling out to Anthem, a better choice is to recapitalize and remake BCBSM as a state-chartered corporation. By being converted to a quasi-public mutual corporation, BCBSM would receive an infusion of additional capital coupled with more flexible underwriting principles, both of which are presumptively necessary and concomitant changes to making its successor – we could call it, the "Community Health Trust of Maine" -- economically viable and attractive to patients, purchasers, and providers alike. One need not look far afield for inspiration. The Maine Employers Mutual Insurance Corporation (MEMIC) stands as a relevant and successful precedent. Where MEMIC helped to improve Maine’s business climate and insurance affordability in the worker’s compensation sphere, the Community Health Trust of Maine (CHTM) would perform a similar role and public benefit with regard to health insurance.

The future mission and direction of the Community Health Trust of Maine would be shaped by the following charter principles contained in legislation that would be necessary to effect the Trust’s creation:

• Promote access to affordable healthcare coverage for all Maine citizens.
• Keep premium dollars, healthcare services, and clinical decision-making in Maine.
• Provide "world class" customer service to patients, employers, and providers.
• Promote and expect "best practices" – clinical and administrative – among participating providers.
• Serve as an integral component of state and regional economic development initiatives.

Because of its unique status, CHTM would bear both special responsibilities and dispensations. Let me illustrate how the preceding charter principles would find expression in the Trust, thereby distinguishing it from other health insurers:

1. Governance. CHTM would be governed by a Board of Directors of 15-20 members comprised of Maine providers and public and private purchasers, perhaps something like this: 25% of the Board nominated by physicians; 25% by hospitals and other provider entities; 25% by Maine government; and 25% by business and industry. To ensure exquisite sensitivity to patient issues and concerns, CHTM Directors would be required to be insured by and receive services from the Trust; that is, they must be patients, too. In most other situations, the insurer, its participating providers, patients, and the purchaser of coverage all move in different directions with often sharply divergent incentives and expectations. Purchasers, providers, patients, and insurers aren’t on the same team; indeed, they’re not even playing in the same game with a mutually agreed upon set of rules. Not surprisingly, therefore, mistrust and poor communication abound. With the CHTM, Maine doctors, hospitals, state government, and businesses would be joined in a common rather than disjointed enterprise to serve Maine residents. Rather than "them and us", CHTM would be informed by the guiding principle of "we".
2. Targeted policies. As an adjunct to state and regional economic development initiatives, CHTM would be expressly authorized and expected to offer low and moderate cost products. Small employers and affinity groups – trade associations, professional societies, credit unions, religious organizations – would be favored markets to reach and insure the many Maine residents who do not have and cannot afford a full benefits package. right now, small employers and start-up companies – the backbone of the Maine economy -- are largely ignored by commercial insurers. Due to its mandate to bolster economic development -- and in order to provide low and moderate cost policies to persons and companies who might otherwise not be able to have or offer any coverage -- CHTM would be exempted from the mandated benefits provisions administered by the Bureau of Insurance and required of other insurers.
3. Medicaid integration. One of the seemingly intractable problems in Maine and other states is the care of Medicaid patients. Some physicians do not accept Medicaid patients or limit the number of Medicaid patients in their practices because of reimbursement which is well below the actual cost incurred in caring for the patient. As a result of inconsistent physician participation in the Medicaid program, good access to routine or primary care becomes more problematic for Medicaid patients, putting them at greater medical risk and the public at risk for greater shifted costs. A cost-effective solution to this phenomenon is to require the Maine Bureau of Medical Services (Medicaid) to contract exclusively with CHTM for Medicaid clients; and, to compensate CHTM’s providers in the same fashion and level as all other CHTM enrollees.
4. Lessened hassle factors. In Maine and across the nation, physicians, hospitals, and other providers are being burdened by increasingly intricate billing protocols coupled with late payments from insurance companies. While the forms and formats differ from one insurer to the next, the hassles are seemingly constant. Providers and patients alike are bedeviled by complicated, time-consuming prior authorizations and referral management processes. By contrast, a hallmark of CHTM would be to provide prompt payment and hassle-free claims administration. Medical management and utilization review would be overseen by Maine-based practicing physicians. Billing protocols would be made simpler and more consistent. Indeed, to reduce the mind numbing complexity and endless variations among insurers with respect to billing forms and formats, all insurers active in Maine would be required to adapt their billing forms and processes to conform with CHTM’s. We should expect and would receive prompt, courteous treatment from CHTM staff because we -- the patients, purchasers, and providers of Maine – are the owners of the Trust.
5. Universal provider participation. As part of its mandate to promote access to care, CHTM would be open to all Maine hospitals and physicians. Indeed, all State licensed hospitals and physicians would be required to apply for and – if approved by the CHTM Credentials Committee -- to participate in CHTM. Thereafter, continued participation by providers in CHTM would be subject to satisfactory performance vis-a-vis clinical, economic, and patient satisfaction measures approved by the CHTM Board of Directors. So that CHTM can preserve a leading edge standard and demonstrate value to its purchasers and patients, these criteria would be rigorous in nature, continuously refreshed, and assiduously applied. Providers not able to meet CHTM’s high performance standards would be dropped from its panel. Certain legal protections, including immunization from antitrust sanctions, would need to be accorded to CHTM in order for the principles of universal participation and of universal billing procedures (see #4) to be realized.
6. Quality improvement. Another distinguishing feature of CHTM is its "best practices"/research mandate. CHTM would become responsible for developing the data gathering, data repository, and analytical functions necessary to allow its stakeholders – the providers, purchasers, and patients of Maine – to monitor the performance of CHTM; to make informed policy decision; and, to assure that Mainers received the best possible care at the most reasonable cost. Appropriate reporting to the public on the clinical and financial performance of CHTM and its providers would be a key feature and seminal duty of the Trust. The highly respected, nationally known Maine Health Information center (MHIC) would be given preferential consideration in managing CHTM’s data, but ownership of the database per se would reside with CHTM.
7. Payment to providers. CHTM would make two payment methods available to its participating providers: fee-for-service and risk-based. Providers would be able to select either arrangement; moreover, they would be allowed to change payment tracks at periodic (perhaps, annual) intervals. Risk-based arrangements would be given preference by CHTM so as to encourage dynamism in the marketplace, continuing innovation with respect to treatment protocols and care delivery, and affordable premiums. Regardless of which payment method they selected, CHTM providers could not balance bill patients.
8. Disposition of budget surpluses. Gains from CHTM operations would be controlled by the CHTM Board – just as would be the case with any other corporation. CHTM would be allowed to retain or to distribute these operating gains at its discretion up to certain limits set by state statute. Retained earnings would be used for working capital, reserves, program/service enhancements, and/or pursuit of CHTM’s other charter principles such as support of economic development initiatives or promoting access. CHTM would also have the prerogative – indeed, an expectation -- to return a portion of its earnings back to stakeholders in the forms of lower premiums for purchasers, bonuses to its providers for superior performance, and/or any combination of these.

So, what are the advantages the CHTM model for its major stakeholders?

• Purchasers would benefit from CHTM because it would offer them substantially greater predictability about and control over premium rates. There would be no surprises, no dramatic price fluctuations in premium levels at the end of the underwriting cycle. They would have greater confidence in the value of the services being purchased because the quality and reliability of research data would be better and more insightful than anything available today. Artifacts in the pricing of health services, especially around specialty care, would be eliminated.
• Government would benefit because CHTM offers a creative approach to better enfranchise the Medicaid population without creating a new bureaucracy.
• Maine’s providers would have a say in the operation of the corporation, would retain control of clinical-decision making, and would receive fair compensation and prompt payment for their services. The provider-equivalent of "the two Maines" – yes, it’s at play for doctors and hospitals, too – would be dissolved.
• Residents would have a wider choice of and greater access to healthcare providers. Health insurance options would be more numerous and more affordable than is possible right now. In addition, no other state in the nation could boast having both quasi-public worker’s comp and health insurance corporations, thereby giving Maine extraordinarily powerful instruments for targeting high quality, well considered economic growth. Effective economic development means more high paying jobs, a more flexible and resilient economy, more Mainers with good health insurance, and a broader tax base.
• All of us – purchasers, providers, and patients – would have a sense of ownership of and commitment to CHTM’s processes and products. The healthcare environment in Maine would be at once more stable and vibrant; more humane and disciplined; more affordable and equitable.

Maine residents have been surprisingly quiet in the face of the expected purchase of their Blue Cross and Blue Shield company by Indiana-based Anthem. Perhaps this apparent lack of concern arises because the public feels distant from and uncomprehending of the health insurance world. Perhaps it is because we have grown accustomed to seeing so many familiar businesses lose or at least substantially alter their Maine roots, sometimes disappearing completely from the state’s economic and social landscape.***

Perhaps it is because the public believes that the creation of a charitable foundation, a required byproduct of the acquisition of the nonprofit Blue Cross by for-profit Anthem, will fully compensate Maine for its loss. But let’s apply this same logic to another, more accessible (if fanciful) transaction. Suppose for a moment that the Baxter State Park Authority were to announce plans to sell Governor Percival Baxter’s legacy including Mt. Katahdin, the essential and enduring landmark of Maine, to the good people of Indiana. Why not? After all, Maine could use the infusion of capital to improve its public infrastructure (think of this as a downpayment on the east-west roadway proposition). Hoosier State residents -- for whom mountains and clean surface water are novelties -- might be willing to put up $120 million (the amount Anthem has offered to acquire BCBSM) to add a little elevation and pristine water from Maine to their own otherwise uninteresting terrain and turbid lakes and streams. Imagine Baxter Park Authority officials deflecting criticism with: "Hey, the park will still be here, even if Maine no longer owns it. Sure, Indiana will now set the fees, determine land use, hire the staff, and control access to the Park. But, don’t worry, officials from Indianapolis have assured us that they won’t be making any substantive changes to Baxter -- even after paying the $120 million. Besides, we would set up a charitable foundation from proceeds of the sale of Baxter to Indiana so that more Mainers could use our other state parks…"

Would Maine’s citizens find this arrangement odd, even disturbing? Would we speak out?

Whatever the basis for the deafening silence, the proposed acquisition of Blue Cross will not be good for Maine patients, those who pay the premiums, or the doctors, hospitals, and other providers who care for Maine residents. As a general rule – MBNA appearing to be a notable exception -- out-of-state ownership is less likely to produce the level of commitment to civic duty and community life than companies whose owners reside in Maine, who share our traditions (and our winters), whose children attend Maine schools, who have a stake in the quality of life and vitality of the towns in which they reside. While the sale or transfer of Maine-based businesses may be good for shareholders, they seldom benefit employees or communities. These principles, I submit, are just as pertinent to health insurance as they are to any other sector of our economy.

Maine has been a leader in so many areas – conservation of resources/recycling, environmental protection practices, a statewide EMS/trauma care system, smoke-free public venues, vocational/technical education, school reforms, prenatal care, reducing unintended pregnancies among teens. Why, then, should it be a passive observer of bad trends and ill omens in health insurance? ****

If the admittedly ludicrous example of the "proposed" sale of Baxter State Park to the State of Indiana would move us to act, what are we waiting for in the very real case of selling Blue Cross/Blue Shield of Maine to Anthem? If ever there were a time for our state motto, Dirigo ("I Lead"), to be animated anew for the benefit of present and future generations of Maine people, this is it. If ever there were an opportunity for this Governor and this Legislature to confer upon Maine residents a legacy as far reaching, lasting, and dramatic as the creation of Baxter Park decades ago, the transformation of Blue Cross and Blue Shield of Maine (BCBSM) into the Community Health Trust of Maine (CHTM) is it.

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* For example, it is a lot less expensive to treat someone’s hypertension or diabetes with routine office-based care than to take of that same patient in a hospital emergency room or ICU who has developed complications arising from untreated hypertension (e.g., stroke, kidney failure) or untreated diabetes (e.g., peripheral vascular disease, blindness).

** Physicians opting for the fee-for-service model would be compensated according to a Resource-Based Relative Value Scale (RBRVS) method. To eliminate inconsistent and inequitable payment practices, a single conversion factor would be used for primary care physicians and specialists alike.

Hospitals opting for the fee-for-service model would be compensated according to common, universally applied fee schedules, Diagnostic Related Groups (DRG’s) for inpatient admissions, and/or Ambulatory Payor Groups (APG’s) for outpatient services. These extant categories may be modified to promote the provision of care in the least restrictive, most clinically appropriate setting. For example, hospitals might be eligible for up to two adjustments to account for differences in the severity of illness among patients: general/overall (especially relevant to referral hospitals which care for the most complicated medical conditions) and patient/episode-specific. To preserve access in rural areas and to encourage small rural hospitals to concentrate on essential, primary care services (rather than dabble in more remunerative procedure-oriented, interventional care), the Trust would pay federally recognized Critical Access Hospitals on the basis of their reasonable costs. Recognizing that all Maine hospitals must meet compete on a regional and even national basis to attract and retain key medical, technical, and administrative personnel; and, to avoid furtherance of the "two Maines" syndrome, there would be no intra-state wage/salary index adjustments.

*** Recent case examples of corporate changes which have had or are likely to produce significant ramifications for Maine people include Bass Shoe in Wilton (acquired by Chesebrough, then later closed), Hannaford Brothers of South Portland (a firm with a sterling reputation just acquired by the bigger-but-not-better Food Lion chain), Hathaway Shirt in Waterville (purchased by Warnaco, then closed, then subsequently reincarnated by a Maine-based syndicate led by former Governor John McKernan), Scott Paper in Winslow (purchased by Kimberly-Clark, then later closed), S.D. Warren Paper in Westbrook (acquired by Sappi, a South African concern, now being phased out), Dexter Shoe (sold to Berkshire-Hathaway, now shedding jobs in Piscataquis County), and Portland’s UNUM (newly merged with Tennessee-based Provident.)

**** On the health insurance front, there is disquieting ferment. In addition to the proposed Blue Cross-Anthem deal, Tufts Health Plan, one of the top rated non-profit HMO’s in the country, has announced its intention to exit the Maine market as of April 1, 2000. It is conceivable that Harvard-Pilgrim, another of the leading non-profit HMO’s, may follow, thus leaving "unchecked" the major for-profit insurers: Cigna (which last year acquired Healthsource); and, Aetna (still assimilating U.S. Healthcare and Prudential into its midst).

Bruce D. Cummings, MPH
Chief Executive Officer
Blue Hill Memorial Hospital
Blue Hill, Maine 04614
207-374-2836
October 12, 1999