Flack continues as Blue Cross sets two-tiered hospital network.

Blue Cross of California ended months of anxious anticipation when it announced selections for its new two-tiered hospital network. But criticism of the Woodland Hills-based health plan's already-maligned selection process has only grown since the hospitals were named earlier this month.

Industry observers charge that the revamped network, which places hospitals in two tiers, was based more on the hospitals' willingness to cut prices rather than the quality of care provided. The result, they say, is to put more pressure on facilities placed in the second tier to remain financially stable.

Blue Cross enrollees visiting second-tier hospitals will be forced to make larger co-payments that will add $250 to $300 per stay, officials said. Those hospitals will also be denied access to Blue Cross' computer network and be placed on longer payment cycles than the first-tier hospitals.

"We will not be focusing as much on building long-term relationships with tier two hospitals as we will with tier one," said Ferial Bahremand, vice president of Blue Cross' regional network development and management.

"What this whole scheme does is take away the last vestige of cost-shifting that existed in California, and make it even tougher for hospitals to treat those without insurance," said David Langness, vice president of communications for the Healthcare Association of Southern California, a trade group that represents hospitals.

Pinch predicted

Langness added those hospitals in the second tier will have no incentive to treat Blue Cross members and will see a drop in patient volume. "That will make it harder for them to remain solvent," he said.

"It's a significant cut from a cost point of view and, depending on their volume of business with Blue Cross, many hospitals are ill equipped to deal with that kind of cut," said Ronald Spoltore, senior vice president of Health Care Financial Advisors, a Rancho Mirage-based consultant.

Among the 34 second-tier hospitals Blue Cross named in Los Angeles County were Torrance Memorial Medical Center, Queen of the Valley Medical Center in Covina, Century City Hospital and Holy Cross Medical Center in the San Fernando Valley.

The county's 56 first-tier hospitals include such large institutions as Cedars-Sinai Medical Center; L.A. County + USC Medical Center; Queen of Angels/Hollywood Presbyterian Medical Center and St. John's Hospital and Health Center in Santa Monica.

Blue Cross officials said hospitals were scored on several measurements, including quality of care as measured by outcomes of various procedures, and whether or not they received key accreditations from outside organizations. They were also evaluated on the ability to work in a managed care environment, and cost-competitiveness.

Blue Cross called its evaluation program "Partnerships for Quality" and stressed the need for quality health care in a statement it issued with the hospital list.

Process questioned

But survey participants questioned how Blue Cross conducted its surveys, and whether quality was actually among the criteria for placements.

Indeed, Bahremand noted that quality scores were not a consideration in negotiations with the hospitals.

"We did not raise the quality issue because, if the hospitals did not meet the basic quality requirements, we would not enter negotiations," she said.

But only one hospital in Blue Cross' old network, Downey Community Hospital, was omitted from the new network. Downey did not answer Blue Cross' request for proposal, officials said.

"That's good news for us, that all of the hospitals that submitted proposals qualified," Bahremand said.

But observers questioned other good news, particularly why Los Angeles County-Martin Luther King Medical Center was placed in the first tier. The facility in South-Central L.A. has been criticized for years for its negligent care and the misdeeds of its medical staff. The county Board of Supervisors ordered a major overhaul of the hospital's management a day before Blue Cross published its list on Jan. 3.

"Our business is not to put the county hospitals out of business," Bahremand said. "We see an obligation to support those hospitals because they serve many people at or below poverty level, and we feel obligated to them."

Questions were also raised as to why Torrance Memorial was relegated to the second tier. That decision mystified hospital officials, since Blue Cross' own survey named Torrance Memorial as among the 24 top scorers in the network for quality of care. The facility has also scored in several national surveys as among the best and most cost-effective hospitals in the U.S.

"I don't know what they were thinking, but quality certainly came second behind their business needs," said Sally Eberhard, Torrance Memorial's vice president of planning and marketing.

"We have not been very successful in our discussions with Torrance, and did not feel it would be appropriate to put them in tier one," Bahremand said.