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Maine.gov > PFR Home > Insurance Regulation > Hearing Decision Index > Document 619 : INS 99-14 : Hearing Decision
STATE OF MAINE
NOW COMES Intervenor, MHA, Inc. (MHA), through its undersigned counsel, and submits this Prefiled Testimony of William R. Diggins, Executive Director of The Maine Health Alliance (the "Alliance"), consistent with the terms of the Superintendents Procedural Order of November 4, 2000.
Q: Please identify yourself and your place of employment.
A: William R. Diggins, Executive Director of The Maine Health Alliance, 12 Stillwater Avenue, Suite C, Bangor, ME. 04401.
Q: How long have you been employed in this capacity, and prior to holding this position, what position did you hold?
A: I have served as Executive Director for the Alliance since February, 1995. Prior to this, I served from 1986-1994 as Vice President for External Affairs for Des Moines General Hospital in Des Moines, Iowa. Prior to that time I worked for ten years as a multi-specialty physician practice manager. I began my career in the healthcare field as a registered nurse.
Q: Please provide a brief summary of your educational background and related matters.
A: I am a native of the state of Iowa. I received a Masters degree in Healthcare Administration from the University of Wisconsin in Madison, Wisconsin and have worked in healthcare for twenty-five years.
Q: Please provide some background about the Alliance.
A: The Alliance is taxable, non-profit organization formed under Maine law. The principal reason for the Alliances formation was to provide a vehicle through which rural community hospitals, together with their medical staffs, could successfully compete in a managed care environment. The Alliance currently consists of 11 rural community hospitals (Calais Regional Hospital, Cary Medical Center, Down East Community Hospital, Houlton Regional Hospital, Maine Coast Memorial Hospital, Mayo Regional Hospital, Millinocket Regional Hospital, Mount Desert Island Hospital, Northern Maine Medical Center, Penobscot Valley Hospital, and St. Joseph Hospital) and approximately 300, predominately primary care, physicians. Seven of the Alliance member hospitals qualify as sole community providers under Medicare principles of reimbursement. The Alliance service area consists of six counties in northern and eastern Maine (Aroostook, Hancock, Penobscot, Piscataquis, Washington, and Waldo). The dominant characteristic of all the counties in which the Alliance operates is that they are exceedingly rural in nature. They also have lower per capita incomes than other portions of Maine.
The Alliance's primary role is to serve as a contracting agent for its members in negotiating, and enforcing, contracts with purchasers of healthcare services, including HMOs. The Alliance is a non-exclusive contracting entity that allows its membership to contract with, and participate in, other networks as well as the Alliance, or to contract directly with HMOs or other healthcare purchasers. Although in earlier years the Alliance spent considerable time and resources on negotiating contracts, in more recent years, an equal amount of time and resources are now being devoted to enforcing existing contracts with HMOs.
Each of the Alliance hospitals is a non-profit, tax-exempt organization. In the vast majority of instances the Alliance hospital represents the largest employer in its community. Although many of these institutions have historically been financially stable, the removal of the state revenue regulation system that was historically administered by the Maine Health Care Finance Commission, together with the introduction of managed care is placing unprecedented financial pressures on some of these institutions.
The Alliance physicians practice primarily in solo and small group practices. Due to the isolated geographic nature of the Alliances service area, in many instances an individual physician may present the only option for health care in a given community. To date Alliance physicians have practiced in a predominately fee-for-service environment, and their more limited managed care experience has consisted of primary care capitation and withhold programs.
The principal payors in the Alliance service area consist of Medicare and Medicaid, respectively. Medicare and Medicaid represent roughly 70% of the aggregate revenue to Alliance members, with Medicare representing approximately 55% of this number. The third major revenue source for the Alliance members is the commercial market; namely in the form of BlueCross BlueShield of Maine ("BCBS"), Healthsource/Cigna, NYLCare/Aetna and Harvard Pilgrim Health Care. The largest single commercial payor is BCBS, which represents approximately 12% of the Alliance providers overall revenue, and over one-third of their non-governmental revenue. Alliance hospitals anticipate receiving approximately $30 million this year, with Alliance physicians receiving approximately the same amount. Payments from Blue Cross and Blue Shield will likely exceed $6.0 million.
Q: Are you familiar with the Standards and Requirements sought by the MHA in the Anthem proceedings?
A: Yes. I have reviewed the listing of Issues proposed by the MHA dated March 3, 2000.
Q: Did you or any representatives of your member institutions participate in discussions leading to these Standards or Requirements?
A: Representatives of our member institutions participate regularly in the MHAs Council on Economics and Finance (CEF). CEOs of a number of our member hospitals participate in discussions of the Maine Hospital Associations Health Policy Council. I understand they were active in the consideration and discussion of these Standard and Requirement.
Q: Could you comment on some of the background factors leading to these proposals?
A: I understand that the recent insolvency of Tufts Health Plan and the economic problems faced by Harvard Pilgrim Health Care played a significant role in the development of these Standards and Requirements.
Q: Can you comment on the exposure faced by the Alliance members from the Tufts liquidation?
A: Certainly. I have reviewed a chart prepared by MHA showing the amounts owed by Tufts to many of our institutions. This shows a total of approximately $20 million owed by Tufts to reporting hospitals.
Q: Do you have a present understanding of the likelihood of recovery of these sums?
A: It is my understanding that providers who timely file their proof of claims for services rendered between 12/20/99 and 2/2/00, will be fully paid for the services rendered. What is far less certain is the amount that will be paid on claims either before or after this period of time. Our members prospects for recovery cannot be determined with any certainty until after the proof of claim period expires, 1999 contracts are reconciled, and the total amount of assets available for distribution is determined by the New Hampshire Commissioner. It has been estimated that these Class Two Priority Claims may be paid at less than fifty cents on the dollar. Using this estimated payment of Class Two Priority Claims, the Alliance members may lose more than $1.0 million.
Q: Are you familiar with the First Standard and Requirement sought by the MHA?
A: Yes. This Standard and Requirement is Require that Anthem Blue Cross Blue Shield be a corporation domiciled in Maine, both initially and permanently thereafter.
Q: Could you comment on the significance of this condition from your perspective?
A: The Alliance, and its membership, have been significantly burdened by the Tufts proceedings being carried out by the New Hampshire Commissioner in a New Hampshire court. We would greatly prefer having these proceedings here in Maine, carried out by the Maine Bureau of Insurance.
Q: What practical problems has the out-of-state review had for Maine Health Alliance?
A: As a result of the proceedings being held by the New Hampshire Commissioner, Alliance has been forced to utilize legal counsel other than that normally used by the Alliance, at rates significantly higher than that paid to local counsel. Additionally, the distance has caused communication problems and has impeded the ability of Maine providers to actively participate in the proceedings.
Q: Are you familiar with the second Standard and Requirement sought by the MHA?
A: Yes. This is to Require Anthem Parent to Guarantee Satisfactory Performance of All insurance and provider contracts and other obligations of Anthem Blue Cross Blue Shield.
Q: Why is this important for the Maine Health Alliance?
A: As noted above, BCBSME is the largest commercial payor for the Alliance members. The recent problems and concerns raised by Tufts and Harvard Pilgrim's financial problems have caused Alliance providers to become keenly aware of the fragility, and apparent under-capitalization, of area HMOs. This concern has been further accentuated by the lack of any true recourse for providers when an insurance company takes advantage of state insolvency/receivership/rehabilitation laws (e.g., providers inability to exercise their contractual rights to terminate being participating providers).
In light of these uncertainties and these negative experiences, providers have legitimately demanded more security in order to more reasonably assure that they will be paid the contractually agreed upon amount for rendering services to HMO members. History has proven that relying solely upon the resources of a Maine based company affiliated with a national or regional HMO for payment is inadequate These factors, viewed together, should properly cause the Superintendent to impose a variety of conditions on Anthem to assure that it will meet its payment obligations to Maine providers. We cannot endure another negative experience like we have had in the case of Tufts.
Q: Are you familiar with the ninth Standard and Requirement of MHA?
A: Yes. This is to require Anthem to maintain reserve funds in Maine adequate to pay claims and all related provider obligations for at least the time period equivalent to the notice period required to terminate contracts by either party.
Q: Can you explain your reasons for supporting this requirement?
A: My responses to the previous questions relating to the first and second MHA Standards and Requirements are equally applicable here.
Q: Are you familiar with the fourth Standard and Requirement sought by MHA?
A: Yes, it is to Require Anthem to Continue Distinct Contracts with Distinct Providers.
Q: Could you explain the importance of this Standard and Requirement from the Alliance's perspective?
A: The Alliance is concerned that providers could be forced to contract in a manner, or for a set of services, they would otherwise not contract for if this Standard and Requirement were not instituted. Of particular concern would be a move (to date not experienced with BCBSME) whereby BCBSME could require providers to contract for services on a fixed unit pricing basis, and/or to include as part of the primary care physicians responsibility, services the provider would need to secure from other providers. I have attached correspondence dated December 23, 1998, March 12, 1999 and November 4, 1999, which our Attorney, Greg Brodek, submitted to the Bureau of Insurance in connection with recent changes made to the Preferred Provider Arrangement Act that further address some of these issues. This is Diggins Exhibit 1. This concern is further heightened due to prevalence of certain services being held by state-sanctioned monopolies in this State, in the case of certain CON-approved services or other services limited by existing licensure approvals ,thereby requiring payors and providers alike to secure certain services at prices dictated by these groups and institutions. If payors are allowed to require providers to secure certain services from out-of-network providers, or include the price of certain out-of-network services in a provider's contract or "risk arrangement," the result will be that these primary care physicians and general acute care facilities will be forced to further increase the discounts they are already being required to provide (as they will have no ability to effect either the rates charged for, or the utilization of, certain services they do not themselves provide). In this environment, and in light of these dramatic changes, we feel it is appropriate and necessary for the Superintendent to take action now, in the context of the Anthem approval, to place proper limits on its ability to implement these adverse practices.
Q: Do you have any evidence or information to suggest that Anthem or other payors have engaged in these practices?
A: To date, we have not been faced with these contracting practices. We would note, however, as we noted during the Bureau of Insurance's meetings on the Preferred Provider Arrangement Act amendments, L.D. 2029, that this legislation will allow for more wide-ranging "risk arrangements," and lays the ground work for implementing many of the practices we have not yet faced, and those with which we are most concerned. The passage of the amendments in L.D. 2029 was largely supported by the HMO industry to the Preferred Provider Arrangement Act. We anticipate that following final enactment of this legislation, HMOs will actively pursue negotiation strategies of concern to us.
Q: Do you have heightened concerns on this issue in the context of the Blue Cross plan?
A: Obviously, due to BCBS market share in our service area we are especially concerned if it were to engage in such practices.
Q: Are you familiar with the fifth Standard and Requirement of MHA?
A: Yes. This is to Require Anthem to Continue Certain Other Provider Contracting Practices of BCBSME.
Q: Could you list the first Blue Cross payment practice MHA seeks to continue?
A: Yes, it seeks to require Anthem to continue Blue Cross Blue Shields practice of providing periodic interim payments (PIP) consistent with the timing and methodology historically utilized by Blue Cross Blue Shield.
Q: What has been the practice of BCBSME for PIP payments, and why has this been important to your member hospitals?
A: BCBSME has made periodic interim payments every week to our hospital members in an aggregate amount that is intended to equal the total amount to be paid to the hospital for providing covered health care services to BCBS' patients over the hospitals fiscal year, divided by 52. These payments have been important from a cash flow perspective, allowing our hospitals to receive weekly payments in predetermined amounts.
Q: What other current Blue Cross practice do you believe is important to have continued, and why?
A: We believe it is important, not only for our membership, but for the subscribers our membership treats, to require Anthem to continue BCBS's practice of maintaining a statewide network of providers consistent with historic levels of participation.
Maine Blue Cross Blue Shield has historically maintained, with one notable exception, a very extensive network that has allowed virtually any qualified provider to participate. I am concerned about BCBS's expressed intent to engage in "selective contracting" in an effort to extract greater price concessions.
Q: Could you describe the potential impact on the Alliance if these practices of open participation" are not continued?
A: Due to the rural nature of the Alliance's service area, and the Bureau of Insurance requirements with respect to provider access in Chapter 850 of the BOI rules, it is likely that broad participation will continue to occur by necessity. The real concern arises in those areas in which there is more than one provider, and a payor with significant market power could play one provider and refuse to deal with the provider that did not agree to a very significant discount. Although one could argue that market forces should be allowed to play out in these instances, this assumes the providers competing have essentially equal market power, and that the market will bring forward a sufficient number of providers to serve community needs. Neither of these premises hold true in much of our service area. Many of our providers, both hospitals and physicians, are facing very difficult economic circumstances. If primary care physicians and specialists are forced by economic circumstances to leave an area, it is very difficult, and very expensive to recruit new providers to fill that gap. The result, if left to proceed to its natural conclusion, would likely result in three regional networks in Maine, each associated with the areas largest tertiary care provider, and yield ultimately higher costs to subscribers.
Q: Are you familiar with the eighth Standard and Requirement sought by the MHA?
A: Yes, I believe this Standard and Requirement is to prohibit "Most Favored Nation" requirements in Anthem provider contracts.
Q: Please describe your reasons for supporting this Standard and Requirement.
A: It is my understanding that Anthem has used "most favored nation clauses" in hospital contracts in other states. One concern over these type of clauses is their anti-competitive nature. A provider may wish to extend a deeper discount, or contract in a different manner, with one provider due to that unique circumstances (e.g., the largest local employer). Moreover the result of such a provision allows a larger payor to ensure it is always receiving the "best deal," thereby preventing providers from entering into more favorable transactions with other payors. Among the reasons providers may wish to extend a "better deal" to other payors may include: better management fees, longer term contract, better rates on certain provider lines (e.g., physicians), or a desire to increase competition in the market. We believe the Superintendent ought to prohibit Anthem from imposing these MFN clauses so that the dominant payor cannot prevent us from pursuing and implementing these innovative and cost-saving strategies.
Q: How do you respond to Anthems contention that there ought to be an even playing field affecting all insurers, and that special requirements ought not to be imposed upon it?
A: I do not completely disagree with this contention. The fact is , however, that not all of the other insurers are subject the same statutory)provisions, nor are they seeking to sell their assets to a for-profit out-of-state insurer. The dissolution and take-over of the Blue Cross Plan is the application before the Superintendent, and the one which we have been asked to address. Chapter 344 of the Maine law establishes several particular requirements to be satisfied by any entity taking over and converting Blue Cross. We believe the Superintendent is fully authorized to, and properly should, impose additional specific requirements on Anthem in these circumstances. We would have no opposition to this same requirement being imposed upon other Maine insurers, and would likely support more generalized rulemaking or legislation implementing this if proposed. In the case of Anthem, however, we believe it is necessary and appropriate for the Superintendent to impose such a requirement now as part of the conversion approval process. The conversion law, Chapter 344, gives him broad powers to do this, and he should exercise these powers in crafting approval requirements along the lines we have proposed.
Q: Does this conclude your testimony?
A: Yes, but I welcome the opportunity to respond to questions the Superintendent and other parties may have.
DATED: March 28, 2000
Sandra L. Parker, Esq. Esq. John P. Doyle, Jr., Esq.
Attorney for MHA, Inc. Attorney for MHA, Inc
MHA, Inc. PRETI, FLAHERTY, BELIVEAU,
150 Capitol Street PACHIOS & HALEY, LLC
Augusta, Maine 04330 One City Center
e-mail: email@example.com P.O. Box 9546
JPD\G:\MHA\2000\ANTHEM\TestimonyDiggins0327.doc (March 27, 2000 9:12 AM)
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on March 28, 2000 a copy of PREFILED TESTIMONY OF WILLIAM DIGGINS was served via hand delivery, overnight mail or electronic mail on each of the persons listed below.
Jeffrey M. White, Esq.
Catherine R. Connors, Esq.
Portland, Maine 04101
(Anthem Insurance Companies, Inc )
Robert S. Frank, Esq.
HARVEY & FRANK
Two City Center, Fourth Floor
P.O. Box 126
Portland, Maine 04101
(Blue Cross/Blue Shield of Maine)
Judith Chamberlain, Esq.
State of Maine
Department of the Attorney General
286 Water Street
Augusta, Maine 04333-0006
(Bureau of Insurance)
William H. Laubenstein, Esq.
State of Maine
Department of the Attorney General
286 Water Street
Augusta, Maine 04333-0006
(Office of the Attorney General)
Joseph P. Ditre, Esq.
Consumer Health Law Program
One Weston Court, Level One
P.O. Box 2490
Augusta, Maine 04338-2490
(Consumers for Affordable Health Care Foundation/Coalition)
Michele M. Garvin, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
(Central Maine Healthcare Corporation; Central Maine Partners Health Plan)
Robert I. Goldman
Maine Council of Senior Citizens
27 Bowery Beach Road
Cape Elizabeth, Maine 04107
(Maine Council of Senior Citizens)
Executive Director of the Maine Ambulatory Care Coalition
P.O. Box 390
Manchester, Maine 04351
(Sacopee Valley Health Center, Regional Medical Center at Lubec, Eastport Health Care, Inc., and the Maine Ambulatory Care Coalition)
Maine Peoples Alliance
192 State Street
Portland, Maine 04101
(Maine Peoples Alliance)
Gordon H. Smith, Esq.
Maine Medical Association
30 Association Drive
P.O. Box 190
Manchester, Maine 04351
(Thomas D. Hayward, M.D.,
Maroulla S. Gleaton, M.D.,
And the Maine Medical Association)
Michel Lafond, Esq.
Sulloway & Hollis
P.O. Box 1256
Concord, New Hampshire 03302-1256
(co-counsel for Maine Medical Association)
Donald E. Quigley, Esq.
465 Congress Street, Suite 600
Portland, Maine 04101-3537
(Maine Medical Center)
Sandra L. Parker, Esq.
Attorney for MHA, Inc.
150 Capitol Street
Augusta, Maine 04330
Kellie P. Miller, M.S.
Maine Osteopathic Association
693 Western Avenue
Manchester, Maine 04351
(Maine Osteopathic Association)
DATED: March 28, 2000
John P. Doyle, Jr., Esq.
Attorney for MHA, Inc.
PRETI, FLAHERTY, BELIVEAU, PACHIOS & HALEY, LLC
One City Center
P.O. Box 9546
Portland, Maine 04112-9546
JPD\G:\MHA\2000\ANTHEM\TestimonyDiggins0327.doc (March 27, 2000 9:33 AM)
Last Updated: August 22, 2012
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