Wanna A Peek At A Blue Cross Hospital Contract?

The Power Of An Annuity…………………

As a kid were you ever told NO! you couldn’t have something? That’s when you wanted it even more and would do anything to get it. We were told some years ago by a Blue Cross official “Bill, you will never get a copy of one of our hospital contracts, so stop asking!”

Well, we got one. Amazing things can happen when you have a wide net of connections across the Fruited Plains. In our mail one day we received a copy of the Holy Grail of Hospital Contracts.

The following provides the reader a sample of the actual contract language found in a Standard Blue Cross Hospital Contract. This is dated by several years and may have changed by now:

Blue Choice will adjust the weekly Blue Cross Uniform Payment Plan (UPP) for all applicable Blue Choice allowances for Covered Services rendered to Blue Choice members. The UPP means the weekly payment that shall be made from Blue Choice to Hospital representing the average weekly claims volume incurred in the previous running quarter. The adjustment in the UPP check will be this estimated difference between the Net Covered Charges and the applicable Blue Choice liability based upon the agreed upon rates attached hereto for each Hospital as a separate Exhibit and incorporated by reference herein. Net Covered Charges means Covered Charges for Covered Services rendered to Blue Choice members less deductibles and co-payments, less coordination of benefits amounts.

The estimated Blue Choice liability for Covered Services rendered to Blue Choice members will be determined based on the amounts reflected in the Rate Exhibits attached hereto.

Adjustments will be reviewed and recomputed by Blue Choice only as necessary to reflect actual Blue Choice claims and/or contractual allowances for Blue Choice Covered Services rendered to Blue Choice members by the Hospital during the particular year as evidenced by Blue Choice processed claims data and/or Rate Exhibits. In the event of termination of this Agreement, any indebtedness of Hospital to Blue Cross may be offset and/or recouped via reductions to or elimination of UPP payments during the month prior to the effective date of termination. In addition, Blue Cross has the right to offset 100% of any claims liability due to Hospital beginning on the effective date of the termination until Blue Cross has been paid in full, regardless of whether Covered Services were rendered prior to or subsequent to the date of termination.

Blue Choice will periodically reconcile for each year during the term of this Agreement the payments made by Blue Choice to HOSPITAL and the weekly adjustments to UPP.

Reimbursement Schedule

In-patient: Per diems ranging among Rev. Codes. Outlier – per diems increased when billed charges reach outlier. Additional Implant Per diem.

Out-patient Surgery: 70% of billed charges not to exceed the O/P Case Rate.

Out-patient Observation Room:  70% of billed charges not to exceed Case Rate.

Out-patient CP Increase Factor: 1.40

Annual Escalator Clause: 5%*

* “Fixed escalator clauses, if set too high, can introduce other unintended risks. For example, an agreed upon flat percentage increase of 4% per year yields an 8.16% price increase over a three-year term.” (That’s a +200% increase) 

SOURCE: The Unintended Consequences of Taking the Escalator – HealthCare Appraisers


Escalator Clauses, Rising Prices, And Why We Should Care

PPO Escalator Clause Directly Attributable to Medical Trend Factor