Blue Cross: $14M loss in ’10 marks ‘progress’

PROVIDENCE – Blue Cross & Blue Shield of Rhode Island reported on April 20 a $14 million loss for 2010, which it called “progress” in efforts to improve its finances.
In 2009, the nonprofit health insurer booked a $100 million loss.
“We’re heading in the right direction, but we continue to experience financial strain,” said Gus Manocchia, vice president and chief medical officer at Blue Cross.
In 2010, Blue Cross’s revenue totaled $1.67 billion. Payments to hospitals and doctors totaled $1.4 billion, about 88 percent of the company’s expenses. Blue Cross’s reserves, funds that are set aside to ensure the health insurer’s ability to pay member claims, dropped to 15 percent of premium revenue, well below the 20 percent average of other regional health insurers, company officials reported.
In response to the losses in 2009, Blue Cross undertook a series of initiatives to help it gain financial traction, including reducing administrative expenses by $15 million and reducing medical claims costs by $25 million.
Additionally, in an effort to moderate hospital costs, Blue Cross decided to change the way it pays hospitals, according to Manocchia. Instead of paying hospitals for the volume of care they provide, Blue Cross introduced a new compensation model that rewards hospitals for working to improve their performance and meet agreed-upon measures of quality and operational efficiency.
Similarly, it also changed the way it pays doctors, starting with primary care physicians, with a new compensation model that focuses on quality of care and patient outcomes, instead of service volume.
Blue Cross also prepared a new drug formulary in 2010 that it said was projected to reduce prescription drug costs by $22 million by the end of 2011.