Remember when Hollywood wouldn’t show an unmarried couple in bed together?  Blue Cross-Blue Shield of Illinois is taking that approach to contract negotiations.  If hospitals want to negotiate jointly with the insurer, they have to be merged.  Clinical integration isn’t sufficient.  It may be an engagement, but it’s not marriage.

An article in today’s Chicago Business reports that the insurer took the position in reaction to clinical integration of suburban Chicago’s Silver Cross Hospital with Advocate Health, the state’s largest system.  If the Blues had accepted the relationship, Silver Cross would have had the added negotiating heft of being part of a 13-hospital system.  But the Blues said, no, you can’t negotiate together unless you’re truly merged.

Clinical integration is the coordination of one or more hospitals and medical staffs, including shared financial risks and rewards, in a coordinated approach to improving quality and reducing costs.  The theory is that if the providers are sufficiently integrated, they can jointly negotiate with payers.  But, as the development in Illinois shows, the theory is running into resistance from the payers.  Why?  Because it’s intended to allow hospitals to raise prices.

Clinical integration is one of two major industry trends meeting payer resistance.  The other is the hospital acquisition of physician practices as a basis for changing physician office rates to hospital rates.