Strategic Planning in Health Care

Blue Cross Blue shield is an association of 42 independent, locally operated health plans. As such, each health plan in the organization is a private insurer that offers coverage to mostly corporate employees. Collectively, they cover 81.5 million people in the U.S. And Canada, and Represent 28.6% of the U.S. population. Through membership in the association, the independent insurers (which formulate their own strategies) are able to offer health plans that can be taken to other areas of the country by pooling the medical professionals that they do business with. In addition to private companies, Blue Cross Blue Shield has partnered with the U.S. Government to offer Medicare services. In 1939 the Blue Cross symbol was officially adopted by a commission of the American Hospital Association (AHA) as the national emblem for plans that met certain guidelines. Blue Cross and Blue Shield insurance companies were set up as community sponsored, non-profit service plans that were based on contracts with hospitals and subscribers. Most of these general voluntary plans accept subscribers in groups and as individuals. As such, Blue Cross Blue Shield is the standard bearer for the medical insurance industry rather than its strategist.

The Blue Cross and Blue Shield Plans occupy a unique niche: they are both sellers of health insurance and buyers of health services. Because companies party to these plans were innovators, they were able to develop a dominant market share in most geographic areas. Many experts, as a result, believe that they receive favorable tax treatment, which includes non-profit organization status and tax exemption.

Blue Cross and Blue Shield's strategic plans are often political ones, as the organization represents the interests of their 42 independent health plans. The independent plans share vested interests in the same political action, which dictates the policies they wish the Government to implement. In the past, Blue Cross and Blue Shield has absorbed most of the operational aspects of Medicare. This strategy has been plagued by mismanagement and fraud. It is estimated that $100 billion a year is lost to health care fraud and abuse. Harvard University's Malcolm Sparrow estimates the figure to be even higher: $300 billion to $400 billion a year.

Cases cited include one in 1993, where Blue Cross/Blue Shield of Florida paid $10 million to settle out of court when charges were brought against it alleging that the company had falsified performance reports and failed to properly screen provider claims.

A similar case was brought against Blue Cross/Blue Shield of Massachusetts, which also chose to settle out of court on charges that it falsified performance reports. Blue Cross/Blue Shied of Michigan and Blue Shield of California made similar settlements. In Michigan, Blue Cross/Blue Shield was accused of falsifying audit reports and using Medicare money to pay claims that were the responsibility of other insurers. California's Blue Cross/Blue shield was accused of falsifying or destroying claims. The former settled for 51.6 million, while the later settled for a mere 12 million.