Blue Cross Blue Shield Strategic Readiness Case Study

Introduction

This case study examines Blue Cross Blue Shield, a healthcare organization whose network spans multiple states. The analysis addresses several key dimensions: an assessment of the organization's readiness to meet the healthcare needs of citizens over the next decade; a strategic plan the organization should pursue over the next ten to twenty years; and an evaluation of how the organization can manage challenges related to network growth, nurse staffing, resource management, and patient satisfaction. While Blue Cross Blue Shield has performed well over the years, the healthcare landscape is ever-changing, and the last five years have been a clear illustration of that reality.

The ACA and the Shifting Healthcare Landscape

There have been many seminal moments in the history of American healthcare. Two of the most significant are the passage of Medicare in the 1960s and the passage of the Patient Protection and Affordable Care Act (commonly known as the ACA, or "ObamaCare") in 2010. While the ACA is certainly not a single-payer system like those found in other countries, it created a paradigm shift in the healthcare market. One of the central provisions of the ACA is the individual mandate — the requirement that people purchase health insurance or face a financial penalty, unless they can demonstrate financial hardship. This requirement has led to a substantial surge in the number of people enrolled in healthcare programs and a corresponding decline in the uninsured population.

For a firm like Blue Cross Blue Shield, this might appear to be an unmitigated benefit, given that they are in the business of insuring people and there are now more potential customers. However, premiums have actually risen for many people, and the sweeping changes to the regulatory and legal landscape at both the state and federal levels have created significant administrative burdens and additional costs for Blue Cross to absorb. Even before the ACA was enacted, Blue Cross — along with the federal healthcare apparatus itself — had to contend with a looming demographic shift: the retirement of the Baby Boomer generation. Due to the large surge in the U.S. birth rate in the late 1940s and 1950s, followed by a sharp decline beginning in the 1960s, there is a disproportionately large cohort of Americans at or near retirement age relative to other demographic groups. Concurrently, it is older Americans who incur the greatest costs in terms of healthcare service delivery and reimbursement (Orlovsky, 2015).

Another issue that will affect Blue Cross, at least indirectly, is the looming shortage of nurses and physicians that appears to be on the horizon. This means that fewer providers will be delivering services to a growing number of patients. The aforementioned expansion of the insured population is simultaneously creating more administrative and claims-processing work for Blue Cross. One contributing factor is the ACA's prohibition on denying coverage or imposing waiting periods for individuals with pre-existing conditions — a significant departure from prior industry standards. Blue Cross and its advocates may take issue with this provision on the grounds that it could encourage people to delay enrollment in health insurance until after they have developed a chronic condition or other serious health problem. The analogy often used is that of someone purchasing homeowner's insurance only after their house has already caught fire.

Baby Boomers and Provider Shortages

However, there are individuals who were genuinely harmed by pre-existing condition exclusions through no fault of their own, which provides clear justification for the rule. The provision is unlikely to be reversed. Even so, the combination of newly insured individuals with pre-existing conditions and a broadly aging population is expected to generate a substantial increase in claims and payouts for health procedures, since many of these individuals were previously uninsured and are now accessing care (DOL, 2015). The nursing shortage compounds this challenge by limiting the supply side of care delivery precisely when demand is rising most sharply.

As it relates to customer satisfaction, there will clearly be some pain points, as Blue Cross may become more selective about what services it reimburses and at what rates. Overall processing times may also increase as transaction volumes rise. The spike in premiums will further generate dissatisfaction among consumers who expect to pay less — or at minimum, no more than they have in the past. The value proposition for Blue Cross consumers may become significantly distorted as the organization's overall cost and revenue structures continue to evolve. It is worth noting that healthcare costs in the United States have historically ranked among the highest in the world, and there is little indication that this will change in the near future (Benen, 2015).

It is difficult to predict with certainty what will unfold in the coming months and years. However, Blue Cross Blue Shield will need to adapt and evolve rapidly, as the medical landscape and its associated cost structures are currently fluid and volatile. A legislative transformation on the scale of the ACA or Medicare is unlikely to occur again within the next fifty years, though the outcome of future elections and legislative cycles makes anything possible. Regardless, demographic and financial data point to a fairly clear trajectory. Blue Cross must be prepared to meet the needs of an evolving and currently aging customer base that will place significant demands on the organization's systems, resources, and strategic capabilities.

Conclusion

Orlovsky, C. (2015). The Baby Boomers' massive impact on health care. NurseZone. Retrieved August 29, 2015, from http://www.nursezone.com/Nursing-News-Events/more-news/The-Baby-Boomers%E2%80%99-Massive-Impact-on-Health-Care_28946.aspx