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Encyclopedia of Cleveland History



BLUE CROSS & BLUE SHIELD OF OHIO is a not-for-profit mutual insurance company and an Independent Licensee of the Blue Cross and Blue Shield Assn. The state's oldest and largest health insurer, by 1995 it served more than 1.6 million Ohioans. The company resulted from the 1984 merger of BLUE CROSS OF NORTHERN OHIO and MEDICAL MUTUAL OF CLEVELAND, INC., to form Blue Cross and Blue Shield Mutual of Northern Ohio. The companies, which offered complementary benefits and shared headquarters, joined to cut operating costs and compete effectively in the marketplace. In 1986 it merged with Blue Cross of Northwestern Ohio, based in Toledo, to form Blue Cross and Blue Shield of Ohio (BCBSO). In 1990 BCBSO, through the former Parkersburg Plan, helped reorganize the insolvent Blue Cross & Blue Shield of West Virginia (Charleston Plan) as Mountain State Blue Cross & Blue Shield. John Burry, Jr., who became chairman of Medical Mutual, Inc., in 1983, became chairman and CEO of the new company after the 1984 merger. Burry was still in that position in 1995, and was a nationally recognized voice in the debate over healthcare reform.

Since its founding, BCBSO consistently worked to contain rising medical costs. It created an HMO that provided outpatient care at its clinics and inpatient care at participating hospitals. In Oct. 1983 it began the CURE (Controlling Utilization Results Effectively) program, which required approval before a patient entered the hospital and prescribed the length of stay. Though criticized by physicians and patients, CURE saved over $40 million in its first year of operation. BCBSOs Financial Investigation Department aggressively pursued alleged fraudulent payment schemes, resulting in more than 400 criminal indictments with a 93% conviction rate and a cost savings of $26 million since it began work in 1983. Another cost-containment measure was the 1985 requirement that hospitals bid for BCBSO business. Though 34 hospitals in Cuyahoga, Lake, and Lorain counties received invitations to bid, only those meeting certain standards were eligible for full BCBSO reimbursement (a plan which preceded the "Super Blue" of the 1990s). Some hospitals, such as LAKEWOOD HOSPITAL, successfully challenged and overturned BCBSO decisions in court until the 1987 state Hospital Insurance Reform Act gave Ohio insurance companies the right to selectively contract and negotiate rates with hospitals. Since 1987 hospital costs in Cleveland have fallen from 6th to 33rd highest in the country.

In the 1990s BCBSO became a leader in the vertical integration of the health care system. In 1994 BCBSO formed a joint venture with MERIDIA HEALTH SYSTEMS, called the Medical Insurance Co. of Ohio, in which BCBSO held a controlling interest. By 1995 BCBSO also had affiliations with ST. LUKE'S MEDICAL CENTER in Cleveland, and Riverside Hospital in Toledo, Oh.