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Encyclopedia of Cleveland History



The CLEVELAND HOSPITAL SERVICE ASSN. (known after 1939 as Blue Cross), was the forerunner of BLUE CROSS & BLUE SHIELD MUTUAL OF NORTHERN OHIO. It administered the first prepaid hospitalization plan in the U.S. directed to the general public, which was endorsed by the American Hospital Assn., the Cleveland Hospital Council, and the medical profession. When the CHSA was created, the Depression exacerbated a crisis in health-care delivery. By the 1920s, hospitals had gained general acceptance as the preferred treatment site for serious illness, but rising costs made many persons reluctant to seek hospital care. In Cleveland, as in other cities, the concept of paying for individual health care through a pooled fund of insurance or taxes (or both) was already under review. JOHN R. MANNIX, a clerk at Mt. Sinai Medical Center, began studying inflated hospital bills, more than doubled by extra services which provided 33% of hospital income. When he became administrator of Elyria Hospital, he experimented with an inclusive rate for maternity coverage and tonsillectomies. Meanwhile, his study of hospital usage in Lorain County showed that the average person spent only $.50 per month on hospital care. When further study of the Greater Cleveland area supported his data, he devised an insurance plan.

Mannix tried unsuccessfully to interest insurance companies, then approached the Cleveland Hospital Council. The council first adopted the concept of inclusive rates, which Mannix had further tried as an administrator at UNIV. HOSPITALS, and later set up a local body chaired by Mannix. By Dec. 1933, some local hospital administrators and trustees and representatives from the ACADEMY OF MEDICINE, the Welfare Federation, and other groups agreed to test the plan through a not-for-profit corporation, the Cleveland Hospital Service Assn. Backed with a $7,500 loan from the Welfare Federation, the organization opened in 1934 in Room 237 of the 1900 Bldg. on Euclid Ave., under the direction of John McNamara. With a staff of 4, McNamara enrolled 13,000 the first year; by Sept. 1935, the successful association paid off its loan and established a small reserve fund.

The first plan cost $.60 a month for 21 days of ward coverage, or $.75 for a semiprivate room. "Hospitalization" included hospital bed and board, general nursing care, routine hospital lab service, use of the x-ray department, use of the operating room, administration of anesthesia by a hospital employee (not a physician), ordinary drugs, and surgical dressings. The policy did not apply to maternity care, mental illness, tuberculosis, contagious diseases, or workmen's-compensation cases. Subscribers could be sent to any of the 13 member hospitals by their physicians. The plan did not cover doctor costs, though its sister plan, MEDICAL MUTUAL OF CLEVELAND, INC., did so after 1945. CHSA enrolled groups at area businesses with 10 or more employees. The first enrollee was Fairview Park General Hospital, followed by Cleveland Trust (see AMERITRUST). The companies collected the premiums and forwarded the money to the CHSA. Contracting companies had to guarantee that 60% of the employees would subscribe; Cleveland companies averaged 75% enrollment. The plan soon broadened to include maternity and family coverage, nongroup coverage, and longer stays.

After World War II, overhead costs for hospitals raised daily charges and Blue Cross payouts; the plan was blamed for a scarcity of hospital beds. A special fund was established to double the number of area beds, increasing the potential for claims from hospital stays and, ultimately, resulting in excess capacity. By 1953 the CHSA, paying out $356,000 a year more than it collected, announced rate increases as high as 59%. Despite public outcry, additional double-digit increases followed; in 1956, a public hearing verified that Blue Cross's requests were justified. Its administrative costs averaged less than 5% (a national record). To pool risks over a larger area as well as improve service and benefits, the CHSA (with 1.5 million subscribers) merged with the Akron Hospital Service Assn. to become Blue Cross of Northeast Ohio in 1957.

Condon, George. Fifty Years of Community Service (1984).