Montana Blues executive quits after controversial tenure

A radiologist group that was sued after it left the Blues networks hopes Peter Babin's departure could signal the end of the litigation.

By Robert Kazel — Posted Jan. 31, 2005

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Four months after accusing a group of radiologists of constituting a "predatory monopoly" and launching an unusual antitrust lawsuit against them, BlueCross BlueShield of Montana CEO and Chair Peter Babin resigned amid mounting controversy over his leadership.

Attorneys for the physicians said they hoped Babin's departure would hasten a settlement of the lawsuit.

Peter Babin, in charge of Montana's largest health plan since 2002, quit without explanation Jan. 7. Neither the company nor Babin would comment on the reasons for the departure, though Babin had come under criticism last year in local media and among some physicians in the state for his high compensation, discretionary use of company funds and various management decisions.

As head of the state Blues plan, Babin became a focus of the consternation of many Montana physicians when the company filed a lawsuit in September 2004 against Missoula Radiology, a 12-physician, hospital-based group and the only radiology practice in the area.

The Montana Blues accused the doctors of excluding competition and keeping patient charges high. The group, unhappy over low reimbursements, had decided to leave the Blues network in mid-2003 and began charging patients more than permitted under its former Blues contract. The radiologists have denied any charge of an illegal monopoly.

The suit has drawn the interest of medical societies and antitrust attorneys because of its uniqueness, as well as doctors' fear that a win by the Blues plan might encourage other health plans to use the courts to compel physicians to join their networks.

Although Babin was generally seen as the key force behind the Blues plan's suit, it was not immediately clear that his resignation would affect the company's willingness to pursue the litigation.

"We are continuing the lawsuit -- no change there," said Linda McGillen, a Montana Blues spokeswoman. "The change in personnel has nothing to do with what we believe is the case [presented] in the lawsuit."

Nevertheless, the radiologists and attorneys for both sides are scheduled to meet Feb. 3-4 in Missoula in a mediation session with a third-party facilitator, said Ralph Palumbo, a Seattle lawyer who is representing the physician group.

"We're certainly hopeful we can work out an arrangement with BlueCross that will be satisfactory to them and which will be settled in early February," Palumbo said.

He added that he was unsure if Babin's leaving would make the payer any more conciliatory, though he said he believed the former CEO had been "instrumental" in pressing for the lawsuit.

Although the suit alleged that the radiology group exerts monopoly power because it had long-standing exclusive contracts with Missoula's two hospitals, Palumbo said the doctors would argue at the new negotiations that those agreements had expired and the physicians were not interested in renewing them.

"The market [for radiologists] is open and remains open," he said. "There is no barrier to radiologists coming into Missoula."

A permanent replacement for Babin had not been selected by the company's board at press time.

G. Brian Zins, executive vice president of the Montana Medical Assn., said Babin's treatment of doctors was "not an amicable relationship," as viewed by the medical community, and was marked by conflict over low reimbursements, unilateral decision-making by the plan, unfair contracting policies and, most recently, doctors' resentment over the antitrust suit.

"Hopefully, [a change in leadership] will result in much more positive relations with the medical profession," Zins said. "The open door just hasn't been open."

Some physicians appear hopeful that the lawsuit will be settled or abandoned now that the company's top leadership is changing. "I would like them to look at their policies and decide the lawsuit against the radiologists was a terrible mistake and drop it, with their apologies," said James E. Jarrett, MD, a member of the Montana Medical Assn. board and an otolaryngologist in Missoula.

Before arriving in Montana, Babin was executive director of Health Plus of Louisiana, a for-profit HMO.

Under him, the Montana Blues in 2003 backed the drafting of a bill that would have enabled the plan to become a shareholder-owned, for-profit company. The measure was never submitted to Montana lawmakers, but it has been widely thought that the company is still interested in converting to for-profit status eventually.

Babin came under a media microscope in 2004 when Montana reporters highlighted his pay and benefits package of $1.4 million a year, including bonuses, his first-class airline travel with his wife to Blues meetings, and money he got from the Blues plan to hire dog sitters while out of town.

In addition, an audit committee of the company's board raised criticisms of how the company was being managed, including high administrative spending, high executive salaries and bonuses, and plans to raise premiums to a point where the plan would become less competitive, according to The Missoulian, the daily newspaper in Missoula.

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Independence Blues CEO dies

The president and chief executive of Philadelphia-based Independence Blue Cross, G. Fred DiBona Jr., died Jan. 11 after a 15-month fight with kidney cancer. He was 53 and had been at the helm of the health plan for 15 years.

Under DiBona, the Blues plan saw its revenues rise from $1.3 billion to nearly $10 billion, the company said, with membership increasing from 2.1 million in 1990 to almost 3.5 million last year.

The health plan under his leadership widened its commercial product offerings, became a leading seller of Medicare supplement plans and sold the first Medicare+Choice PPO plans in the country.

The plan also extended its customer base beyond Pennsylvania to New Jersey and Delaware and became a national third-party processor, through its AmeriHealth subsidiary.

Before coming to Independence in 1990, he was president and CEO of Keystone Health Plan East, an HMO started by Pennsylvania Blue Shield.

That company became Highmark, and Independence later acquired Keystone.

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