California doctors, hospitals battle Blues' new fee schedule

The policy on pay for endoscopic services violates state insurance and anti-kickback laws, the medical community says.

By Amy Lynn Sorrel — Posted July 17, 2006

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Physicians and hospitals are fighting a new Blue Cross of California payment policy that they say illegally interferes with doctors' medical decision-making and restricts access to care.

Under the reimbursement schedule for endoscopic procedures, Blue Cross plans to cut fees by 20% for services done in hospital outpatient departments. Meanwhile, the insurer will pay doctors a 5% rate increase for procedures performed in an ambulatory surgery center or doctor's office.

Blue Cross says the new policy, announced in March, will increase access by expanding its network to include the ambulatory surgery centers, while making procedures more affordable for patients.

But the medical community says it violates several state laws. The California Hospital Assn. filed a lawsuit against Blue Cross to stop the policy from taking effect on July 1. The California Medical Assn. also has asked the insurer to rescind the policy, although the physician group has not joined the lawsuit.

"State law is quite clear -- health plans shouldn't force doctors to make patient care decisions based upon money," said CHA President C. Duane Dauner. Anything short of being able to act in the best interest of patients "is an unethical violation of the sacred doctor-patient relationship."

The CHA and the CMA support the use of ambulatory surgery centers when appropriate but expressed concerns that the new fee schedule does not provide exceptions for high-risk patients who might require a hospital setting to assure patient safety.

"The CMA is also concerned that this policy will make these important screening and diagnostic procedures less accessible to patients," because many doctors do not have medical staff privileges at the ambulatory centers that Blue Cross has enlisted, CMA Executive Vice President and CEO Jack Lewin, MD, stated in a June letter to the health plan.

Often, physicians can't get admitting privileges at outpatient surgery centers because the facilities do not accept new applications for medical staff membership, the letter states.

Forcing doctors to send patients elsewhere for treatment would "disrupt the physician-patient relationship," he said. The CMA also reported its concerns to the Dept. of Managed Health Care in April and is seeking an investigation of possible violations.

Blue Cross denies that the new fee schedule will prevent doctors and patients from having a choice in medical care. The pay policy applies only to adults and does not include children, university medical centers or rural areas where there are not an abundance of ambulatory surgery centers, said Robert Alaniz, a spokesman for WellPoint, Blue Cross' parent firm.

"The cost factor is one of the major obstacles to patients scheduling these procedures," he said. In California, colonoscopies cost between $2,500 and $6,000 in a hospital, compared with outpatient surgery center fees that range between $300 and $500, he said.

"But the bottom line is broadening our network and access," he said. Alaniz declined to comment on the litigation or any possible legal violations the payment policy may pose.

Accusations of legal breaches

The CHA lawsuit, filed in Los Angeles Superior Court, says Blue Cross' payment rules violate the state's Knox-Keene Act, which regulates health plans and insurers. The provisions require doctors to make medical decisions "unhindered by fiscal and administrative management." The law prohibits any contract between doctors and health plans that "includes specific payment made directly, in any type of form ... as an inducement to deny, reduce, limit or delay medically necessary and appropriate services."

Further, the CHA lawsuit contends, the 5% boost in pay for ambulatory surgery center services breaches state anti-kickback laws that make it illegal to offer payments in exchange for patient referrals. The health plan also is committing fraud against patients who are "misled" into believing they have choices in where they receive treatment, the CHA alleges.

In a letter to Blue Cross and in its informal complaint to the DMHC, the CMA agreed that the new payment contract may violate access-to-care regulations under Knox-Keene.

Geographic rules in the law maintain that covered services be available "within 30 minutes or 15 miles" of a patient's residence or workplace. The doctors' letter points out that Blue Cross' list of options for ambulatory facilities would force patients to get care outside those boundaries.

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Case at a glance

California Hospital Assn. v. BlueCross of California

Venue: Los Angeles Superior Court, Central District
At issue: Whether a payment policy that cuts reimbursement for endoscopic procedures performed in a hospital outpatient facility but increases fees for surgeries done in an ambulatory surgery center or a doctor's office violates state insurance and anti-kickback laws.
Potential impact: Doctors say the contract interferes with their ability to make decisions in the best interest of their patients and will limit access to care. BlueCross says the policy will increase patient access and make procedures more affordable for patients by adding ambulatory surgery centers as an option.

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