California plan backs down from some scheduled fee reductions

The announcement comes after regulators open an inquiry as to whether Blue Cross fulfilled terms of its merger agreement with the company that became WellPoint.

By Pamela Lewis Dolan — Posted Sept. 10, 2007

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Days after a state hearing looking at whether Blue Cross of California had reneged on promises it made in order to get a merger approved, the plan said it would back down from some proposed reimbursement cuts.

But the plan's move might not be enough to keep some physicians from reversing their decisions to drop the insurer.

Blue Cross says its move was not related to the hearing, but to a re-examination of its reimbursement schedule after physicians wrote the plan's medical directors to take a look at some of the proposed reductions.

"When they looked at them they said, 'You're right, those weren't intended to be reduced,' " Blue Cross spokesman Nick Garcia said.

Among the services for which the insurer decided not to decrease reimbursement are hospital-based newborn care, mammograms and colonoscopies. Additionally, the company said immunization reimbursements would increase and would be reviewed quarterly as opposed to annually.

California Medical Assn. spokeswoman Karen Nikos said her organization is "pleased that [Blue Cross has] made these changes, definitely, but we are concerned that there remain many procedures that involve screenings and preventive procedures, in particular, that are being reimbursed at very low levels."

In a memo to physicians, Blue Cross wrote that "most physicians (approximately 70%)" would see an overall rate increase or no change in overall compensation under the new fee structure. Left unstated in the memo was the approximately 30% of physicians who would see a rate cut.

The new schedule went into effect Aug. 30, after multiple delays -- in part, because the California Dept. of Managed Health Care, which regulates health plans, determined Blue Cross had not given physicians appropriate notice.

The announcement came just days after the managed care department hosted a hearing to discuss Blue Cross's activities since its parent company, WellPoint Health Services, merged with Anthem Inc. in 2004, with the Indianapolis-based company eventually becoming known as WellPoint.

As part of the merger agreement, instituted when California regulators first objected to the deal, the Dept. of Managed Health Care has authority to investigate whether Blue Cross complied with terms of the deal.

Blue Cross says it has. But the department says since the merger, it has received 4,149 complaints from physicians and patients about Blue Cross benefit changes, reimbursement rate cuts and premium increases.

The California Medical Assn. conducted a survey in July of 495 practices representing 1,566 physicians. The association reported that 24.4% of the respondents said they had already decided to terminate and 48.4% were still considering it.

In the first six months of 2007, the DMHC reported, it has received "85% more Blue Cross provider termination requests than in all of 2005. They are projected to nearly double the number received in 2006."

The department said it would investigate why so many physicians were dropping the plan. It also said it wanted to know why Blue Cross this year sent a $950 million dividend -- nearly the same amount as sent in 2005 and 2006 -- back to the home office in Indianapolis, and whether that violated an agreement limiting the amount of money Blue Cross could send out of state. That provision expires in November.

In addition to the in-person testimony from the CMA and others, the department received 300 letters from both plan members and physicians, mostly concerning the August fee schedule changes.

The Dept. of Managed Health Care has until three months after the hearing to return with its findings on whether Blue Cross fulfilled its promises to state regulators.

If the department finds it hasn't, then it may issue fines and other penalties. However, the merger would not be undone.

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