Blue Cross payment rollback irks doctors

LOS ANGELES — Blue Cross of California's latest antidote to rising health-care costs isn't going down very well with physicians.

The state's largest for-profit health plan is set to roll back in August its payments for about half the services and procedures provided by physicians.

Many of the 53,408 physicians in Blue Cross's preferred provider organization (PPO) networks say it's a prescription for disaster.

The health plan imposed the new rates unilaterally. In most cases, physicians said, Blue Cross will get its way because it controls the bulk of their patient base.

More than 300 physicians have sent notices threatening to dump the insurer if the rates take effect as scheduled Aug. 6.

Some said the new rates won't even cover the cost of supplies.

"I don't know how anybody can afford to stay in practice and accept Blue Cross rates," said Dr. Charles Fishman, a San Luis Obispo dermatologist who sent a letter telling Blue Cross he would drop its contract if his rates were not improved.

A spokeswoman for the insurer described the level of complaints over the new rates as routine, and she said the number of termination notices from physicians over the issue was negligible — less than 1 percent of the doctors in its PPO networks.

"We continue to have the largest physician network of all our competitors," said Shannon Troughton, a spokeswoman for Blue Cross' parent company, Indianapolis-based WellPoint Inc.

The rate dispute is the latest skirmish between physicians and Blue Cross since the insurer was bought by WellPoint, formerly named Anthem, nearly three years ago. It is one of many complaints expected to be aired at a public hearing on Blue Cross set for Aug. 7 in Los Angeles.

Cindy Ehnes, director of the California Department of Managed Health Care, called the session to hear whether the insurer was living up to promises it made to win approval for the November 2004 deal that transformed the Indiana company into one of the nation's largest providers of health benefits.

Troughton said WellPoint had been a good corporate citizen since it took over California's Blue Cross. She said its growing enrollment was evidence that it was providing a service consumers valued. The new reimbursement rates were intended to pay physicians at "sustainable levels." The insurer does not intend to pay physicians less than their costs, but determining what those costs are is difficult, Troughton said.

The rates largely were based on cost and reimbursement data from other payers, particularly Medicare, the government's health-insurance program for seniors, she said. Because of its unparalleled patient base and federal budget constraints, Medicare traditionally has paid far less than commercial insurers. Now, for many procedures, Blue Cross will pay less than Medicare, physicians said.

The new rates include almost as many increases as decreases. Primary-care physicians will fare better than specialists under the new rates, Troughton said. This reflects an industrywide effort to counter an emerging shortage of primary-care physicians by raising the payment for general and preventive-care practitioners.

But even primary-care physicians said their practices will suffer under the new rates.

"If we make 10 or 15 cents on a vaccine, that's good ... and that's not counting our staff" time, said Dr. Ken Diamond, a Beverly Hills pediatrician. "I don't want to make a huge mark-up on vaccines because they are so important, but I have to be able to pay our nurses."

Diamond's partner, Dr. Ron Nagel, said he knows many people will find it difficult to sympathize with physicians who traditionally have been well compensated. But, he said, the cuts are economically devastating, particularly for physicians who begin their careers with more than $100,000 in education debt and whose overhead is constantly rising.

Like other physicians, Nagel said the rates for many of his services will be cut by one-third or one-half. He particularly is outraged by what Blue Cross will pay him for a newborn hospital checkup. The infant visit, which includes discussing lactation and other issues with the mother, is set to be reduced from $51 to $28.

"That is insulting," Nagel said.

But pediatricians said they can't walk away from Blue Cross because it covers more than half their patients, and, in Beverly Hills, there are plenty of other pediatricians willing to step in.

Blue Cross "won't renegotiate," Nagel said. "They will say, 'You take it or leave it.' "

Dr. Daniel Lensink, an ophthalmic plastic surgeon in Redding, said Blue Cross was cutting his payment to remove a patch of skin cancer from an eyelid from $231 to $179. He sent a letter threatening to drop out unless Blue Cross negotiates some of his rates. As the only specialist of his type between Sacramento and Eugene, Ore., he said he wouldn't turn away Blue Cross patients. But they might have to pay higher out-of-network co-payments for his services.

"Doctors feel like the bottom is falling out," said Lensink, president of the region's medical society.

One Newport Beach oncology practice figures the new rates will result in a $400,000 annual loss on the cost of treating Blue Cross patients, about 40 percent of its cases.

As a result, Newport Cancer Care & Medical Associates sent letters to those patients explaining that they would be expected to pay the difference between the reimbursement rate and the costs of their chemotherapy.

"We have to have you sign your life away in order to cover the cost of treatment if Blue Cross won't pay," practice administrator Beau Donegan said.

She said the group had no choice. At as much as $80,000 per patient per course of treatment, the group spends an average of $1.5 million on chemotherapy drugs a month. The group faces being cut off if it doesn't pay suppliers within 30 days.

"If we're not getting reimbursed, we can't pay for the drugs for the other patients," Donegan said. "The pharmaceutical companies and the insurance companies are the ones who are truly the profit-takers, and we're caught in the middle. The patients and the physicians are caught in the middle."

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