Awkward Start for the New WellPoint
Only a few months after a controversial deal created the nation’s largest health insurer, the new WellPoint Inc. is raising the ire of a top California regulator.
State Department of Managed Health Care Director Cindy Ehnes this week took the unusual step of ordering WellPoint’s Blue Cross of California unit to reinstate coverage at Pomona Valley Hospital Medical Center and allow its members to seek treatment there.
Blue Cross dropped Pomona Valley from health plans covering up to 17,000 people after its contract with the hospital lapsed Tuesday. The two sides have been engaged in a long-running dispute over unpaid claims that the hospital values at $4.2 million.
Ehnes issued her order after the insurer failed to notify physicians in time to make alternative hospital admitting arrangements, she said.
In addition, Ehnes said, Blue Cross’ transition plan was inadequate because of the six alternative hospitals to which it directed patients one was a nursing home, another was a drug rehabilitation center and a third was a general hospital that was already 99.6% occupied.
“I want Blue Cross to keep its promises to me and to California,” Ehnes said. Before its parent company was sold, she noted, “I received a personal commitment from Blue Cross’ leadership that they would maintain their commitment to quality care for enrollees in California.”
The way the decision to drop the hospital was handled threatened the health of Blue Cross members in the Pomona Valley, she said.
Blue Cross has 15 days to request a hearing where it can propose a new plan to notify physicians and to offer other hospitalization options for patients.
Spokesman Michael Chee said Blue Cross would address Ehnes’ complaints: “This is the first time we’ve heard this kind of concern expressed, and we certainly don’t think this is anything to do with the result of the merger.”
In November, after several false starts, Anthem Inc. completed its $21-billion acquisition of WellPoint Health Networks Inc., creating the biggest health insurer in the U.S. with more than 28 million members. Indianapolis-based Anthem then adopted the name of its Thousand Oaks-based takeover target.
Anthem touted the cost savings that the deal would bring. But the purchase sparked considerable opposition, partly because of sizable transaction-triggered payments made to WellPoint executives. Some healthcare experts also warned that the merger’s benefits to patients could be limited.
In July, Ehnes approved the sale, saying it “was a good deal for consumers and sends a strong message that California is a state with a competitive and healthy marketplace where business is welcome.”
State Insurance Commissioner John Garamendi rejected the acquisition, calling it “one lousy deal for California healthcare consumers.” He later approved the sale after the companies agreed to invest at least $265 million in various healthcare programs around the state.
Pomona-area doctors were upset by Blue Cross’ decision to drop the hospital and said it threatened patients’ health.
For at least five pediatricians, Pomona Valley is the only facility where they have admitting privileges. “On any day during flu season, we could have a very sick child in need of hospitalization,” said Dr. Carrie Knoll, one of the pediatricians. “It really left our clients very vulnerable.”
Pomona Valley President Richard Yochum praised Ehnes, saying her response limited the disruption for patients. Several colonoscopies were canceled after patients had gone through a day of preparation.
Pomona Valley continued to provide radiation treatments to Blue Cross cancer patients, however, after WellPoint dropped its coverage.
“The hospital took the high road,” said hospital spokeswoman Kathy Roche. “And that meant we took a financial risk.”
Blue Cross’ Chee said the hospital shared the blame for allowing the contract to lapse.
Yochum said it would have been irresponsible for it to renew a Blue Cross contract when the insurer was disputing payments for claims representing more than half the hospital’s net income last year of $7.2 million.
On Friday, WellPoint shares closed at $120.95, down $1, on the New York Stock Exchange.
