PacifiCare Joins Project to Cut Health Care Costs : Networking: Cypress firm is among 6 HMOs in pilot program that may save billions a year in administrative expenses.

By ANNE MICHAUD

June 3, 1993 12 AM PT

TIMES STAFF WRITER

CYPRESS —

PacifiCare Health Systems said Wednesday that it is taking part in a pilot program in which a computer network will replace paperwork and telephone calls between the company and its physicians.

That type of system could eventually link health care companies nationwide through a single computer network, said Kenneth O’Donnell, president and chief executive of National Electronic Information Corp., the system’s developer.

He likened it to the banking industry’s automated-teller machine network.

Such a system could save the nation’s $800-billion health care industry between $30 billion and $137 billion a year, O’Donnell said.

The test project, which will continue through the summer, includes five other HMOs in four states. National Electronic Information, based in Secaucus, N.J., then hopes to offer the service to other entities that reimburse physicians, O’Donnell said. The charge would be about 20 cents a transaction.

“The whole concept is to reduce the administrative cost of health care, offer better service to (physicians) and remove administrative burdens from the patient,” O’Donnell said.

The computer network, called NEIC Healthcare Information Network, was designed for National Electronic by PCS Health Systems in Scottsdale, Ariz. It allows physicians to verify that a patient is covered by a certain type of insurance and the terms of that coverage. When fully operational, it would transmit referrals to a specialist electronically, without paper, and patients would no longer have to ponder which insurance forms to send.

Administrative simplification, O’Donnell said, is one goal on which all parties studying the health care industry seem to agree.

Alan Hoops, PacifiCare’s president and chief executive, said such a communications system could make managed care more cost-effective and efficient.

“We are excited to be at the forefront of our industry in gaining the ability to communicate with our providers electronically,” he said in a prepared statement.

National Electronic is privately owned by a consortium of the nation’s largest commercial insurance companies, including Aetna, Travelers, Cigna, Metropolitan and John Hancock Mutual Life Insurance Co.

The corporation, founded in 1981, was transmitting a volume of about 740,000 claims by 1988, O’Donnell said. This year, he said, that volume is projected at 35 million claims.

PacifiCare provides health care services to employer groups and Medicare beneficiaries in California, Oklahoma, Oregon, Texas and Washington. The company, which serves more than 1 million members, had 1992 revenue of $1.83 billion and employs 1,500 people.