WellPoint Rates Come Under Fire
WellPoint Health Networks Inc. is facing opposition from some doctors and hospitals about what they say are insufficient reimbursement rates paid by the managed-care company.
Sutter Health, which operates hospitals in Sacramento, has already moved to sever ties with Woodland Hills-based WellPoint, a licensee of the national Blue Cross & Blue Shield Assn. Some other Sacramento systems say the rates paid by the company aren’t covering costs. Four doctors groups are also working to bring about a class-arbitration hearing over allegations of contract violations.
The loss of just one company isn’t likely to have a major effect on WellPoint, and any hospital giving up business with WellPoint would have to cope with a significant decrease in revenue, analysts said. If WellPoint loses its ties with other major operators, though, the company could be facing more of a challenge.
“Is this the beginning of some sort of provider revolt? I don’t think so,” said Greg Crawford, an analyst at Fox-Pitt Kelton Inc. “I don’t think either company comes out a winner in this.”
WellPoint shares fell $1.63 to close at $63.38 on the New York Stock Exchange. (The news was first reported in the Wall Street Journal.)
WellPoint said it’s not planning to change its business strategy, which has helped it show consistent earnings growth for the last several years, and that other hospitals have managed to work with the rates it has offered. The company also said it doesn’t believe it has violated any contracts with doctors.
Sutter Health ended its contract with WellPoint last month, citing inadequate reimbursement rates. The system has 23 hospitals that provide services to WellPoint customers.
WellPoint said a hospital system has two options if it’s unhappy about reimbursement rates: It can notify the company that it wants to renegotiate rates of an existing contract, or it can terminate its contract and then negotiate new rates.
Two other hospital systems, either in or preparing to begin negotiations with the company, said WellPoint’s rates are too low in light of their costs. University of California-Davis Health System plans to inform WellPoint this week that it wants to renegotiate its agreements with the company.
“WellPoint for us is one of our lowest-paying managed-care companies,” said Frank Loge, chief operating officer of the system. “Hospitals and physicians can no longer continue to provide good, quality care without being paid appropriately.”
WellPoint’s two-year contract with Catholic Healthcare West, covering 32 of the system’s hospitals in California, is to end June 30. The hospital system said reimbursement is a significant part of its negotiations with WellPoint.
Four California doctors’ groups have brought a lawsuit against WellPoint alleging contract violations between 1993 and 1995 and seeking class-action status. The California Medical Assn. said it’s hoping to eventually receive approval for a class-arbitration action against the company at the state level that could include as many as 13,000 doctors.
