Blue Cross Settles Suit Over Hospital Payment Practices

Blue Cross of California said Wednesday that it settled a lawsuit from one of California’s largest hospital chains that had contended that the big insurer routinely declined to pay for patient services as a way to boost profitability.

Separately, the Woodland Hills-based health plan said it reached a new contract with St. John’s Health Center in Santa Monica. The 233-bed hospital stopped accepting Blue Cross insurance in August, protesting the insurer’s payment rates.

The two developments appeared to resolve some of the tensions between Blue Cross and several health-care providers that in the last year have criticized the insurer over its payment practices and low reimbursement fees.

Catholic Healthcare West, which operates 40 hospitals in California, had alleged in the Los Angeles County Superior Court lawsuit filed in June that “Blue Cross has engaged in a pattern of practices designed to increase its own profitability by delaying and denying payments due to hospitals that provide medically necessary care.”

Catholic Healthcare threatened to sever its contract with Blue Cross, a move that could have disrupted medical care for tens of thousands of patients. The two companies, however, reached a contract agreement in August, but it took an additional six months to completely resolve their dispute and settle the litigation.

Contractual agreements now in place, as well as greater efforts to electronically connect Catholic Healthcare’s billing system with Blue Cross’ payment system, should reduce the late payments, underpayments and payment denials that were at the heart of the dispute, said John Ray, a Catholic Healthcare senior vice president.

Blue Cross provides medical insurance for 5.6 million Californians. Catholic Healthcare West is a San Francisco-based nonprofit organization that owns 13 hospitals in Southern California, including St. Mary Medical Center of Long Beach, St. Vincent Medical Center of Los Angeles and Glendale Memorial Hospital & Health Center.

The companies declined to discuss other details of the settlement but did agree to work jointly to improve patient safety as well as nursing recruitment and retention.

Meanwhile, Catholic Healthcare reached an agreement earlier this week with the California Nurses Assn., or CNA, that paves the way for union-organizing efforts at its hospitals. CNA already represents about 5,000 out of 14,000 registered nurses at Catholic Healthcare’s hospitals.

Union officials said the agreement goes “well beyond existing labor law governing union representation campaigns and elections.”

Specifically, it gives nurses the right to discuss CNA representation on work time in the hospital.

It also states that attendance at meetings called by management to discuss CNA representation shall be voluntary, and it bars management from initiating one-on-one conversations with nurses about CNA representation. It gives the union the ability to meet with nurses in the hospital and allows them to use bulletin boards to make announcements.

Finally, it says elections for CNA representation, overseen by a neutral third party, will be held within 45 days after the union requests an election.

The agreement shores up the chain’s relationship with its nursing staff and allows it to address “more important issues than fighting over how to conduct a representation campaign,” said Lori Aldrete, a spokeswoman for Catholic Healthcare.

Blue Cross’ new contract with St. John’s Health Center, which is not affiliated with Catholic Healthcare, will provide more favorable terms to the hospital for treating Blue Cross patients.

St. John’s resumed accepting Blue Cross insurance earlier this month, but for six months Blue Cross sent patients to other hospitals. St. John’s average daily patient census in January--a key measure of hospital health--fell to 183 in January from 194 in the same month a year earlier. Hospital Chief Executive Bruce Lamoureux attributed the decline to Blue Cross patients deciding to go elsewhere rather than risk higher out-of-pocket expenses at St. John’s. He said it was too early to measure the financial cost of the dispute.

Before the contract interruption, Blue Cross accounted for about 12% of its patients, Lamoureux said.

The new contract with St. John’s and the settlement with Catholic Healthcare West come at a time of rising profit for WellPoint Health Networks Inc., the Thousand Oaks-based corporate parent of Blue Cross.

On Tuesday, WellPoint said its profit last year rose 21% to $342.3 million compared with 1999.

WellPoint shares rose $4.58 to close at $104.90 on the New York Stock Exchange on Wednesday.