Blue Cross Tells Doctors: Stress Care, Not Costs

Blue Cross of California, in a radical departure from industry practice, is scrapping an incentive program in its HMO that rewards doctors for controlling medical costs. The insurer instead will link bonus payments directly to patient satisfaction--a stunning indication that the industry’s oft-criticized focus on cost containment no longer works.

Blue Cross, a unit of WellPoint Health Networks Inc. of Thousand Oaks, will announce the changes today. Experts said other HMOs probably will follow suit. But they also pointed out that the shift will not solve all the ills facing HMOs.

The new incentives, which apply only to physicians in Blue Cross’ health maintenance organization, come as the industry enters a period of renewed turmoil. Rising health-care costs have trimmed HMO profits; Maxicare Health Plans, a weak health insurer with thousands of Los Angeles-area members, is operating under Bankruptcy Court protection.

In Washington, lawmakers are crafting patients’ rights legislation that would allow consumers to sue their HMOs and give them direct access to specialists.

Blue Cross said its new program isn’t in response to the federal proposal, which health insurers and big business oppose. Blue Cross Vice President and Medical Director Jeff Kamil said the HMO, with 2.2 million members, began work on the revisions a year ago.

“The marketplace is stressing quality of care as the most significant issue,” Kamil said. “Our incentives are structured to emphasize quality of care [with] specific, measurable criteria built into contracts.”

An influential employers group Monday praised Blue Cross’ action.

“This is a huge step forward,” said Peter Lee, president of San Francisco-based Pacific Business Group on Health, a coalition that represents large California health-care purchasers. “This raises the bar for other health plans in the state.”

Lee said that employers have been pushing health insurers to improve the patient care provided through HMOs. Some forecasters believe that health insurance premiums might double in the next five years, he said, a consequence of an aging population with access to increasingly advanced, but costly, methods to treat disease.

Employers “are looking closely at what value they are getting for their money,” Lee said. “They want to see that quality of care is improving in some way.”

Under the new bonus program, Blue Cross will reward physicians groups that meet certain criteria. The insurer, the fourth-largest HMO in the state, will post results quarterly on its Web site so consumers can use the information to make decisions about their medical care.

Blue Cross will measure patient satisfaction in a number of ways. Besides regular patient surveys, it will interview patients when they switch doctors groups to determine whether quality of care is a reason for the change. It also will monitor how quickly patient grievances are heard and resolved.

Physicians groups will be graded on certain preventive health measures, such as conducting regular breast and cervical cancer exams and advising patients to enroll in smoking cessation programs. Physicians groups will be expected to notify Blue Cross when patients are discharged from hospitals so the insurer’s case managers can coordinate at-home care, such as the need for a visiting nurse or an oxygen tank.

Blue Cross said physicians groups could receive a bonus that equals as much as 10% of their quarterly payments for medical care, an inducement observers described as substantial. Previously, the bonus was linked almost entirely to cost-saving measures.

Other HMOs include quality of care in their bonus calculations, but it is given less weight than cost-control measures. In a recent survey of large physicians groups, the Pacific Business Group on Health found that quality of care accounted for no more than 2% of the bonus doctors receive from HMOs. The Integrated Healthcare Assn., a group whose members include insurers, hospitals and physicians, has proposed a bonus in the 2% to 4% range for HMOs, as a first step toward rewarding improved patient care.

“We thought 5% would be enough [for physicians] to sit up and take notice. Ten percent is way at the upper end of the scale,” said Beau Carter, executive director of the Integrated Healthcare Assn.

Blue Cross’ Kamil said that although the insurer is no longer rewarding cost cutting, health-care expenses are not expected to rise as a result of the changes. He said the emphasis on prompt referrals to experts and preventive treatment will keep medical costs down in the long run. The insurer does not expect total bonus payments to increase under the new incentive program.

One-third of physicians groups did not qualify for bonuses under the old program, he said, a percentage that is likely to hold under the new plan, at least initially.

“This is new territory,” he said. “There will be some who do not qualify. They will have to make changes.”

Blue Cross’ incentive program is likely to prompt other HMOs to implement similar programs, experts said Monday. Though such a response is welcome, it is not a panacea for managed care, they said.

“We still have a system with significant shortfalls, where patients are not getting the care they should be getting,” Lee said.

Physicians groups said the new incentives have built-in shortcomings and could be undermined by other aspects of the compensation agreements Blue Cross has with doctors. Blue Cross, like most HMOs, pays doctors groups a fixed amount per patient, a formula known as capitation. Low capitation rates, among other factors, have been blamed for the financial failure of physicians groups in recent years.

A recent survey by the Integrated Health Assn. found that physicians groups are struggling economically, with only the larger groups posting slim profit margins. Physicians said the favorable bonus plan wouldn’t make up for low capitation rates; HMOs are beginning their negotiations with physicians groups for next year.

Blue Cross is known to drive a hard bargain and is ranked as one of the strongest HMOs financially. Kamil said the incentive program is not intended as a tool to ratchet down contract rates.

Jack Lewin, executive director of the California Medical Assn., which is suing Blue Cross for allegedly defrauding physicians, said that although the incentive payments support “commonly accepted goals,” he feared they may favor physicians groups that cater to affluent patients.

“Physicians who take care of the sicker, poorer populations, and populations with limited English proficiency, might not do so well in this kind of reward system,” he said.