Blue Cross cuts causing pain

Times Staff Writer

Blue Cross of California’s latest antidote to rising healthcare costs isn’t going down very well with physicians.

The state’s largest for-profit health plan is set to roll back its payments for about half the services and procedures provided by physicians next month.

And many of the 53,408 physicians in Blue Cross’ preferred provider organization (PPO) networks say that’s a prescription for disaster.


Doctors say the health plan imposed the new rates unilaterally. In most cases, they say, Blue Cross will get its way because it controls the lion’s share of their patient base.

But other physicians say they’ve had it with Blue Cross. More than 300 of them have sent notices threatening to dump the insurer if the rates take effect as scheduled Aug. 6. Some say the new rates won’t even cover the cost of supplies.

“I don’t know how anybody can afford to stay in practice and accept Blue Cross rates,” said Dr. Charles Fishman, a San Luis Obispo dermatologist who sent a letter telling Blue Cross he would drop its contract if his rates were not improved.

A spokeswoman for the insurer described the level of complaints over the new rates as routine, and she said the number of termination notices from physicians over the issue was negligible -- less than 1% of the doctors in its PPO networks.

“We continue to have the largest physician network of all our competitors,” said Shannon Troughton, a spokeswoman for Blue Cross’ parent company, Indianapolis-based WellPoint Inc.

The rate dispute is the latest skirmish between physicians and Blue Cross since the insurer was purchased by the Indianapolis company formerly named Anthem nearly three years ago.

It is one of many complaints expected to be aired at a public hearing on Blue Cross set for Aug. 7 in Los Angeles.

Cindy Ehnes, director of the California Department of Managed Health Care, called the session to hear whether the insurer was living up to promises it made to win approval for the November 2004 deal that transformed the Indiana company into one of the nation’s largest providers of health benefits.

Troughton said WellPoint had been a good corporate citizen since it took over California’s Blue Cross. She said its growing enrollment was evidence that it was providing a service consumers valued.

She said the new reimbursement rates were intended to pay physicians at “sustainable levels.” The insurer does not intend to pay physicians’ less than their costs, but determining what those costs are is difficult, she said.

So, she said, the rates were largely based on cost and reimbursement data from other payers, particularly Medicare, the government’s health insurance program for seniors.

Because of its unparalleled patient base and because of federal budget constraints, Medicare traditionally has paid far less than commercial insurers. Now, for many procedures, Blue Cross will pay less than Medicare, physicians say.

Troughton said the new rates include almost as many increases as decreases. Primary care physicians will tend to fare better than specialists under the new rates, she said.

This reflects an industrywide effort to counter an emerging shortage of primary care physicians by raising the pay for these general and preventive care practitioners relative to specialists.

But even some primary care physicians say their practices will suffer under the new rates.

“If we make 10 or 15 cents on a vaccine, that’s good ... and that’s not counting our staff” time, said Dr. Ken Diamond, a Beverly Hills pediatrician. “I don’t want to make a huge markup on vaccines because they are so important, but I have to be able to pay our nurses.”

Diamond’s partner, Dr. Ron Nagel, said he knows many people will find it difficult to sympathize with physicians who have traditionally been well compensated.

But, he said, the cuts were economically devastating, particularly for physicians who begin their careers with more than $100,000 in educational loans to repay and whose overhead is constantly rising.

Like other physicians, Nagel said the rates for many of his services will be cut by a third or half. He is particularly outraged by what Blue Cross says it will pay him for a newborn hospital checkup.

The visit, which includes discussing lactation and other issues with the mother, is set to be reduced from $51 to $28.

“That is insulting,” Nagel said.

But the pediatricians said they can’t walk away from Blue Cross because it covers more than half their patients, and, in Beverly Hills, they figure there are plenty of other pediatricians willing to step in.

Blue Cross “won’t renegotiate,” Nagel said. “They will say, ‘You take it or leave it.’ ”

In San Luis Obispo, Fishman said he was prepared to drop his Blue Cross contract if a better deal was not forthcoming from the insurer. But he said he would not turn away loyal patients.

Instead, he will ask Blue Cross patients who wish to continue seeing him to pay his fee up front. As a courtesy, his office will submit claims to Blue Cross on the patient’s behalf. But the patients will have to absorb any difference between his fee and the reimbursement.

Dr. Daniel Lensink, an ophthalmic plastic surgeon in Redding, said Blue Cross was cutting his pay to remove a patch of skin cancer from an eyelid from $231 to $179.

He sent a letter threatening to drop out unless Blue Cross negotiated some of his rates. As the only specialist of his type between Sacramento and Eugene, Ore., he said he wouldn’t turn away Blue Cross patients. But they may have to pay higher out-of-network co-payments for his services.

“Doctors feel like the bottom is falling out,” said Lensink, the president of the region’s medical society.

One Newport Beach oncology practice figures the new rates will result in a $400,000 annual loss on the cost of treating their Blue Cross patients, who make up 40% of its cases.

As a result, Newport Cancer Care & Medical Associates sent letters to those patients explaining that they would be expected to pay the difference between the reimbursement rate and the costs of their chemotherapy.

“We have to have you sign your life away in order to cover the cost of treatment if Blue Cross won’t pay,” said practice administrator Beau Donegan.

She said the group had no choice. At as much as $80,000 per patient per course of treatment, the group spends an average of $1.5-million on chemotherapy drugs a month. The group faces being cut off if it doesn’t pay the suppliers within 30 days.

“If we’re not getting reimbursed, we can’t pay for the drugs for the other patients,” Donegan said. “The pharmaceutical companies and the insurance companies are the ones who are truly the profit-takers, and we’re caught in the middle. The patients and the physicians are caught in the middle.”

Dr. Ralph Armstrong, an osteopathic obstetrician-gynecologist in Hollister, said the reimbursements for procedures he performs often are being slashed. Gall bladder removals and appendectomies, for instance, are set to be reduced 28%.

“If this is a good part of your practice and all of a sudden your rates are being decreased significantly, you might not be able to practice here any more,” said Armstrong, who is president of the San Benito County Medical Society. “We have only three general surgeons in town. If we lost one of our general surgeons that would be devastating.”



Healthcare hearing

Physician and consumer complaints about Blue Cross of California will be aired at a state hearing next month in Los Angeles.

The state Department of Managed Health Care’s hearing is scheduled for Tuesday, Aug. 7, from 10 a.m. until 3 p.m. in the Carmel Room Auditorium at the Junipero Serra Building, 320 West 4th St., Los Angeles.

In addition to physicians’ complaints, regulators are expected to take testimony from the public about premium increases, retroactive cancellation of individual coverage after a serious illness and the level of corporate profit, including a recent payment of $950 million by Blue Cross of California to WellPoint Inc., its corporate parent.

For more information or to submit comments to state regulators, contact Denise Schmidt at (916) 322-2078 or send an e-mail to publiccomments@ You may also submit written comments by mail to Department of Managed Health Care, 980 9th St., Suite 500, Sacramento, CA 95814.

-- Lisa Girion