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Blues bend on publicized policies

By Jeffrey Barg

We published two stories in March dealing with physicians’ concerns about policies of the state’s most dominant health insurers: Highmark Blue Cross Blue Shield and Independence Blue Cross.

In one story, we detailed physicians’ concerns about capitation utilized since the mid-1990s by IBC to pay Philadelphia-area cardiologists and gastroenterologists, and plans by Highmark to begin using a similar methodology with cardiologists, orthopedic surgeons and ophthalmologists in western Pennsylvania. In short, the Philadelphia doctors said that they were currently getting reimbursed approximately half of what they were getting in the mid-1990s and that the diminished reimbursement could adversely impact the quality of care delivered. Pittsburgh doctors feared the same result from Highmark’s plans.

In the other story, we exposed systematic downcoding by Pennsylvania Blue Shield, now a subsidiary of Highmark, of professional charge submissions for critical care services. Blue Shield had, unbeknownst to most physicians, programmed their computers to automatically replace the code for critical care first hour with the code for subsequent hospital visits after the first three charge submissions of a hospitalization. Just as with the capitation scheme, the insurer’s corrective for perceived overutilization was viewed by physicians as arbitrary, onerous and potentially detrimental to quality of care.

Despite physicians’ vehement opposition to the capitation and downcoding policies, the insurers showed no inclination to change them. State and federal regulators have shown little interest in intervening. And it seemed unlikely, given the insurers’ commanding market shares and the relative fragmentation of physicians, that physicians had the leverage to force change. Few individual physicians or even group practices could afford to terminate contracts with the Blues, unless most of their colleagues followed suit, and if such a joint response were orchestrated, it would probably draw an antitrust lawsuit.

Yet, several months following our publication of these disputes, Highmark and IBC have ceded ground in each case.

The most dramatic retreat was from the systematic downcoding. Blue Shield discontinued the policy as of May 1st and said it would not use the practice on any other codes. Instead, it is conducting greater utilization review of critical care services.

IBC announced several changes to their capitation program this July, including raising capitation rates by up to 32 percent as of June 1st. They also sent out a notice to all the physicians in the program responding explicitly to many of the points in our story. We would have been happy to put these responses into our original story, but IBC had declined to participate.

Highmark has twice postponed the implementation of its capitation program. Originally scheduled for an April 1st launch, the program was postponed until July 1st of this year and then in May, Highmark postponed the start of the program once again, this time until early 2001. Physicians had fired two warning shots across Highmark’s bow: in March, the Pennsylvania Medical Society and the American Medical Association sent a joint letter to the U.S. Justice Department requesting an investigation of Highmark’s and IBC’s market power; and in April, Pa.’s cardiology, ophthalmology and orthopedic surgery specialty societies sent a model letter to their western Pa. members which could be sent to patients to explain why they were seriously considering no longer participating in Highmark’s Medicare HMO.

This is not say that Pa. physicians are dead set against capitated payments based on episodes of care. But, if doctors are to assume greater risk, they want to have more control over the way the system operates, something that insurers have been reluctant to give. After IBC sent a letter to Philadelphia-area ophthalmologists asking them to enroll in an episode of care program two years ago, an IPA composed of 30 percent of the area’s ophthalmologists formed to propose several alternative episode of care approaches. IBC suddenly appeared to lose interest in pursuing such a system with ophthalmologists. And now the Pennsylvania Orthopaedic Society has formed a subsidiary to administer an episodic case rate project of its own creation.

It remains to be seen whether insurers and physicians will be able to develop the necessary level of trust and collaboration required to make such a system work. But it seems clear that insurers cannot count on physicians to remain passive about the way that system is designed.

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