Blue Cross fined $73,600 by state Not paying interest on late bills among violations cited by Md.

September 22, 1992|By Patricia Meisol | Patricia Meisol,Staff Writer

State insurance regulators fined Blue Cross and Blue Shield of Maryland $73,600 yesterday for violations including failing to pay interest to doctors whose bills went unpaid for months and sometimes years.

The fine, stemming from a review of the company's business practices, is one of the largest penalties levied since the Insurance Division began inspecting insurance companies' marketplace conduct in 1985, said Nelson Ayling, chief of market conduct review for life and health insurance companies.

Doctors claim that their inability to collect from Blue Cross has led to higher medical costs because they are forced to borrow money to pay their bills on time.

The regulatory review of Blue Cross, conducted over the past year, looked at the company's payment of claims and advertising practices in 1991. It was the first such review of the company since 1986.

The state fine comes three days before a U.S. Senate subcommittee opens hearings on the management and regulation of the Maryland Blues and three months after the state's insurance commissioner, John A. Donaho, complained that the company has eluded regulation.

Sen. Sam Nunn, D-Ga., head of the Senate Permanent Subcommittee on Investigations, which is examining the insurance industry, said in a statement announcing the hearing Friday that the impact of mismanagement and ineffective regulation on the cost of health care can't be ignored.

"Those factors, in addition to many others, must be considered in our examination of the Maryland plan as well as in our long-range investigation" of Blue Cross and Blue Shield plans, Mr. Nunn said.

Mr. Ayling estimated in a 37-page report on Blue Cross' business practices that at least 2 percent of the 12 million claims paid each year by the state's largest health insurer are late.

In the past 5 1/2 years, he said, Blue Cross has failed to pay interest on at least 1.1 million of those late claims to providers.

In contrast, Mr. Ayling said, most other insurers the division has examined have been paying medical claims within the required 30 days.

John A. Picciotto, Blue Cross vice president and legal counsel, said yesterday that the company has already taken steps to correct problems noted in the report, including a new claims processing operation that he said should be in place within 18 months.

"We have recognized . . . that service is something we need to improve and have made it a high priority," Mr. Picciotto said.

In the state's report, released yesterday and covering the period through Dec. 31, 1991, examiners for the state's Insurance Division also faulted Blue Cross for failing to substantiate advertising claims, keep a central advertising file available for state inspection, or register its agents. Blue Cross said it has corrected those items.

When it came to complaints, the insurer faired better. Examiners concluded that with the exception of doctors and hospitals, Blue Cross "does make an effort to settle all complaints in a prompt and conscientious manner."

The bulk of the late claims were those submitted by doctors and hospitals on behalf of their patients.

The division's focus on the company's payment of interest on late claims stemmed from a Glen Burnie internist's complaint that the Blues had failed to pay him interest on 420 late claims for as long as 10 months.

"The late payments are quite outrageous. They have been persistent and long standing. And when you call them on the telephone, they say all the right things . . . ," said Dr. Lawrence Vidaver, a Glen Burnie internist who said he negotiated with Blue Cross for months to get the insurer to reimburse $400 in interest he calculated was due him in 1990.

"It is very, very hard to feel they do business in an orderly fashion," he said. Dr. Vidaver said he is still waiting for his 1991 interest check. Of the bills he sent to Blue Cross and other insurers in August, Dr. Vidaver said, 45 percent are already 60 days late.

He said his case was not unique and that many doctors have difficulty paying their bills because of the late reimbursement.

"There are cash-flow problems across the state," he said, adding that it would be naive to think such practices don't raise the cost of medicine.

"You have doctors paying interest to keep their practices running. If we don't get payments on time, we have to borrow money, and when we borrow, we pay interest," he said.

The division's review also found that one health care provider was forced to wait three years before his claim was paid last November. The provider, who was not identified, is still waiting for the interest payment, the report said.

State and Blue Cross officials said they did not expect an onslaught of demands from doctors for interest on old bills because these have mostly been settled.

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