Blues seek EDS for electronic claims network

January 16, 1993|By Patricia Meisol | Patricia Meisol,Staff Writer

Blue Cross and Blue Shield of Maryland has signed a letter of intent with Electronic Data Systems Corp. for the computer services company to take over and expand the health insurer's electronic claims network.

The proposed contract, which must still be approved by the insurer's board as well as by state regulators, has drawn criticism from senior managers at Blue Cross, who question whether it could eventually gut the insurer's core business of processing claims.

The letter of intent calls for the Dallas-based company, a unit of General Motors Corp., to take over the Blues' LifeCard subsidiary and hire as many as 25 of its employees, including the Blues vice president who helped select EDS.

The LifeCard system handles claims that are filed electronically. Between 20 percent and 30 percent of the health insurer's claims are handled electronically, using a system in which claims are filed directly on computer, eliminating paper. Expanding that system is viewed as key to cutting the company's administrative expenses.

"EDS has the wherewithal, the technology and the money to do things we cannot. . . . We wanted someone to be technically competent and also market savvy," said Thomas J. Durel, the vice president whose job would move to EDS, explaining why the Blues opted not to upgrade LifeCard for future expansion.

He said, however, that the insurer's $20 million-plus CARE system, a technologically sophisticated but still-troubled claims processing unit, would continue to oversee the payment of claims.

The Blues hope to use the deal to develop a statewide "community based" electronic network in Maryland. Under such a network, all insurers and providers, such as hospitals, doctors, pharmacies and laboratories, would use the system to file claims and exchange medical information.

Mr. Durel, head of electronic connectivity services, would not disclose any of the financial terms, but said the Blues were approaching the deal in terms of a partnership. He said it would eliminate the need for the Blues to make a major investment to upgrade the aging LifeCard system to handle more electronic claims.

The cost and purpose of the EDS contract has been questioned by several senior managers, according to company memos obtained by The Sun.

In a Dec. 21 memo, Linda Benedict, senior vice president for business operations, said she would continue to look for lower-priced competitors to increase the number of claims coming into the Blues electronically. She also expressed concern that the insurer might be close to ceding its claims business to EDS.

"Speaking for myself (but probably also for all of my staff), I have no desire to get out of the claims processing business. That is the key service that BCBSM has provided for years," she wrote.

"While we do need to get better at managing care, I think we can do that best by continuing to process claims, thus, I see no need for an EDS-like partner to assist in claims processing -- if that is one of the eventual aims of ECS [electronic connectivity services, the Blues unit in charge of the contract]."

In a Jan. 4 response, company Vice President Tom Higgins defended the decision, saying EDS was the dominant player in electronic claims processing and its systems would be compatible with any national program, should one be developed.

Talks with EDS have been in the works since November, when the company was selected, according to Mr. Durel.

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