Blues get a 2nd chance on Medicare

June 30, 1993|By Patricia Meisol | Patricia Meisol,Staff Writer

Blue Cross and Blue Shield of Maryland, which ranked among the worst Medicare contractors in the country last year, is getting a second chance to keep its contract to process health care bills for the federal program.

The Health Care Financing Administration renewed contracts on Monday worth $22 million a year with the state's largest health insurer.

But the federal agency awarded the contract on several conditions, including that Blue Cross pass an unusual midyear review and that the insurer do the work at prices between 18 percent and 23 percent lower than prices received this year.

The HCFA, which administers federal health insurance for the elderly and disabled, threatened to pull the contract in December if Blue Cross did not meet agency goals. The agency changed its mind after considering the progress the company has made this year and a promise from its new president and chief executive, William L. Jews, of continued improvements.

"There was definitely improved performance in processing the claims timely, and progress had been made in meeting all the other HCFA goals," said Carol J. Walton, director of the HCFA's bureau of program operations, the office that oversees contracts. "But I think it would be fair to say they are not totally out of the woods."

The contract was renewed, she said, because "William Jews has committed the plan to making the goals at a reasonable and competitive cost, and I think that new commitment from him, along with the progress, will result in new value for the government and the public."

Ms. Walton said it was difficult to compare the price negotiated with Blue Cross for the next fiscal year with the price of its current work because the HCFA has revised some of its contracts.

Blue Cross is one of nearly four dozen contractors that the HCFA hires each year to pay the health care bills submitted under the Medicare program.

Last year, the Maryland plan was ranked lowest among all contractors serving Medicare Part B, which covers doctors' bills for recipients, in such measures as timeliness and accuracy of payment. The company also received a low score as a contractor on Medicare Part A, which pays hospital bills. Blue Cross agreed to the terms after deciding "it was in the best interests of the people of Maryland," said Amy Levy, a Blues spokeswoman.

Whether it was in the best interests of Blue Cross is not certain. Mr. Jews will study the contract this year and decide whether the Blues should continue in the Medicare business, Ms. Levy said.

"We are going to do everything possible not to lose money," Ms. Levy said, adding that it would depend on how the contract was managed.

Mr. Jews is "looking at new ways of managing Medicare so that we do not lose money," Ms. Levy said.

The contract award came a month after the HCFA refused to renew a Medicare processing contract with another low-ranked contractor in the state of Washington. That contractor, King County Medical Blue Shield, ranked second-lowest nationwide for performance among Medicare Part B contractors.

Ms. Walton said the situation differed partly because the Maryland Blues' troubles were confined to the past few years of a contract that has been renewed annually with good performance ratings since 1967.

By contrast, the Washington State contractor, which had the work for only two years, was never able to meet performance goals. The drop in performance in Maryland has been attributed to a change to a new computer system.

More than 300 of the Blues' employees work on Medicare contracts full time.

To keep Medicare Part B, Blue Cross agreed to:

* Charge the government no more than $12.7 million for the current fiscal year, which ends Sept. 30. Blue Cross declined to say how much more it expected to receive this year.

* Cap at $1.40 the amount it charges for each claim processed in fiscal 1994. This compares with a current-year charge of $1.81 per claim.

If costs are higher, Blue Cross cannot recoup the difference. The company must also pass performance standards after a review in October 1993 and March and October 1994.

To continue to process claims for Medicare Part A, the Blues agreed to a cap of $2.30 per claim, compared with a current charge of $2.81.

Medicare has lost billions of dollars in recent years as the result of poor controls on the way it pays insurers, the General Accounting Office reported in January.

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