Blues to relinquish Medicare contract

May 24, 1994|By Patricia Meisol | Patricia Meisol,Sun Staff Writer

Blue Cross and Blue Shield of Maryland, smarting from losses on its federal contract to pay doctor bills for the elderly, said yesterday that it would give up the prestigious contract rather than make the big investment needed to keep it.

As many as 230 people who work at the insurer's Timonium offices for claims processing could lose their jobs as a result.

The insurer has been under sustained pressure from the Health Care Financing Administration since at least 1992 to improve or lose the contract. Blue Cross won a conditional renewal in September 1993 but, despite improvement, has remained on probation for poor service and high costs.

The insurer said it would cut $5 million in losses in 1995 by giving up the contract, which expires Sept. 30. Blue Cross, which has had the contract for Maryland since 1967, backed out after the federal government raised the ante for service requirements.

"What we saw were dramatic improvements in customer service, but also we saw HCFA raising the bar, and rightly so, and we would have to make major expenditures in systems to continue," said Amy Levy, Blue Cross vice president.

Making such an investment would only increase the insurer's losses, she said.

HCFA Administrator Bruce C. Vladeck said yesterday that his agency will require the new contractor to set up shop in Maryland and consider hiring the estimated 200 to 230 Blue Cross employees now handling the contract.

He also said the government would begin immediately to find a replacement contractor and that the transition "will be accomplished without any disruption of service to Medicare beneficiaries or providers."

The contract could be extended past Sept. 30 to insure continued service. Blue Cross, too, said it would give affected employees the chance to interview for other jobs.

Maryland Insurance Commissioner Dwight K. Bartlett III, who previously questioned why the insurer participated in the unprofitable contract, said yesterday that he believes Blue Cross "will be better off financially in the long run, although it could experience some bumps along the way."

The Maryland Blues is one of about 80 contractors nationwide hired by the HCFA to pay the health bills for the elderly and disabled under the federal Medicare health insurance program. In fiscal 1993, Maryland Blue Cross handled 7.8 million claims from more than 11,000 doctors and medical suppliers, paying $480 million in medical bills for the elderly under Medicare Part B.

It didn't do a great job, though. The insurer was the worst-ranked contractor in the nation in 1992, with substandard rates for accuracy, timeliness and customer service. The poor performance led HCFA's contracts manager, Carol J. Walton, to issue several warning letters in 1992 and early 1993 that the contract would be terminated if problems persisted. The government hired Blue Cross again for a year on condition that the insurer pass unusual midyear reviews and that it do the work at prices as much as 23 percent lower than it previously charged.

Many of the Blues' problems stemmed from installation of a new computer system, and the problems lasted far longer than the government considered normal. Delays at one point last year interrupted the cash flow at some doctors' practices and forced them to borrow money from banks to pay their bills.

Maurice Hartman, administrator of the HCFA's regional office in Philadelphia, said a review by his office in March found that, despite improvements, the Maryland Blues still fell short in detecting fraud and abuse in bills from doctors and in customer service.

The Maryland Blue Plan will continue to process Medicare Part A claims, which are those from hospitals, nursing homes and other institutional providers.

Blue Cross was paid about $22 million to handle both parts of its Medicare business in 1993.

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