Blues sued over plan to cut fees

January 13, 1995|By John Fairhall | John Fairhall,Sun Staff Writer

A company representing 900 doctors has filed a $16 million lawsuit challenging Blue Cross and Blue Shield of Maryland's plan to cut the fees it pays to most specialists.

Blue Cross general counsel John A. Picciotto said yesterday the suit is "without merit" and predicted it would be dismissed by the courts.

Baltimore-based InforMed Physician Services Inc. filed the suit in Baltimore County Circuit Court.

The state insurance commissioner concluded a hearing earlier this week on Blue Cross' plan to slash the fees of several thousand specialists and other medical professionals. The commissioner has several weeks in which to act.

InforMed is asking the courts to prohibit Blue Cross from reducing fees paid to the 900 doctors, mostly Baltimore-area specialists, represented by InforMed. InforMed also seeks at least $16 million in damages as a result of Blue Cross' alleged failure to fulfill a contract with InforMed and its physicians.

InforMed is headed by David W.B. Willse, who has had a long relationship with Blue Cross. Mr. Willse sold Willse & Associates, which processes insurance claims and provides other services for clients, to Blue Cross in 1984. Mr. Willse continued to work for Willse & Associates until 1988, after which he formed InforMed.

The suit, filed Tuesday, alleges that Blue Cross reneged on contracts dating to 1992 to increase the 900 doctors' fees by 5 percent, for which the doctors would increase their efficiency and reduce the costs of medical services provided to Blue Cross subscribers. InforMed says the contracts were approved by former Blue Cross President Carl J. Sardegna. The current president and chief executive, William L. Jews, took over in 1993.

The doctors were enrolled in a special Blue Cross physician group, the Select Advantage Network. InforMed helped the doctors monitor and trim treatment costs by gathering and analyzing information from their practices.

InforMed says network physicians became on average 15% more efficient than other doctors treating Blue Cross subscribers, saving Blue Cross tens of millions of dollars. Nevertheless, the suit alleges, Blue Cross paid only some doctors their promised increases, while denying them to 900 others.

InforMed itself was paid about $400,000 a year by Blue Cross, but was owed more, the suit alleges.

But Mr. Picciotto said Blue Cross does not owe the doctors money. "We believe we've lived up to the contract we have with David Willse and InforMed."

"Unfortunately the cost of defense" of the suit "will be borne by Blue Cross, which means Blue Cross subscribers," Mr. Picciotto said.

Another issue raised by the suit concerns Blue Cross' alleged failure to pursue and obtain the insurance commissioner's approval of the contracts with InforMed and the doctors.

Former Commissioner John A. Donaho had preliminarily denied approval, after which InforMed hired a lobbyist to persuade state lawmakers in 1993 to put pressure on Mr. Donaho. That tactic failed. Although state regulators never approved the plan, the contracts remained in force, according to the suit.

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