A $52 million contract to administer Medicare claims in Michigan is up for grabs after an 11th-hour effort by Blue Cross and Blue Shield of Michigan failed to help it retain the business.
Several insurers told MODERN HEALTHCARE last week they were interested in the business after HCFA held firm on its decision not to renew the contract with the Michigan Blues, which is being investigated for allegedly falsifying hospital audit records to keep its contract with Medicare (March 7, p. 16).
"We have Medicare business now, and we are looking at ways to get more business," said David Gross, associate manager of the Detroit office of the Travelers Insurance Co.
The Travelers already handles audits of about 10 hospitals, 250 nursing homes and 40 rehabilitation agencies in Michigan, Mr. Gross said.
HCFA's decision, reiterated at a March 4 meeting with Michigan Blues executives in Chicago, ends a 27-year relationship the Blues had as Michigan's fiscal intermediary.
The lost business amounts to 10% of the Blues' $500 million operating budget.
"That area was not a profit center," Michigan Blues' communications director Rudolph Difazio said of the Medicare contract. "That money came in the door and went out the door."
The Blue Cross and Blue Shield Association, the national group for independent Blue Cross and Blue Shield plans, issued a statement last week saying it was "dismayed" by HCFA's decision to remove the Michigan Blues as a subcontractor.
Meanwhile, members of Michigan's congressional delegation have been working with HCFA to ensure that 680 employees whose jobs are directly tied to Medicare will be hired by the organization that eventually gets the contract to handle the claims.
Blue Cross and Blue Shield of Illinois has been temporarily handling the reimbursement of Medicare claims by Michigan hospitals, a contract valued at $15 million. Through that contract, the Michigan Blues had handled Medicare bills from 200 hospitals and 41 skilled-nursing facilities.
Last week, HCFA told the Illinois Blues plan it would get the Michigan Medicare contracts through the end of the current fiscal year, which ends Sept. 30. The Illinois Blues is also interested in the contract for the fiscal years that follow, an Illinois Blues spokeswoman said.
HCFA officials haven't indicated when they will make a decision on awarding the Michigan Medicare contract for future fiscal years.
The Michigan Blues, the nation's second largest, handled benefits of $10 billion in 1992, including $4.3 billion in Medicare payments.