Blue Cross and Blue Shield of Georgia stirred up plenty of animosity among doctors when it changed its fee schedule about three years ago-and then refused to reveal precisely how those reimbursements were calculated, according to the state's medical society.
Last week, after a long and costly court struggle, the Medical Association of Georgia claimed victory when the state Supreme Court supported a lower court's ruling that required the giant insurer to disclose what fees it would pay to doctors.
The decision, which also will force Blue Cross to detail its payment methodology, could have an impact on doctors across America who are faced with similarly secretive managed-care contracts, observers said.
"Other state medical societies will have a strong interest in this case," said David Cook, the medical association's general counsel. "This is the first case we're aware of in this country that requires this. We're very pleased."
Highlighting the importance of the case, the American Medical Association's litigation center joined the case as a plaintiff shortly after the lawsuit was filed in 1997. Donald Palmisano, M.D., a member of the AMA's board of directors who is also an attorney, said the national group entered the legal fray because "it's an issue of fair play" that potentially affects "every physician who does any kind of insurance work."
Despite the court's ruling, Blue Cross-the state's largest insurer, with about 1.8 million customers-considered the case at least a partial victory because it affirmed its right to amend the contract within the context of the original agreement. That means that Blue Cross can change the rules-or the rates-almost at will with a standard 30-day notice, company officials said.
"This is a clear victory," said Charlie Harman, a Blue Cross vice president. "It retains the company's right to manage medical costs in order to provide the highest premium value and the lowest-cost insurance to our customers. We won on that. Technically, (the Medical Association of Georgia) lost."
Harman said there is no other avenue of appeal for Blue Cross, which is now taking steps to comply with the court ruling and disclose the methodology of its reimbursement rates. He said the company doesn't know yet what methodology it will ultimately use to calculate physician fees.
Blue Cross' parent firm, Cerulean, is in the final stage of a possible sale to Thousand Oaks, Calif.-based WellPoint Health Networks. The final step in the $700 million acquisition is a scheduled hearing next month before the state insurance commissioner.
The state medical association filed suit when Blue Cross altered the wording of a contract that had previously paid doctors based on "usual, customary and reasonable fees" charged to patients with traditional insurance. Instead, Blue Cross indicated that its fees would be based on what physicians throughout a certain geographic area received from every provider, including Medicare and Medicaid. The new formula included maximum-allowable payments under a resource-based relative value scale similar to the one used for the two federal healthcare programs.
That, Cook said, represented a big change from standard past contracts that were usually based on a percentage of what the physician charged to patients. It also means less money for doctors. "In practical terms," Cook said, "it was a reduction in the payment."
Harman acknowledged that Blue Cross changed its formula to the relative value scale used by the federal health programs. But he defended the practice, saying, "Even if rates did go down, in certain areas this (relative value scale) is not some kind of uncommon criteria for setting rates-it's done by the federal government."
Harman also said the court ruling allows Blue Cross wide latitude in changing fees.
Cook said the medical association, which represents about 8,000 of the state's estimated 13,000 practicing physicians, never quarreled with Blue Cross' right to change fees. Doctors simply want to know the bottom line.