By Christopher Guadagnino, Ph.D

Published May 1999

PROVIDERS ESCALATE CONFLICT WITH INSURERS

• Payors & providers reach impasse

• UPMC's battle against Highmark's role in the Allegheny bailout

• React to this article in the Discussion Forum.

PND: What progress has been made toward having the Pa. Insurance Department holding hearings over the merger that created Highmark Blue Cross Blue Shield?

RS: The Pa. Insurance Department finally has initiated the pre-hearing conference process for the holding of full adjudicatory adverse party hearing among the following entities: the Insurance Department, Highmark, the Pennsylvania Medical Society and the Pennsylvania Society of Internal Medicine. These hearings should have been held before the approval was granted by the insurance commissioner. We basically called them to task legally and, on August 12th, 1997, a unanimous decision by the entire Commonwealth Court corroborated our concerns.

PND: Why is the outcome significant for physicians in southeastern Pa.?

RS: The ultimate goal is to restore Blue Shield to its proper independent stance from Blue Cross and return it to 50 percent physician governance and return it to creating cooperative agreements among the various Crosses, particularly with regard to the Keystone Health Plans. An important point in the filing is that the transfer of Keystone Health Plan East had to be undone. Keystone Health Plan East, thereby, would be no longer controlled by Independence Blue Cross. Then we work back from there, as opposed to having decision making under Independence Blue Cross or Highmark being autocratic, virtually im
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## #$­¦# 2# Ä" there would again be 50 percent physician governance at a number of levels: the corporation membership governing body, empowerment on the board, as well as all the committees that are appointed by the board. Currently, its up to 25 percent and its appointed rather that elected. In other words, they can control which physician they want to put into that position, who may or may not advocate on behalf of his or her colleagues.

A 50 percent physician governance would mean better oversight over quality. For example, I used to be on a home care review committee by Blue Cross. They threw out the committee. They used to have the ability for the physician to learn what their protocols were. And now they’re proprietary and confidential. So therefore there’s no way to anticipate what’s happening. You just have to roll the dice, bill, and hope that they’ll cover you. In addition, you would be far less apt to have the policies approved related, for example, to episode of care. That means that, cash flow-wise, the Blues can reimburse for a service provided on January 1st on April 30th because you have to give the whole episode, then bill, and then they have 30 days to pay it. That includes the necessity for the physician to pay facility fees even if the patient is in a skilled nursing facility.

You would be far less apt to have nurse triage systems established, as is occurring in Pittsburgh.

We hope that an independent Blue Shield would restore the social mission which has been ignored by Highmark and it could potentially start competing with various other Blues organizations. At Independence Blue Cross’ annual meeting last month, CEO G. Fred DiBona predicted that by the end of this year, three quarters of all the patients covered by the Blues will be in a managed care structure. This is the way they’re handling it: they’re raising the rates for indemnity programs on two successive years by double digit percentages to force people into the managed care programs.

PND: On what basis do you assert that the consolidation should be unwound?

RS: The entity, "Highmark," is monopolistic. It is not upholding, through its present governance, the traditional social mission that had been pursued by the various Blues organizations since their inception in the 1930s. The double-digit price increases in the indemnity program are classic behaviors of the monpolist. We have accumlated numerous examples of patient care problems, which have not received oversight by physicians prior to a final adjudication.

PND: What is the current status of the hearing process?

RS: We are in the pre-hearing exchange phase. We have been challenged by Highmark. The allegation is that our attorney has a conflict of interest based upon the fact that our attorney’s law firm, out of a New York office, did work for the Davis Group years ago. Davis Group was subsequently acquired by Highmark, which essentially claims that the fate of Highmark and the fate of Davis Group are linked.

PND: How do you respond to Highmark’s allegation?

RS: They are not linked. The idea that a grandparent entity such as Highmark asserting this level of control over an entity owned by a subsidiary was discounted by the American Bar Association. Our expert who wrote the book on legal ethics has found no justification for this challenge, which we consider to be no more than delaying tactic. The next step is that a hearing examiner is going to appoint an expert in legal ethics to hear all the issues. That report will be sent back up to the hearing examiner and he’ll decide what to do. The trouble is, it is also appealable to the Commonwealth Court. I hope for a quick resolve.

PND: What would be the next step, assuming you overcome Highmark’s conflict of interest objection?

RS: The Insurance Department hearing examiner makes a decision that goes to the Supreme Court and Highmark would have to comply with it.

PND: Who holds the authority to unwind the merger that created Highmark?

RS: The insurance commissioner, the U.S. Justice Department or the Pa. attorney general. We claim also that the agreement established between Highmark and the attorney general has been violated by Highmark. That’s why we’d like to see the attorney general get involved.

PND: What is your involvement in the PSIM complaint filed against Highmark’s proposal to finance West Penn’s purchase of Allegheny’s hospitals?

RS: I am immediate past president of the PSIM but I am still a separately named party.

PND: Why was the complaint filed?

RS: The filing with the Federal Trade Commission, the United States Department of Justice and the Pa. attorney general is an attempt to block the properties of the former AHERF system from being purchased through the West Penn system with $125 million loaned to it by Highmark. The problem really is that Highmark would thereby be entering the provider world and, with its monopoly over the health insurance system, this would predictably lead to a monopoly in the health care delivery system. No monopolies benefit the customer, therefore this deal is dangerous. Contractually, the sale would establish a preferential fiscal relationship between the West Penn system and Highmark. If they default on repayment, then Highmark can take control over the organization.

PND: What is it that you expect the FTC, Justice Dept. and Pa. Attorney General to do?

RS: We’d like to have them investigate and potentially enjoin these events from occurring.

PND: What responses have you gotten?

RS: The issues are under study.

PND: When do you expect to hear anything?

RS: They never announce what they are going to do until they announce what they did.

PND: Will the U.S. Bankruptcy Court’s control over Allegheny’s assets pose a jurisdictional obstacle to the actions you hope to see?

RS: We hope that the Bankruptcy Court recognizes its responsibilities to the community.