Blue Cross defends its claims denials No medical necessity given as reason for some refusals to pay; Identifying the problem; Jews says Maryland's hospitals charge more than they should; Health care


The chief executive of Blue Cross and Blue Shield of Maryland yesterday defended his company against charges of arbitrary claims denials and said the claims dispute is a distraction from the real problem -- that Maryland hospital costs are too high.

"This is not meant as an attack on hospitals," said William L. Jews, CEO of CareFirst Inc., the holding company for Blue

Cross. "But we have a responsibility to our policyholders to be sure we are paying the right costs in the right place for the right care."

His comments came as Blue Cross filed a response with the state insurance commissioner to a complaint from the Maryland Hospital Association (MHA) charging Blue Cross with improperly denying payment for some medically necessary care.

In its response, Blue Cross defended its decisions, saying the services for which it refused to pay had not been medically necessary.

It also included three consultant studies concluding that Maryland hospital care costs more than it should, and that strict review by insurers is needed to avoid unnecessary costs. For example, the consulting firm Arthur Andersen concluded that Blue Cross overpays for hospital care in Maryland by 38 percent, or about $80 million a year, compared with national "best practice" benchmarks.

Half of the excess cost, the Andersen report said, comes from high prices, the other half from unnecessary admissions or hospital stays that are longer than needed. The overpayments, said the report, translate to $14.25 per member per month -- costs that are reflected in premiums.

MHA's complaint about claims "employs unfounded allegations of care being systematically denied to our customers," Jews said in written comments with the studies. He called the complaint "a blatant attempt to divert attention from the serious and alarming issue of the level of hospital costs in Maryland and how they compare to the rest of the nation."

Calvin M. Pierson, president of the hospital association, said Blue Cross was on rocky ground.

If Blue Cross cites high cost to justify claims denials, he said, "they're implying they're denying care to hold down costs -- and that's illegal in Maryland. It's really a smoke-screen at this point to obscure the fact that they're denying payment for medically necessary care." Jews said he hoped to promote "a partnership with doctors and hospitals that will force us to sit down and talk about restructuring the system." Maryland's system of hospital regulation, he said, needs to be loosened to make it easier for insurers to give flat-price contracts to hospitals, giving the hospitals incentive to hold down costs.

"Under a changed regulatory environment, we extend the olive branch to establish this partnership in the best interests of the citizens of Maryland," Jews said.

Changes in regulation were also needed, he said, to allow market forces to remove "excess facilities whose capital costs are a strain on the system."

He said he did not want to see the system deregulated altogether. "I would recommend an incremental approach," he said. "We need to tweak the system initially, and see if that allows creative administrators to function."

The MHA's complaint, filed in April, charged Blue Cross and Mid Atlantic Medical Services, Inc. of Rockville, a large HMO company, with refusing to pay for care by arbitrarily applying guidelines on when hospitalization was needed and how long a stay was required for a given problem.

When an insurer refuses to pay part or all of a claim for an insured person, the cost comes out of hospital profits but is not generally billed to the patient or used to justify future rate increases.

MHA gave Insurance Commissioner Steven B. Larsen 100 examples, such as a claim for a patient with a perforated appendix that Blue Cross declined to pay as not medically necessary.

Of the 62 claims submitted to Larsen for Blue Cross members, the insurer said, it had sufficient information to review 53. John A. Picciotto, executive vice president and general counsel for CareFirst, said Blue Cross believed that its action was justified in each of the 53.

One of the studies it submitted was by actuarial consultants Milliman & Robertson Inc., authors of the most frequently used set of guidelines for lengths of hospital stays. In the cases in the MHA complaint, Milliman & Robertson said, Blue Cross had approved hospital stays that exceeded guidelines more than half the time, showing that the insurer was considering individual cases and not applying the guidelines arbitrarily.

Larsen said yesterday that his staff is reviewing each of the lTC cases and hopes to make decisions on some within 30 days.

In addition, Larsen said, his office had contracted for a "market conduct examination" of Blue Cross in response to MHA's request. A nonprofit medical review organization, the Delmarva Foundation for Medical Care of Easton, is to review 500 randomly selected cases to see if Blue Cross paid claims properly. He said this study will take several months.

Pub Date: 7/25/98

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