WELLPOINT: Health Plan Thrives While Doctors Allege Care Suffers
In the wake of the California Medical Association's lawsuit last week against three insurers, including WellPoint Health Networks Inc., a Wall Street Journal profile reveals how the state's second largest insurer became "one of the industry's few financial successes." According to the Journal, WellPoint CEO Leonard Schaeffer has propelled his company to the industry forefront by following one simple strategy: "squeezing doctors and hospitals." By shying away from the HMO frenzy in favor of preferred-provider organizations, Schaeffer has used "market clout to extract the best possible deal from physicians." Schaeffer also has managed to attract 19% of California's insured population to the plan. But doctors involved in the health plan say that its focus on the bottom line and the pursuit of profit has "jeopardize[d] the quality of patient care." CMA filed suit last week under the federal RICO Act, alleging that WellPoint's Blue Cross of California and two other health plans have employed "coercive, unfair and fraudulent means to dominate and control physician-patient relationships." CMA charges that the health care company has wielded its market influence in California to impose low reimbursement rates, spending only 77.9 cents of every dollar for medical care -- one of the lowest ratios among all state health plans. "Blue Cross is our worst contract -- for many procedures it pays less than Medi-Cal," Andrew Leeka, CEO of Good Samaritan Hospital in Los Angeles, said. He noted that the hospital lost $3 million last year on Blue Cross patients, who comprise 10% of Good Samaritan customers, but bring in only 5% of the facility's revenue. Dr. Thomas LaGrelius said he agreed to take part in the Blue Cross PPO after the company promised to send more patients and "not to mess" with his family practice in exchange for a 10% discount on fees. But he and other doctors have since pulled out, as his fee discounts sunk to 60% and tests he ordered for patients were denied. "This is the kind of thing they do all the time that delays the diagnosis and shows no regard for the patient," LaGrelius said, adding, "They have a whole staff of people whose job it is to block, restrict, deny and avoid care." Schaeffer says doctors who feel the same way should follow LaGrelius' lead and drop out of the network, but physicians argue they "can't afford to" because of the company's large market share. Meanwhile, Wellpoint officials admit they must improve provider relations, but say they will stick to the business model that has garnered success thus far -- an approach they hope to extend beyond California (Rundle, 5/31).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.