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Read Making a Killing

home / healthcare / in the media

San Diego Union Tribune
Mar 04, 2000

by Tony Fong

Opponents To Suitor For Aetna Speak Out

As quickly as the offer from the parent company of Wellpoint Health Networks Inc. to Aetna Inc. was announced this week, the opposition to the proposed deal was being heard.

And perhaps nowhere was the criticism louder than in California.

Why? Because Wellpoint's core business is here where it owns Blue Cross of California. Of the 7.3 million members Wellpoint has in its medical division, 5 million are in California, including 3.7 million in the Blue Cross HMO.

In San Diego County, Aetna has 250,000 members in its HMO. Blue Cross has 118,000 members.

Wellpoint also offers specialty services such as pharmacy benefits management and long-term care insurance.

Many doctors greeted the announcement of the proposed merger with a shudder. Beyond the usual complaints that accompany consolidation in the industry, including less choice for consumers, Blue Cross carries a reputation in the provider community for being inflexible in its contract negotiation and for making the reimbursement process laden with obstacles.

"Blue Cross is probably our most difficult relationship in terms of HMO relationships," said Donna Mills, administrator for Sharp Rees-Stealy Medical Centers, and Sharp Mission Park Medical Center.

Added Dr. Ted Mazer, a San Diego otolaryngologist and chairman of the state medical association's committee on medical services: "They take advantage of contracts that are very manipulatable . . . They are not very well-respected in relation to payments and responsiveness to physicians."

The association has a pending lawsuit against eight HMOs, including Blue Cross, for not paying physicians for services rendered to plan members.

Michael Chee, a spokesman for Blue Cross, responded that those were personal opinions and in any contract negotiation there are bound to be difficulties.

"Nobody puts a gun to anyone's head in the negotiations," he said.

Critics also have taken issue with Blue Cross' medical-loss ratio, a measurement of the amount of revenues that are funneled back into the delivery of care. Generally, a higher ratio is interpreted as an indication of better care for consumers. Lower ratios are welcomed by Wall Street as an indication of better financial management but read by skeptics as a withholding of patient care.

Blue Cross' medical-loss ratio has consistently been below 80 percent, meaning that less than 80 cents of each dollar coming from member premiums was reinvested into the system for health care. The remaining balance was spent on administrative expenses and profits.

"As a public policy issue, we question anyone who's pulling out more than 20 cents on every dollar," said Dr. Robert E. Hertzka, past president of the San Diego County Medical Society.

Both the state medical association and Jamie Court, advocacy director for the Santa Monica-based Foundation for Taxpayer and Consumer Rights, have said they will ask the U.S. Department of Justice and the state Attorney General's Office to look at whether a merger would violate antitrust laws.

Chee from Blue Cross called the requests by both organizations "ridiculous" because at this point the merger is only a proposal. A merger would have to meet state and federal approval, anyway.





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