Blue Cross sets new policy on doctor bonuses

Published on

Physicians’ rewards now based on quality of care

The San Francisco Chronicle

In a major policy shift that will affect more than 1 million HMO members, Blue Cross of California said yesterday that it will reward doctors for satisfying patients rather than cutting costs.

Under its new program, Blue Cross, a division of Wellpoint Health Inc. of Thousand Oaks (Ventura County), will base its entire health maintenance organization incentive program on a quality scorecard rather than on controlling medical expenses.

“We believe this program will encourage physicians to improve relationships with patients and medical groups to improve quality over time,” said Dr. Jeff Kamil, Blue Cross‘ medical director in charge of policy and quality.

As health insurance premiums continue to rise by double digits, patients remain frustrated with managed care, and the House of Representatives is debating a federal patients’ bill of rights, a version of which already passed in the Senate. If other HMOs follow suit, patients could have greater influence over their care.

The Pacific Business Group on Health, a San Francisco coalition that purchases health care for major companies in California, praised Blue Cross‘ move and predicted other health plans will follow.

“It’s the first major health plan to integrate large rewards with standard measures (of patient satisfaction) that can cut across all health plans,” said Peter Lee, president of the group.


Blue Cross has about 5.6 million members in the state, about 1.5 million of those in its HMOs. These health maintenance organizations reimburse doctors for services rendered. Under the new plan, Blue Cross is prepared to pay as much as 10 percent more.

Blue Cross‘ 10 percent figure raises the bar, Lee said. In a survey of seven major health plans conducted last year, the group found performance-based incentives accounted for an average 1 percent of the bonuses doctors receive from HMOs.

Lee said that as employers pay higher premiums, they want to see the value they’re getting. “Blue Cross‘ action’s will accelerate other health plans both in putting more money on the table and using common measures to give consumer tools to measure health plans,” he said.

Blue Shield, a competing health plan whose headquarters are in San Francisco and has about a million members, started a performance-based review system about six months ago, said its chief medical officer, Dr. Jeffrey Rideout.


“It’s a good thing–not necessarily a unique thing,” said Rideout of the Blue Cross program. Rideout said Blue Shield‘s plan differs in that it is voluntary on the part of the physicians and includes a standardized patient satisfaction survey.

Blue Cross‘ scorecard uses the same patient survey, which was developed in part by the Pacific Business Group on Health along with various health plans and medical group associations.

Patients will be randomly surveyed about such issues as their doctor’s communication skills and quality of care.

But the Blue Cross plan also includes other quality measures such as preventive health efforts, the number of patients who transfer as a result of poor care and the medical group’s internal assessment of its physicians.

The Integrated Healthcare Association, a group of hospitals and insurers, has pushed for a quality-based bonus program. But IHA Executive Director Beau Carter was concerned about the possibility of health plans devising their own standards.

“If each health plan designs its own, we’re going to make the problem of dueling scorecards even worse,” Carter said.

Steve McDermott, chief executive of Hills Physicians Medical Group in San Ramon, an independent physicians association with about 2,500 doctors, commended Blue Cross‘ efforts. “But I want to also challenge Blue Cross to add more money to the table,” he said, offering two or three times the Blue Cross plan’s bonus levels.


McDermott said bonuses account for about 1 percent of his revenues and estimated the new program could earn an additional $2 million this year for his group. “This will cause a number of medical groups to not make it because they won’t be able to meet the requirements,” he said.

While quality of care is a major issue for consumer groups, Jamie Court, head of the Foundation for Taxpayer and Consumer Rights, questioned Blue Cross‘ motivation.

“This seems like an admission that the system is broken, but with little more than window dressing to fix it,” he said.

Court said that if doctors continue to get paid a fixed rate per patient, as they generally do under HMO contracts, they will be encouraged to do less for patients. “The ultimate judge of quality is whether a physician has adequate funds to pay for what they deem necessary for a patient,” he said.

Court also questioned the timing of Blue Cross‘ announcement coming in the middle of the national patients’ bill of rights debate. But Blue Cross officials said its new program had been in the works before the issue re-emerged in Congress.


The California Medical Association, a physicians’ trade group, supported quality-based bonuses but criticized putting more money into bonuses while some doctors’ groups have been going bankrupt.

“There’s not enough money in the system at this time to take care of patients. How can you satisfy patients if we don’t have enough money in the system?” said Dr. Frank Staggers, an Oakland urologist and president of the CMA.

The battle between how much the plans reimburse doctors and hospitals for services was played out dramatically in January when Blue Cross and Sutter Health failed to reach an agreement for seven weeks after their contract expired. An agreement was reached, but not before 30,000 HMO members were transferred to different doctors.

Other physicians groups, however, praised the program. “Overall, we think the concept is a very good one,” said Richard Angeloni, a spokesman for Brown & Toland in San Francisco, which has about 1,600 doctors in the group.

Costs vs. quality

oCanceled: Blue Cross of California discontinued a program that rewarded HMO doctors for containing medical costs, replacing it with bonuses linked to customer satisfaction.

o Why: HMOs are under fire from dissatisfied customers, investors who want higher profits and regulators looking to pass patients’-rights legislation.

o What’s next: Other major HMOs are expected to follow suit, giving patients a stronger voice in health-care operations.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases