Regence Threatens Lawsuit After Losing PEBB Contract
After losing its public employees contract to Providence, Regence protests the decision
May 12, 2009 -- The threat of a lawsuit hangs over the Public Employees Benefit Board after it rejected Regence BlueCross BlueShield's bid to provide health coverage to state employees. Providence Health Plans won the multi-million dollar contract by a 5-3 vote when the board met on April 21.
Obviously stunned by the decision, Regence isn’t taking the matter lightly and sent the board a strongly-worded protest letter on May 1.
At stake: 102,507 public employees and their dependents.
When the board meets next Tuesday (May 19), Regence’s protest will take center stage. A lingering question is whether the board reached its decision based on accurate, complete and unbiased information from its consultant. Mercer’s detailed analysis determined Providence could best fulfill PEBB’s vision to improve patient outcomes and quality.
Unwilling to accept defeat, Regence insists it was unfairly evaluated and PEBB violated its procurement regulations by not using a competitive bidding process.
“We believe you have a duty to set aside the decision,” according to the letter from Dr. J. Bart McMullan, Jr., president of Regence. “We also reserve the right to pursue judicial remedies if our protest is denied or otherwise thwarted.”
Depending on the outcome, both Providence and Regence face major challenges. Providence is in the midst of ramping up its strategic business plan and hiring staff since its overall membership will soar from 154,610 (end of 2008) to 257,117.
Unless the decision is overturned, Regence’s image in the community could suffer after losing a contract it’s held since the early 1990s. Obviously layoffs would occur. And, with a decline in membership, its numbers would reach their lowest level in several decades -- 674,140. Regence had over 1 million members in 2007.
In arguing its case, Regence’s strongest point is the renewal procedure used by PEBB, which did not conduct an open bidding process. “In selecting a health plan, the legislature generally requires PEBB to use a competitive bidding process,” McMullan wrote.
Instead, they chose a small regional health plan with a few thousand members in the Portland area to run their statewide program.
McMullan also believes PEBB’s decision was based on false information from Mercer such as the impact on the provider network. Over 6,338 people who saw Legacy providers over the last 12 months will lose access, not 3,900 people, which was mentioned in the analysis.
Mercer also asserted that PEBB could save $2.1 million by choosing Providence. But, no details were shown about how those numbers were derived, McMullan said, “which improperly influenced the board into believing that the estimate was more precise and accurate than it actually is. We believe PEBB would save money under Regence’s proposal.”
Regence also has a clear advantage in administering pharmaceutical claims and rebates, which represent 14 percent of costs and has high satisfaction ratings based on its six-minute average call times. Neither of these factors were considered by Mercer, according to McMullan.
Last fall Regence lost another important contract – public school teachers after the Oregon Educators Benefit Board awarded the 145,000 member contract to The ODS Companies and Providence Health Plans.
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