Regence Reduces Payments to Healthcare Professionals

At the same time, the insurer is requesting a 9.6 percent rate increase for people who purchase their own coverage

July 26, 2012 -- Physicians and other healthcare professionals are being hit with a rate reduction from Regence BlueCross BlueShield on October 1, while the insurer is asking the Insurance Division to approve a 9.6 percent increase for roughly 53,000 people who buy their own coverage. A public hearing on that rate request will be held next Monday at 3 p.m. in Salem.

There’s a bit of a disconnect between reducing provider reimbursement and asking for a premium increase, said Vern Saboe, a chiropractor in Albany who lobbies on behalf of the Oregon Chiropractic Association.

“It’s not a logical question; you also need to look at what Regence is paying its executives,” said Saboe who participated in the health transformation team to improve the healthcare system for people on the Oregon Health Plan.

In late June, chiropractors learned their fees would decrease by 25 percent while the rates paid to psychologists for their hourly therapeutic visits are going down by 6.7 percent.

Other medical professionals impacted by similar reductions include physical, occupational and speech therapists, and physicians such as radiologists, ophthalmologists, anesthesiologists and surgeons.

These reimbursement reductions do not impact Medicare or Medicaid payments. Also, Regence withdrew from the Medicaid market in the late 1990s and is not participated in the transformation of Oregon's healthcare system by organizing a coordinated care organization similar to other major insurers in the state.

“We’re gnashing our teeth, and it’s hard to understand what’s going on,” said Julie Nelligan, PhD, president of the Oregon Psychological Association. “If we resign from the Regence panel, it puts our patients in a bind. It’s pretty difficult for me to screen people beforehand and ask them what insurance they have. Whenever our patients have a new plan year, their deductibles, premiums and co-pays go up and now BlueCross is reducing what they pay us. One rumor we’re hearing is that BlueCross is trying to get out of the individual market.”

Psychologists are concerned that Regence is trying to force them off the panel and limit access to mental health services thereby reducing demand.

Regence has acknowledged that it projects losing 11,000 members in the individual market by 2013, a figure that represents 20 percent of its market share.

“That, in itself, raises serious questions about the ongoing stability of Regence’s risk pool and its ability to insure customers in the future because the likelihood is that people who stay with Regence will be those with pre-existing conditions who can’t readily switch to another health plan,” said Jesse Ellis O’Brien, healthcare advocate for the OSPIRG Foundation, which has been analyzing Regence’s rate request.

“We’re hoping Regence will give us more information about where that 11,000 projection came from and which segment of the population is likely to switch or drop coverage and also how much of that loss of membership will be due to increased premium costs and other factors such as network changes,” he added.

Regence spokesman Scott Burton defended the company’s decision to reduce rates, telling The Lund Report, “Regence is committed to addressing rising medical costs that lead to more expensive premiums for our members. Reimbursement rates are a key factor in this equation as the cost of care continues to rise across the country and here in Oregon.”

There’s no question that medical costs have gone up over the past several years. However, Regence "worked to reduce expenses to our members," said Burton. According to data filed weith the Oregon Insurance Division, its salaries and benefits decreased by 11.7 percent between 2010 and 2011, while commissions paid to insurance brokers went down 18 percent during that same time period. 

Regence has told the Insurance Division that it intends to help reduce costs and improve care by introducing multi-year medical home pilot programs and integrated disease management programs.

These changes should save consumers 0.6 percentage points as a result of the future provider network changes in Portland. The figure that Regence cites for the latter set of cost containment and quality improvement efforts is $13.3 million overall and $3.3 million for the individual market, and that $3.3 million represents something on the order of 2% of the total premium for its individual market customers, but there's no detail about how that figure was derived, said O’Brien.

“We’d love to hear more information about what Regence is doing and their projections on how much money their customers will be saving because of work in this area," he said.

O’Brien criticized Regence for not having other initiatives to hold down costs such as quality pricing which rewards providers to use best practices. There’s also no mention of value-based pricing options or ways to reduce medical errors or hospital-acquired infections.

"It appears that Regence is not engaging in a lot of cost containment and quality improvement strategies that we feel are important for the long term,” O’Brien said.

In response, Burton said, "We will discuss our Oregon individual rate filing at next week’s public hearing requested by the Oregon Insurance Commission." 


Regence has also been making substantial investments in for-profit companies. Click here to read more about this issue.

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Adjustments to provider reimbursement happen with every insurance carrier. While I'm not always a big fan of Regence, I do think that trying to tie reimbursement changes to a small subset of the overall provider community to a proposed rate increase to a specific line of business (individual insurance plans only...not group insurance), is a stretch. Holding providers accountable to what they are charging is an important and often overlooked part of our sorry health care payment system structure. Before viewing this as an "issue", some missing blanks should be filled in. Were the providers asking for an increase in their fees? If so, what was their justification? How do the Regence contractual allowances compare to other insurance carriers? What about Medicare and Medicad payment levels? Some providers are used to a system which allows them to charge whatever they want with no justification or accountability. Providers are also well known to "cost shift" to insurers to make up for cuts they take in other areas like Medicare and Medicaid. Is that fair to Regence or their customers? I'd like to know more! In regards to the statement, "Regence increased the commissions paid to insurance brokers by 84 percent between 2010 and 2011", where is that information being found? I find that very hard to believe based on my knowledge of Regence's commission structure.

Poolside is correct, there is not a 1 to 1 correlation between provider reimbursement levels and premium increases. At the very least, there is a substantive lag between implementation of a lower reimbursement and the impact on claims experience. That said, it is another PR misstep in a long line of missteps. Anyone contracting with the Blues, however, is a "contracted provider" and is familiar with a fixed reimbursement rate set by contract. Existing providers would not be suddenly going from a fee-for-service to a contracted rate model. The "84 percent" increase in broker commissions year-to-year has to be an example of lying with statistics - otherwise, you would see producers flooding that market like mad. My guess is that number was derived from some percentage differential, and based only on the individual market. Employers groups will not tolerate such a substantial increase to commission payments. And a increase from a 1% commission to a 2% commission on individuals or micro-groups (for example), is 100% - but very little dollars. See below: I also sincerely doubt that employee salaries increased across the board by 38%. Regence is widely known as being very generous with their salaries for managers and above. Directors and higher are richly compensated compared to peers. However, 38%? Are you including bonuses? Looking at total salary dollars? The Product Manager making $120,000 in 2010 is NOT making $172,500 today. Something is wrong with the analysis. That said, I am no fan of Regence. I strongly believe Ganz has implemented a long-term exit strategy from the individual market specifically, and the insured market generally. His CP-SS initiative is a decade-long, billion-dollar failure. New companies under the Cambria umbrella are associated with, not core to, health insurance. Account Management functions are out-sourced to BCBS South Carolina. Claims processing is outsourced for the UMP, because Regence faced BCBS Association sanctions on top of OIC action. Ganz is launching a Regence RX, a pharmacy benefit manager - a distraction at best. This company is rotten to the core, and it starts with Mark and Mohan.

We would like to take this opportunity to correct the record. Regence BlueCross BlueShield of Oregon’s commissions to insurance brokers and salaries to employees did not rise during 2010 and 2011 as reported. Both decreased as we worked to reduce expense to our members. According to data filed with the Oregon Insurance division, salaries and benefits decreased 11.7 percent and commissions decreased 18 percent during that time. Scott Burton, Manager of Media & Public Relations Regence BlueCross BlueShield of Oregon From The Editor The Lund Report regrets this error and has made the necessary correction in the story. Diane Lund-Muzikant

Mr Burton misleads us by stating that salaries and benefits decreased for Regence employees.Did any Regence employees actually get salary cuts?? The answer is NO. In fact, all Regence employees received annual salary increases and ALL Regence employees received annual bonuses in March 2010, March 2011 and March 2012. If salaries and benefits went down 11.7% it was due to a workforce reduction. How about if Mr. Burton discloses his total compensation for the past few years so we can see the percentage change for ourselves? I think the editor got it right in her story and readers are not so easily fooled.

Sassy - Given the stealth layoffs that have been happening in all departments across the company, it is quite possible that total salary expense has in fact decreased. I don't have their FTE count handy, but I believe it will show a drop in total compensation dollars that follows the drop in FTEs. Stealth layoffs have been going on for a couple of years - a group here, and group there - enough to avoid a inquiry from the press.

Reducing health care costs requires a lot more than just reducing the cost for the units of service (e.g., the fees paid for office visits, etc.). It requires programs to reduce the number of units of service as well. If Regence was serious, they would work with providers to manage units of service through care coordination, waste reduction, safety, and wellness. But Regence has lost what limited resources within its Division of Health Services it once had to do these things - it just lost its Executive Medical Director in Washington (Dr. Joe Gifford) and in the past 4 months also lost the Chief Medical Officer (Dr. Ralph Prows), the Executive Medical Director in Utah (Dr. Michael Kaufman), its Senior VP for Health Services (John Stellmon) and many more. It has been unable (or uninterested?) in replacing these positions,and there are a half dozen other care management positions currently vacant. Simply put, Regence has no credible programs or resources to reduce health care costs. Is this intentional or just one more reflection of their deeply flawed strategy? Actions speak louder than words, and I see no indication that Regence cares about the health, cost, or the care experience of Oregonians.