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Last Updated: 2001-07-10 17:09:03 EDT (Reuters Health)

By Karen Pallarito

NEW YORK (Reuters Health) – In a groundbreaking move, Blue Cross of California today announced that it is dropping its system of rewarding physicians in its HMO networks solely for controlling costs and utilization. Instead, the health insurer said that it would base bonus payments largely on patient satisfaction and the quality of care provided.

The new system represents a radical shift away from traditional managed care incentive plans that tie financial rewards to a doctor's ability to contain costs. And it is the latest example of how HMOs are backing away from policies that anger doctors and consumers.

Blue Cross officials insist that the new system responds to marketplace demands for payment incentives emphasizing quality, not to Senate passage of a patient's bill of rights, or to lawsuits filed by doctors against HMOs for allegedly delaying and denying payment.

"Our interest in doing this is primarily to re-stage and reformat healthcare delivery in California. We believe that this change will bring about quality care…we believe this is cost-effective care," Dr. Jeff Kamil, vice president of medical policy and quality at Blue Cross, told reporters at a briefing today.

Blue Cross, a unit of giant WellPoint Health Networks Inc., is the state's largest health insurer with 5.6 million members.

The revised "quality score card" unveiled today adds a new category for rewarding physician groups. It calls for medical groups to establish an internal process for measuring each doctor's quality and clinical performance and for doling out bonuses to those who score well.

For example, a group may use member surveys, complaints and grievances and patient turnover to measure patient satisfaction. Physicians will also be scored on their ability to keep people healthy and to manage chronic disease. Potential measures include the percentage of patients receiving appropriate asthma care and advice to quit smoking.

Dr. Michael Belman, a staff vice president and Blue Cross medical director, said that evidence suggests that physicians working in managed care are more satisfied when rewards are linked to quality rather than cost containment.

As a result, more than half of a medical group's score will be based on patient health outcomes and satisfaction. Bonuses under the plan could amount to as much as 10% of a medical group's total medical care payments, officials said.

The new system takes effect immediately for all medical groups serving Blue Cross HMO patients in the state.

Two medical directors of physician groups who spoke at today's briefing hailed the new system as a positive step for healthcare in California. Peter Lee, president of the Pacific Business Group on Health, also praised the new bonus plan, which he believes will promote physician accountability and member satisfaction.

While Blue Cross expects other HMOs to follow suit, clearly the move to revamp doctor bonuses is no panacea for an industry under siege.

Physicians in several states have fought back against HMO payment practices in a series of lawsuits consolidated in federal court in Miami, Florida. The California Medical Association is one plaintiff in that racketeering case, which accuses WellPoint and other major HMOs of attempting to cheat doctors.

While the CMA says that the new bonus plan is a good idea, it doesn't solve the problem of underreimbursement.

"In California, capitation payments are 30% below the national average," said Peter Warren, the CMA's director of media and public relations. "Instead of paying incentives for the quality of care…Blue Cross needs to bring the floor up," he said.

"In some ways, we wonder whether it isn't a public relations gambit," Warren told Reuters Health. "They need to reward doctors for taking care of the sickest patients, poor patients, the elderly and those with chronic conditions."

-New York Newsroom 212 273 1700