In what was described as "a straight business decision" aimed at cutting costs, federal health officials have canceled a contract with D.C. Blue Shield for processing and paying Medicare claims for more than 300,000 elderly patients in metropolitan Washington.
After Oct. 1, claims will be funneled through another firm that will be chosen largely on the basis of doing the work for less than approximately $4 a claim that would be charged by D.C. Blue Shield, according to Everett Bryant, regional administrator for the Health Care Financing Administration.
For Blue Shield, the cancellation of the 15-year-old contract will mean the loss of about $5 million in annual fees it receives for processing nearly $100 million in Medicare claims. It also is expected to result in the loss of 161 jobs from the staff of about 2,000 employed by the affiliated Blue Cross and Blue Shield medical plans at 550 12th St. SW.
The affected Medicare program pays doctor bills and such related costs as laboratory and X-ray fees for patients over the age of 65 covered by the program.
Bryant said the "straight business decision" to cancel the contract stemmed from Blue Shield's $4-a-claim cost, which exceeds the national average of around $2.70 and the local budget of around $3.40 for processing.
The cancellation reflects in part the Reagan administration's efforts to cut costs, Bryant said. He said his agency, part of the Department of Health and Human Services, could not afford -- in effect -- to finance the cost of a planned installation by Blue Cross of a new computer that eventually would reduce processing costs.
Raymond D. Freson, public relations manager for Blue Cross/Blue Shield, said the claim cost figures cited by Bryant were higher than Blue Shield's own figures, possibly because of the projected costs of the new computer. Freson said the computer installation would have increased costs temporarily, but that savings would have shown up by late next year. He said the existing computer facility is incapable of adjusting swiftly to frequent changes in payment procedures imposed by the federal health care agency, requiring an undue amount of manual screening of claims.
Freson also said costs per claim reflected, in part, Washington's above-average wage scales for claims workers.
D.C. Blue Shield currently handles claims for the District along with Montgomery and Prince George's counties in Maryland and Arlington and Fairfax counties and the city of Alexandria in Virginia.
Bryant said his agency would invite proposals for doing the job, with the selection to be made without competitive open bidding. In addition to national insurance companies, the prospective new firms include Blue Shield plans in Maryland and Pennsylvania, he said. Patients covered by the current plan should not expect any reduction in the quality of service, he added.
Freson disputed the latter point, saying the affiliation of D.C. Blue Shield with the local Blue Shield program often results in clients receiving full payment of dual claims based on the submitting of a single bill.Under the new system, he said, these clients would have to submit claims to two separate offices.