The state stepped into a bitter battle Thursday between Blue Cross of California and the doctors, hospitals and medical labs that serve about 700,000 people covered by the state's largest health plan.
At issue is the contentious financial relationship between medical providers and Blue Cross, which the state's top HMO regulator warned might worsen the plight of California's struggling hospitals.
The dispute began this year when Blue Cross sought to require hospitals, physicians and labs to sign a confidentiality agreement that would prevent them from publicly discussing fee negotiations.
But the providers balked, saying it prevented them from using lawyers and other outside consultants to represent them in fee negotiations, a routine practice.
If they refuse to go along with the rules Blue Cross lays down for the negotiations, the providers say, the health plan threatens to stop sending them patients.
On Thursday, the Department of Managed Health Care issued a cease-and-desist order forbidding Blue Cross to continue its efforts.
Blue Cross said it had tried to address the agency's concerns and was surprised by the action. The company, owned by Indianapolis-based WellPoint Inc., said its negotiating tactics were nothing new and were aimed at holding down medical costs.
WellPoint spokeswoman Shannon Troughton disputed the assertion that the confidentiality agreements limited providers' ability to use consultants.
"Instead, what it does is provide protection of confidential information and bars consultants from sharing Blue Cross data with other providers and competitors," she said.
Troughton said the company had used the agreements since 2002, and other health plans used similar policies.
She also disputed the department's assertion that the confidentiality agreements could lead to contract terminations.
"State law requires that we routinely notify the department of contracts we are currently negotiating and potential termination dates," Troughton said. "However, it's important to note, in the last year only two out of 380 hospitals in our commercial division have terminated their contract."
The agency issued the order after several hospitals said they were prepared to stop doing business with Blue Cross when their contracts expired rather than negotiate new rates without professional representation. Sixteen of those hospitals had contracts set to expire by year-end.
