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mediaries' office, telephone communications, individual letters, and participation by the intermediaries in regional and State provider association meetings.

Since the inception of Medi-Cal, March 1, 1966, Blue Cross has an increasingly intensive utilization review and audit program to safeguard against abuses while at the same time assuring that eligible recipients receive optimal health care.

BLUE CROSS-MEDI-CAL'S "CLEARINGHOUSE"

Medi-Cal is a vast program as the later charts on performance show. In support of Medi-Cal, Blue Cross acts-as does Blue Shield in its particular fieldas a "clearinghouse" in behalf of the State of California to:

1. Receive bills for services rendered to eligible people, determine compliance with regulations and approve for payment those bills that meet the requirements of law and regulation, including those that apply to the appropriateness of costs and charges.

2. Maintain all necessary records and furnish the State all necessary information and reports.

3. Provide liaison and coordination with providers and groups, organizations, committees representing them, or other interested parties.

4. Apply safeguards against unnecessary utilization, abuse and fraud.

REIMBURSEMENT

Blue Cross' experience in cost-related reimbursement is unequalled. Blue Cross has a staff of accountants trained in hospital accounting fully qualified to review financial statements, determine allowable cost and apply a reimbursement formula.

Since the State initially adopted a formula similar to the one Blue Cross of Southern California uses, Blue Cross was able to provide an existing staff of experts.

Understandably, confusion could develop if a single provider, for example, was subject to audit by Blue Cross for its business; by another Medicare intermediary for Medicare claims; and by a state agency for Medi-Cal. As it is, in most instances, a single audit suffices. The hospital can supply its cost figures to Blue Cross, and Blue Cross can determine payment for all.

RELATIONS WITH PROVIDERS

An important advantage of Blue Cross' administration of the Medi-Cal program is its long-term favorable relationship to hospitals. Actually, the hospitals, along with the general public, have a voice in the policy and operations of Blue Cross through board membership. Blue Cross is sponsored and supported by hospitals; Blue Cross works closely with recognized hospital organizations; the contractual relationship between hospitals and Blue Cross is yet another bond between the providers of institutional care and the fiscal intermediary in the Medical program. The hospitals and the general public are accustomed to working with Blue Cross.

Evidence of provider preference for Blue Cross can be found in the fact that 92% of all Medicare participating hospitals in California selected Blue Cross as intermediary under that program. So did 60% of extended care facilities and almost all home health agencies. While selection by provider is not permitted under Medi-Cal, it can be assumed that there would be essentially the same ratio of preference for Blue Cross.

This provider rapport works to the advantage of the Medi-Cal program in other ways. Blue Cross field representatives, who regularly visit hospitals and other providers, help train personnel in administrative practices involving MediCal. They also serve to answer questions and solve problems that might arise, in advance.

Hospitals prefer to work with Blue Cross, rather than directly with government. Blue Cross understands hospital problems and manages an equitable balance of provider and state interests in administering Medi-Cal.

COORDINATION BETWEEN MEDI-CAL AND MEDICARE

Many Californians are covered by both Medicare and Medi-Cal. In such cases, the provider-where Blue Cross is the intermediary-may submit one claim on the Medicare form and refer to coverage under Medi-Cal. The Medicare claim

form is processed and amounts payable under both programs are determined. Payment is thus made by the same organization but from separate funds.

These dual claims currrently run almost 40,000 per month. Since in the great majority of cases Blue Cross administers both programs, coordination is easily accomplished, and speedily. Were another organization to administer Medi-Cal, delays and most probably confusion might develop in coordinating the benefits payable under the two programs.

COOPERATION WITH BLUE SHIELD AND OTHER INTERMEDIARIES

Blue Cross enjoys cordial working relationships with Blue Shield and other intermediaries.

As an example of how this is helpful to Medi-Cal (and Medicare) administration, both Blue Shield and insurance companies request information about hospital care through Blue Cross. This system reduces the number of people who approach hospitals to review confidential medical records. It is customary for hospital personnel who know Blue Cross personnel to allow them ready access to necessary information.

CONTROL MECHANISMS

Blue Cross processes claims professionally-that is, with an eye to services which could be inconsistent with the diagnosis and charges not in line with similar hospitals.

This same service is performed for Medi-Cal. The system requires trained personnel and cooperation from the providers.

The procedure

1. Claims are reviewed for benefits or exclusions, for medical necessity and for appropriate charges;

2. Claims requiring medical evaluation are sent to the Medical Audit & Review Section;

3. This section, staffed by experienced medical auditors, reviews the claim. It is approved and returned for processing and payment, or is referred for further check;

4. When indicated, an investigator is sent to the facility to obtain copies of patient records. These records are reviewed by a physician who is a Blue Cross medical advisor in instances where a physician's judgment concerning the medical aspects is required;

5. A claim, rejected for medical reasons, is returned to the provider with an explanation by the physician;

6. Should a questionable pattern of care develop, the facility's claims are audited. The provider is invited to discuss questionable claims. If a problem is still not solved, the provider meets with the Peer Committee of the California Hospital Association for final examination and resolution.

The Professional Relations Department also has responsibility for Blue Cross' activities in utilization review. As required under Medicare, utilization review is being installed in most hospitals to apply to all patients. In this sensitive area, Blue Cross' professional assistance and counsel is readily accepted because of its long experience and close relationship with providers.

SUMMARY

To summarize-since March 1, 1966, Blue Cross has worked with 1,903 providers, and paid 4,010,945 claims, totalling $730,367,036.

Over the past thirty months, significant improvements in performance have been achieved through the informational, utilization review and audit procedures and collateral educational and support operations.

Medi-Cal has come through its early problems of changes in regulations and policies, the complexities and resultant delays in determining eligibilities and the cross-relation with Medicare in determining eligibility and usage under that program.

In its intermediary role between the providers and eligible beneficiaries and under the fostering policy guidance of the Department of Health Care Services, Blue Cross has seen the program become an efficient contributor to the health care of the people of California.

Blue Cross welcomes the projected plan for systems analysis of administration of Medi-Cal and will join the Department of Social Welfare, the Department of

Health Care Services, and all other interested institutions and departments in working for its success.

The success of Medi-Cal thus far is only a beginning to the benefits to be enjoyed by the people of California from title 19. In its fiscal intermediary responsibility under this program, Blue Cross is dedicated to the equitable provision of good health care services for all the people of California as one more example of private enterprise working with government for the common weal.

The following tables provide some indicators for Blue Cross' performance of its intermediary role under Title 19, Medi-Cal. They cover the number of claims processed, the benefits paid, review activity, field activity and administrative costs:

BLUE CROSS PERFORMANCE-STATEWIDE

TABLE 1.-CLAIMS VOLUME AND AMOUNTS PAID (FIRST 12 MONTHS), MAR. 1, 1966, THROUGH

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TABLE 2.-CLAIMS VOLUME AND AMOUNTS PAID (SECOND 12 MONTHS), MAR. 1, 1967, THROUGH

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Vendor

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TABLE 3. CLAIMS VOLUME AND AMOUNTS PAID (FIRST 6 MONTHS OF 1968-69)
MAR. 1 1968, THROUGH AUG. 31, 1968

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318,898, 710

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TABLE 4.-CLAIMS VOLUME AND AMOUNTS PAID (TOTAL PERIOD), MAR. 1, 1966, THROUGH AUG. 31, 1968

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TABLE 5.-PROVIDERS COMMUNICATIONS CONTACTS MAR 1, 1966, THROUGH AUG. 31, 1968

Visits to providers facilities.

Workshops (average attendance 95 persons)..

Bulletins...

10, 357

75 113

TABLE 6.-BLUE CROSS ADMINISTRATIVE COSTS (STATEWIDE), MAR. 1, 1966, THROUGH AUG. 31, 1968

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ITEM 2: EXHIBITS RELATED TO STATEMENT OF JUANITA C. DUDLEY,* ASSISTANT REGIONAL DIRECTOR, WESTERN REGIONAL OFFICE, NATIONAL URBAN LEAGUE

EXHIBIT A. LETTER TO DIRECTOR OF HUMAN RELATIONS AGENCY, STATE OF CALIFORNIA

MAY 6, 1968.

DEAR MR. WILLIAMS: Recently many of the Negro Professionals offering services to Medi-Cal recipients have brought to our attention two extreme hardships being imposed upon them by the slowness of services given by the Blue Shield Company. Upon discussing this with the Los Angeles office of Blue Shield it was suggested that their services would be greatly improved if two innovative changes were made, these are:

(1) Establishment of a Southern California Computer Center to process this region's claims;

(2) Adoption, state wide, of the San Bernardino Plan, which involves each recipient having 5 eligibility cards being given to them each month for use by practitioners to enable the elimination, in time, of the processing of eligibility by Blue Shield.

As these two innovations are feasible, we would strongly urge the adoption of same. Blue Shield states, that, as of today, they are processing January and February applications for payment which indicates a hardship on the practitioners.

It was most rewarding having an opportunity to talk with you personally during lunch at the Human Relations Commission Luncheon meeting in Sacramento last week.

Sincerely,

JUANITA CARROLL DUDLEY,

Assistant Regional Director, Health and Welfare.

EXHIBIT B. NEWSPAPER ARTICLE CONCERNING REPORT ON MEDI-CAL PROGRAM BY CALIFORNIA DEPARTMENT OF JUSTICE**

LYNCH CHARGES MEDI-CAL FRAUD

SACRAMENTO.-Nursing homes, drugstores and other parts of the medical establishment are robbing the state's Medi-Cal program of at least $8 million and probably more every year, Atty. Gen. Thomas C. Lynch has charged.

His Department of Justice said a nine-month investigation into abuses of the $800 million program showed Medi-Cal was riddled with kickbacks, phony claims, "overserviced" patients and other "illegal and unethical activities."

A 75-page report charged that physicians, dentists, druggists, optometrists, hospitals, nursing homes and others paid with Medi-Cal funds cheated the taxpayers out of about 1 per cent of the program's budget.

See statement, p. 666.

**See full report, app. 4, pp. 812-836.

Lynch's chief deputy, Charles O'Brien, told a news conference that the temptation to abuse Medi-Cal was made easier by a vast bureaucracy operated by both the state and its fiscal intermediaries, Blue Cross and Blue Shield.

The report identified no bilkers and called for no indictments. O'Brien said the attorney general could not prosecute because records were too inadequate to make a case.

"The best prosecutor in the world would be hard-pressed to use these records," he said.

State human relations secretary Spencer Williams demanded that specific cases of fraud be identified and prosecuted.

O'Brien acknowledged that while there might have been some deliberate "overutilization" by medi-care recipients, nearly all the abuses were by the medical profession.

"One of the worst ironies in the world is that when we are talking about law and order and increasing penalties for liquor store holdups, that striped tie, buttoned-down crimes goes unpunished," he said.

About 1.5 million poor Californians receive free medical care under the program, financed by state, federal and local governments. Blue Cross and Blue Shield funnel the money from the state and the medical suppliers.

But O'Brien charged "the private sector has not handled it (Medi-Cal funds) the way the private sector handles its own funds." He said the intermediaries were paid on a cost-plus basis "so there is no incentive for improvement."

He also asserted the state had no effective enforcement program "to discover, investigate and defer" frauders.

Professional and other organizations criticized the report as "generalized" and "vague." They demanded proof of such claims as:

Druggists charge the state three times as much for the same medication as they charge the public.

Some nursing homes require "under the table" payments from patients to secure admission while others accept kickbacks from vendors in exchange for business.

Doctors, dentists, optometrists and other professional falsified claims for treatment that was never performed or for treatment that was unnecessary. In one case, an optometrist sought state authorization for an expensive pair of sunglasses for a blind patient.

Some nursing homes pocketed for their own use state funds for incidental patient expenses.

O'Brien said the Justice Department is investigating the possibility that organized crime had infiltrated the nursing home business, but that evidence so far has not indicated it is extensive.

Williams said the state has not and "will not tolerate fraudulent misuse of Medi-Cal funds by those who receive or provide services."

He said he requested a meeting with Lynch's staff, "to secure specific cases of fraud and abuse which were uncovered." He added, 'we will continue to insist on prosecution in any case where there is evidence of wrongdoing."

EXHIBIT C. LETTER FROM ROBERT H. WEST, VETERANS AFFAIRS COORDINATOR, TO ADVISORY BOARD MEMBERS

JUNE 8, 1968.

DEAR VETERANS AFFAIRS ADVISORY BOARD MEMBER: On Tuesday, June 18, Senate Bill 1263, sponsored by Urban League Veterans Affairs, will be heard before the Education Committee in Sacramento. This bill is an effort to recognize the college equivalency of armed forces technical training and service. Specifically, this bill, introduced by Mervyn Dymally, will allow 15 semester units for each year in the service as a medical technologist or laboratory technician up to 60 units or equivalent to two years of college work.

This college credit will encourage veterans to take advantage of GI Bill education and earn their degrees as medical technologists. Another beneficial feature of this legislation is to alleviate the shortage of trained medical technologists presently plaguing the world of medicine.

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