News in brief - June 5, 2006

Mass. Blues pay-for-performance program grows - No fraud prosecution for HealthSouth - Baylor heart hospital investigated

Mass. Blues pay-for-performance program grows

BlueCross BlueShield of Massachusetts has expanded its pay-for-performance program in 2006, including doubling the bonus pool money available to physicians from $94 million to about $189 million.

Blues officials report nearly 5,300 primary care physicians and more than 9,100 specialists are actively participating in the program in 2006, an increase from fewer than 5,000 primary care and about 6,500 specialists in 2005.

The program also has 60 participating hospitals this year, compared to 29 in 2005. Blues officials attributed increased participation to both a larger bonus pool and to natural renegotiation after old contracts had expired.

Primary care physicians who participate in the program are eligible for a maximum bonus of $20,000 annually, with the average bonus totaling about $10,000, according to Blues officials. The Blues launched the pay-for-performance program in 2003.

No fraud prosecution for HealthSouth

Under a new agreement, HealthSouth Corp. won't face prosecution from the Dept. of Justice for the massive accounting fraud at the outpatient services chain.

The agreement, announced May 18, calls for HealthSouth to pay $3 million to a consumer fraud fund. It also requires that HealthSouth continue to cooperate with federal investigators, and it places the company "in essence" on probation until May 2009, U.S. Attorney Alice H. Martin said, though the company admits no wrongdoing.

Martin said the agreement acknowledges "the comprehensive corporate governance and compliance reform" that has taken place and is continuing at Birmingham, Ala.-based HealthSouth.

The agreement also noted that HealthSouth agreed to pay the Securities and Exchange Commission $100 million and to pay civil litigants $445 million to settle claims stemming from the multibillion-dollar accounting fraud at the company, which was first revealed in 2003 and led to criminal convictions against more than a dozen former employees.

HealthSouth board chair Jon F. Hanson said in a written statement that the company was "delighted to put this chapter behind us."

The company also filed its first regular quarterly earnings report since the accounting scandal surfaced, revealing a wider loss and dip in revenue. It reported a loss of $435 million, or $1.09 per share, for the quarter that ended March 31, compared with a loss of $258 million, or 65 cents per share, for the same period a year earlier. Revenue was down to $792 million from $849 million the year before.

Baylor heart hospital investigated

Baylor Health Care System has revealed that federal and state authorities are investigating whether its joint venture with physicians to operate a heart hospital in Dallas violates anti-kickback and tax exemption laws.

In a note to bondholders on May 10, Baylor said that it received a notice in December 2005 that the Dept. of Justice was investigating the financial relationship between its Baylor University Medical Center and a group of physicians. The medical center owns 51% of the Baylor Jack and Jane Hamilton Heart and Vascular Hospital, while the physicians own 49% of it.

Baylor said it was also notified in April by the Texas Attorney General's Office that the partnership was being investigated.

The Dallas-based health care system said it believes both investigations were prompted by complaints from HCA Inc. The national hospital chain has nearly a dozen facilities in the area.

A spokeswoman for the U.S. Attorney in Dallas said federal prosecutors would not confirm or deny an investigation. Representatives of the Texas Attorney General's Office and HCA did not respond to phone messages seeking comment.