Paying the physician's fee: Blue Shield and the reasonable charge

Abstract

At a time of debate over physicians' fees and income, we describe the evolution of Blue Shield plans and programs to pay physicians' fees. We review how Medicare's "reasonable-charge" formulas fostered Blue Shield "usual, customary, and reasonable" (UCR) contracts. In a three-year period in the Washington, DC, area, Blue Shield UCR protocols permitted "customary" allowances for selected surgical procedures to rise 29 to 75 per cent; charges by two physicians increased allowances for coronary-artery bypass from $2000 to $3500. We find little justification for secrecy in fee-payment protocols. Physicians dominate the District of Columbia Blue Shield Board and its committees, and they control fee-payment formulas. Nationally, 61 per cent of Blue Shield boards have majorities of health-care providers; approximately two thirds of fee-related committees have physician majorities. We urge increased public debate, public representation, and accountability in monitoring and reforming the programs that we describe.