May 23, 2006
Blue Cross and Blue Shield of Kansas Creating New Subsidiary to Handle Medicare Operations
In an effort to enhance its opportunity to win a contract to handle Medicare operations in a four-state region, Blue Cross and Blue Shield of Kansas is creating a new subsidiary dedicated solely to its Medicare business.
Earlier this month, the BCBSKS Board of Directors approved a staff recommendation to create a subsidiary that later this year will bid for the Medicare Administrative Contract for Jurisdiction 5 that represents the four-state area of Kansas, Missouri, Nebraska and Iowa.
The nearly 350 employees dedicated to current Medicare business administered by BCBSKS were invited to help name the new subsidiary for which they will soon be working. They selected Wheatlands Administrative Services.
“While it is not mandatory that we create a subsidiary, CMS (Centers for Medicare and Medicaid Services) has a track record of looking positively on bidders that run their Medicare operations separately from their non-government business,” explains William Pitsenberger, BCBSKS senior vice president. “Creating Wheatlands Administrative Services is an expression of the company’s commitment to continuing our 40-year tradition as a Medicare contractor.”
BCBSKS has served as a Medicare contractor since 1966. It currently is the fiscal intermediary for Part A in Kansas and the carrier for Medicare Part B in Kansas, Nebraska and northwest Missouri. In 2005, BCBSKS processed more than 20.2 million Medicare claims in access of $2.7 billion.
The Medicare Prescription Drug Improvement Act of 2003, in addition to creating a prescription drug plan for seniors, calls for CMS to completely replace its procedures for entering into administrative contracts. CMS is planning to award a total of 23 Medicare Administrative Contracts (MAC), downsizing from the current number of 51 contractors.
Doug Scott, chief operating officer for Medicare at BCBSKS, said the intent of the reform is to generate cost-savings; identify a single contractor for both Parts A and B in each of the 15 regions or jurisdictions created by CMS; provide more accurate claims payment and administrative savings; and to increase competition to deliver better service.
BCBSKS expects to receive the Request for Proposal from CMS in September of this year and will have 45 days to respond. CMS anticipates it will award the contract in July 2007 for an effective date of July 2008.
“Winning this contract is important for our current employees and the City of Topeka,” Scott says. “If we are successful, we anticipate adding around 250 jobs to help cover the increased workload; if another contractor is selected, we’ll decrease our workforce by about 350 jobs when the transition is completed in July 2008. We have a reputation for being good at what we do for Medicare and that is because of those 350 hard-working, conscientious employees in our Medicare area.”
The steps to create Wheatlands Administrative Services are expected to be completed this summer, Pitsenberger said. Its board of directors is scheduled to conduct its first meeting Aug. 16 and the company’s current Medicare work will be transferred to the subsidiary around September. BCBSKS employees dedicated to Medicare operations will be transferred to Wheatlands in mid-December when the first payroll period for 2007 begins.
Michael M. Mattox, BCBSKS president/CEO, will serve as chairman of the Wheatlands board and will be a non-voting member. The board also will consist of three current BCBSKS board members -- Leon Boor (Abilene), Louis “Gene” Mosiman (Topeka) and Gary Shorman (Hays) – and two directors not associated with BCBCKS who will be named in the coming months.
Blue Cross and Blue Shield of Kansas is an independent licensee of the Blue Cross and Blue Shield Association. BCBSKS is the state's largest health insurer, serving all Kansas counties except Johnson and Wyandotte.
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