Blue Cross' Schaeffer offers some interesting observations on industry.

Blue Cross of California/WellPoint Health Networks Chairman and CEO Leonard D. Schaeffer invited me to his office in Woodland Hills for about 90 minutes last week.

I never really net Schaeffer until thai time, having only one other in-person contact with him by chance three years ago - an unusual state of affairs for the executives I write about.

And until last week, I had also only interviewed him once, a very brief contact by phone. Then, all of a sudden, I was afforded more time with him than I typically have with executives I interview on a regular basis.

Perhaps I shouldn't be surprised, for Schaeffer is in many ways a unique figure in Southern California's health care industry. He is one of the very few top health plan executives who has also held a high place in government, having directed the Health Care Financing Administration - which administers the Medicaid program - during the Carter administration.

A Princeton University alumnus, Schaeffer is also among the very few top execs who does not possess a graduate degree (most of his colleagues or rivals are either trained as physicians or hold master's degrees in public health administration).

And in an industry where low-key civility is the norm. Schaeffer has drawn criticism on a par with elected politicians. For whatever reasons, observers have rarely expressed kind words about him.

Despite the iconoclastic image Schaeffer seems to have made for himself, I thought the time with him was well-spent. Schaeffer was very cordial, if a little formal.

And despite the criticism he has endured in this publication and others in recent months, he has a framed complimentary L.A. Business Journal editorial from 1992 hanging in the reception area just outside his office.

Some of our chat, by mutual agreement, was off the record. I will say that nothing divulged during that portion would be considered shocking or earth-shattering. Actually, the most interesting parts occurred on the record, when Schaeffer divulged his philosophy regarding the operation of managed care health plans and how they interact with its enrollees.

I had broached this particular topic since Blue Cross received its share of less-than-flattering publicity during 1995. The Washington-based National Committee on Quality Accreditation, a high-profile organization that performs quality measurements, denied accreditation for Blue Cross, while rivals Health Systems International and PacifiCare Health Systems received theirs.

The Pacific Business Group on Health, a coalition of large businesses that negotiates with health plans, also gave Blue Cross its lowest marks in its first annual quality report card.

For starters, Schaeffer told an anecdote connected to his tenure as CEO of Group Health Inc., a Minneapolis-based health maintenance organization he headed in the early 1980s after leaving HCFA. A Group Health enrollee had requested that the father of her child. a leukemia victim, be tracked down and forced to donate sperm so she could give birth to another child who would be a suitable bone marrow donor to her son.

Naturally, the request was turned down. The boy eventually received a transplant from a non-related donor through the University of Minnesota's medical center. The transplant failed, and he wound up dying painfully.

"This goes to the issue of what we do to people to keep them going," Schaeffer said. He noted that often the patient's attitude and expectancies plays as much a part of how well medicine works as the treatment itself.

"There's the (basic) acute medical model, where you break your arm, a doctor sets it and puts it in a cast and it heals," Schaeffer said. "Then there are other models," including the scenario involving the boy with leukemia.

What this boils down to, according to Schaeffer, is that current quality measures are highly subjective at best because they do not measure the complex relationship involving physicians, their patients, and the treatment, and the expectations held by all involved.

Therefore, the quality surveys shouldn't be taken as an absolute until more accurate versions are developed.

Schaeffer noted that recent high-stakes litigation involving HSI and its enrollees regarding its policies on autologous bone marrow transplants - typically performed on those suffering certain types of cancer - could be taken as an indication its enrollees believe there are more problems involving the quality of the coverage than what is home out in report cards issued by the PBGH and other organizations.

As for the NCQA accreditation denial, Schaeffer observed that "it was an embarrassment for us" but that the NCQA also has egg on its face. He said the organization changed the guidelines Blue Cross was required to follow during the course of the survey without notifying the health plan.

Looking toward the future, Schaeffer said WellPoint would expand nationally, and that it is expected to start up operations or make acquisitions in Texas, the Southeast and the Midwest.