HEALTH CARE SHIFT : BLUE CROSS MAKE-OVER SETS AGGRESSIVE PACE FOR EXPANDING FOR-PROFIT CENTERS IN U.S.

Byline: E. Scott Reckard Associated Press 

The conversion of Blue Cross of California into a giant for-profit managed health care company is the most dramatic example of changes at traditionally nonprofit Blue Cross and Blue Shield plans across the country.

The make-over requires Blue Cross to donate $3.3 billion in assets to charities whose job will be to encourage preventive medicine and help care for poor Californians.

At the same time, it relieves Blue Cross of its public obligation to accept customers regardless of health, positioning its parent corporation - WellPoint Health Networks Inc. - for national expansion of its HMOs and other managed care businesses.

WellPoint chief executive Leonard Schaeffer said May 20 that his plans include joint ventures or takeovers of other ``Blues'' health insurance operations with little managed care experience.

WellPoint plans to transfer holders of traditional health policies to its health maintenance organizations and other managed care networks.

Many of the 63 independent Blues health plans around the country are working on similar conversions in order to raise capital and become more competitive with other managed care businesses.

Schaeffer's plans are among the most aggressive. He and other advocates of managed health care argue that it provides superior service at a lower cost.

Traditionalists disagree, opposing the concept of for-profit Blues plans and insisting that the nonprofit, local approach serves patients best.

Howard Berman, chief executive of the still nonprofit Blue Cross and Blue Shield of Rochester, N.Y., said profit-oriented health plans have difficulty serving investors and patients.

``You can't serve two masters,'' he said. ``And you have to pay the investors their legitimate due. That's money that is being drawn away from other purposes, such as being more expansive in terms of the health care benefits you can provide.''

Blue Cross of California, based in Los Angeles, is the second of the Blues health plans to become a fully shareholder-owned, for-profit company. Earlier this month, Cerulean Cos. Inc., the parent company of Blue Cross and Blue Shield of Georgia, filed to sell stock.

WellPoint, originally created as a for-profit subsidiary of Blue Cross of California, will now become the parent corporation.

The new company will operate under the Blue Cross name in California.

WellPoint's growth as a managed care company illustrates the massive conversion from traditional insurance to managed care going on in the United States.

Since its creation several years ago, it has transferred millions of Blue Cross customers to managed care, growing to one of the largest such companies.Last month, WellPoint reported a quarterly profit of $60 million on $763 million in revenue.