Sick insurer misses cure deadline

By ANDREW LAXON

Southern Cross Healthcare has pushed back its deadline to fix a computer crisis which has left it owing $25 million in unpaid claims.

The company told customers last week that it hoped to have the backlog of about 50,000 claims under control by the end of the month.

But yesterday, chief executive Roger Bowie said Southern Cross had set itself a new deadline to resolve the problem by the end of February.

Mr Bowie said he apologised deeply for what he called "a sad chapter" in the 40-year history of the country's biggest health insurer.

Asked if the company's 810,000 customers could rely on the company's revised deadline, he said: "I'm very confident. We know what we've got to do."

Mr Bowie blamed the extra month's delay on an unexpectedly high number of claims for January. Usually insurers expected the number of claims to reduce over the Christmas break.

The company had increased its claims staff from 38 to 57 people to fix the problem and might hire more temporary staff if necessary.

Since last month, the number of claims being approved by each staff member had risen from about 45 to 60 a day.

Mr Bowie told the Weekend Herald nothing was wrong with the Diamond computer system which Southern Cross bought when it took over rival health insurer Aetna.

But the company had not employed enough staff or given them adequate training.

"You've got to make a call on what's enough - we made the wrong call."

He rejected allegations by former staff that making almost the entire claims department redundant through a move to Hamilton had caused the delay.

Mr Bowie said the previous staff would still have had to learn to use the new computer system, which was designed to hold complicated information on fixed-price contracts between the company and its medical specialists and private hospitals.

Eventually, this new system would lead to faster claim approvals and better service for customers.

Mr Bowie, who wrote to the Herald this week rejecting public speculation that Southern Cross could not afford to pay the claims, said the company was financially secure and had no cashflow problems.

It had $220 million in reserves - the equivalent of eight months of claims payments - and a strong AA- credit rating from the Standard & Poor's agency.

Southern Cross has been accused of insensitivity in its handling of the crisis, which has left thousands of policyholders worried and embarrassed by their inability to pay medical bills.

Some private hospitals say they could not contact anyone from the company over the Christmas break to find out when they would be paid.

Several callers to the Herald have complained about comments last week by chairman Dr Hylton LeGrice that the delays were "a small hiccup" which was not a great concern to the board.

Mr Bowie said the company could always do better with its public relations.

Southern Cross would run newspaper advertisements today apologising to its members and explaining the reasons for the delay.

The country's third-biggest health insurer, Sovereign Healthcare, has announced that it will start an aggressive marketing campaign from today aimed at luring away dissatisfied Southern Cross customers.

* Next week: What went wrong at Southern Cross.

* If you are a Southern Cross member having trouble with a claim, please send an e-mail to newsdesk@herald.co.nz.