August 15, 2001 


Managed Care Continues to Sink

AIDS Liver Transplant

California Heart Surgery Results Released

Laboratory Tests

Pain Medicines


Managed Care Continues to Sink

Aetna profit dropped 94% due to  large deficits in its managed care business causing loss of value for the shareholders.  The medical costs are taking 91.3 cents out of each premium dollar versus 86.8 cents a year ago. United is spending 84 cents and Cigna 87 cents.  This has already caused a change at the helm of the large company in the last year.  The premiums for the coming year will continue to increase possibly up to 20% and Aetna is attempting to rid itself of its HMO product.  It wants to focus on employer paid products that they administer and disease management, neither of which have risk.  Their rolls shrank due to their leaving of the HMO market in multiple states. 

Speaking of Aetna I must give it kudos for opening up its Atlanta healthcare business to other hospitals beside Northside.  For years that hospital has had a monopoly even in the legal sense on MCO OB business.  Now that business is open to other hospitals as well.  Northside had tried to buffalo Aetna by threatening to drop out of the network.  Their bluff was called and now they need to beg to get back into the network.  Turnabout is fair play.  Meanwhile Blue Cross is considering opening up its network as well due to significant travel times.

Conseco Medical Insurance is phasing out its health policies in 16 states due to unpredictability and unprofitable.  They obviously only want those that are profitable and predictable.  Don't we all!  This affects 80,000 "clients", not people.

Three California Health plans have announced earnings for 2001 will be below 2000. Kaiser, PacifiCare, and Health Net are the culprits.  This means that premiums will go up significantly in all three MCOs.  Nobody is speaking of rises in the non-HMO market.

Central Ohio is planning on a 15-25% increase for 2002 and a 12-16% non HMO  premium increase after that.  The HMOs with prescription benefits, the only reason to join an HMO, will see premium increases in the 25-35% range.  Hospitals and physicians especially those that have banded together for clout are demanding more money and the only way to pay is to increase premiums.  Of course, the employers are not going to pay and therefore are going to the defined contribution plan.  There may be an additional 5% hike if the Bill of Rights pass since HMOs will be held liable.  Some of the HMOs are stating they will only deal with one system and the basis is cost, not quality.

In Palm Beach the volume of HMO insured has decreased over the past year.  Aetna has seen a 13% decrease in its insureds and is raising costs, the spiral of death.

Intermountain Health is breaking from the traditional HMO model and allowing its subscribers to see specialists without a referral and be able to have covered surgeries without advance permission.  What a concept!  This almost reminds me of fee-for-service, that old concept that worked for several hundred years. Maybe the threat of a Patient's Bill of Rights and customer satisfaction is having its mark. Of course, IHC has not resolved the problem of having a physician revolt in part of Utah due to their ridiculously low payment.

Blue Cross & Shield of Kansas City Mo. have been removed from the Medicare HMO business.  The ouster was due to compliance claims and is the same as what happens to physicians who are convicted of Medicare fraud.  They can reapply to the program, but if they do within 5 years they are subject to a negotiation and a corporate integrity agreement.

California regulators have seized another HMO.  This time it's the Watts Health Foundation.  The reason is the same as with Maxicare, no money to pay claims. The enrollees are 80% Medicaid and 10% Medicare.  Watts had liabilities of almost $60 million and assets of only $15 million. 

Detroit Medical Center (DMC) has decided not to purchase the money plagued OmniCare Health Plan.  This forced the State of Michigan to takeover the plan and its 97,000 enrollees.  DMC had in the past dumped its money losing Medicaid HMO and sold off its unprofitable physician practices.  

Alta Hospital District in Dinuba, California, a 39 bed hospital has closed its emergency room and acute care services.  This is another in the financially troubled small rural hospitals.  The hospital will become an extended care facility of 18 beds and will expand its rural health clinic.  It will also apply for sub-acute bed status.          

Last month I commented on Blue Shield's dropping of three San Jose hospitals and stated they would get together.  Of course, they have.  It is a shame that meaningful negotiations can not happen until the contract is either at the ending stage or past that stage.  That is usually the fault of both sides.

Kaiser intends to raise premiums again this coming year.  The amount is unknown but will be greater than 10%.  This is from the company that touts the HMO format.  The amount should be interesting since in California it also owns hospitals and may be faced with mammoth loses on new nurse's pay and seismic upgrades.  

KPC, the defunct IPA in southern California, has almost a year after the closing devised a plan to distribute the patient medical records.  The plan is to bring all the records together in one facility for 12 months and have the storer attempt to find the rightful owners of the records.  After the year all remaining records will be destroyed unless the company storing the records wants to keep them at their own expense.  The cost for this effort is $2.7 million, with KPC paying $300,000 and the HMO's involved paying the rest.  The HMOs have already spent $3 million attempting to find their patient's records.                   

A story out of the Seattle area states how one group is doing well with capitation.  The Northwest physicians Network in Tacoma was losing money on standard capitation.  They have reversed this by having the claims paying aspect come to them.  This gives them the necessary information to adequately manage the cap payments.  They have started disease management programs for diabetics and heart failure.  My question is if they now have the data and are paying the claims, what are the HMOs doing, and why are they needed?                 Top

AIDS Liver Transplant

The patient from Boston with AIDS and Hepatitis C  whom I reported on in the last news is now only halfway to her goal of enough money for a liver transplant.  The HMO in Boston refused to pay for her transplant since it was experimental and the State appeals agreed. About $350,000 was raised including a contribution of over $100,000 by the same HMO that refused her request in the first place.  The problem is she did not take into consideration how much it would cost for the initial work-up and the cost of her donor brother's surgery that is elective, so non-covered.  She is now in Pittsburgh awaiting enough money and to see if the brother is a candidate to be a donor.        Top

California Heart Surgery Results Released

California has joined New York, New Jersey and Pennsylvania in the release of general information regarding cardiac surgical mortality.  The results showed that only three hospitals in the State have better than expected mortality rates.  These are Summit in Oakland, Sutter in Sacramento and Hoag Memorial Presbyterian in Newport Beach.  Congratulations to those institutions.  Most hospitals were at the expected mortality, but four had worse than expected mortality figures.  The only Bay Area Hospital with more than expected mortality was John Muir in Walnut Creek.  This was interesting since the same surgeons operate at John Muir as at Mt. Diablo, but at Mt. Diablo have an expected mortality.  The years studied were 1997 and 1998.  The study did show that those hospitals that did the most surgeries had the better averages.  Also, since this study was voluntary, 19 Bay Area hospitals declined to participate in the study.            Top

Laboratory Tests

St. Agnes Medical Center in Philadelphia placed an incorrect number in figuring out the INR for patients on Coumadin.  This may have led to five deaths (see Legislation).  About one week after the problems with the test surfaced, the first of many probable law suits was filed.  It helps to be first since you get the publicity as an attorney.  This one alleges the patient was hospitalized for lethargy and dehydration then developed "massive internal bleeding and other health problems."  It does not mention if the "massive hemorrhage " resulted in any blood transfusions.

The CDC in an article in OB/GYN states that women who have had hysterectomies and have no history of cancer or precancer of the cervix do not need Pap smears.  The researchers believe that since only 10% of the women had those criteria that 85% of Pap smears done on hysterectomized women were unnecessary at a cost of $500 million in the past three years.  They also state the risks of the Pap are anxiety, unnecessary investigation in false positive patients.  They do not address the aspect of vaginal cancer and the amount of non-false positive positives picked up.  I heard the same thing from the same organization when PSA came in and they were wrong then.    Top

Veteran's Administration to Pay

The Veteran's Administration has agreed to pay private facilities to care for emergent health care needs of veterans.  The pay is 70% of the Medicare rate and the patient must be transferred to a Veteran's facility when stable.  This will apply to veterans who are enrolled in the VA health system, have seen a VA professional within two years or have no other health insurance, including Medicare.  Now if we can only get all veterans into mainstream medicine and save millions of dollars with a possible increase in the quality of care. Top

Pain Medicines

The USA Today has a story about patients not getting the pain medicine they deserve.  The story focus is on physician's fear of hooking patients on opiates or not giving enough to make life tolerable.  This subject has also become front page with the use of OxyContin by junkies, where they crush the pill to get a quick high.  Purdue Pharma, the maker of the medicine will change the formulary so that when the crushing occurs the pills will automatically self destruct.  The other problem mentioned in the article but only as an aside is the fear of physicians of being hounded by their State Medical Board.  There is a guideline developed by physicians that to date has only been adopted by 48 of 69 member boards.  Boards sometimes adopt the guideline but still hound good physicians that do not follow every i or t in the law.  The article doesn't mention what happens when a district attorney wants to move up the chain and can earn his/her bones on putting away a physician for over-prescribing medication.  (See Story in Legal)                Top


Los Robles Medical Center is increasing their ICU beds from 20 to 30.  They are doing this to add flexibility  to the bed designation in order to not need to divert patients.  This is part of a master hospital plan to upgrade the emergency room, and hospital.  The ICU will be complete next spring.

Fresno Hospital has an overcrowding in their ED.  They have opened an urgent care facility called "QuickER" across the street from the ED.  It will consist of 10 treatment rooms which include 2 pediatric rooms, lab and x-ray.  This is only a temporary fix since they are planning a new and larger ED.  The ED has had a 13% rise in patient volume as opposed to the national average of 9%.

Modern Healthcare has an article on Sutter Health, the largest hospital affiliation in Northern California.  The now have 26 hospitals, 6 LTC, 19 HHC and 17 affiliated medical groups.  This market power has led to an operating net income of $35 million in 2000 up from $2 million the year prior.  Revenue is also up 21%.  There has been and continues to be consolidation of the entities and upward migration of the fees allowed.  The unions are not happy since they are now up against a formidable foe that is laying off employees as part of some of the consolidation.     Top 


DISCLAIMER: Although this article is updated periodically, it reflects the author's point of view at the time of publication. Nothing in this article constitutes legal advice. Readers should consult with their own legal counsel before acting on any of the information presented.