September 1, 2001 

CEO Steps Down

Fall of Managed Care

Second Opinions


Malpractice Insurance

Fascinating Idea

CEO Steps Down

The CEO of Alta Bates Hospital in Berkeley has "unexpectedly" stepped down.  Since the merger with Oakland's Summit, Alta Bates has announced the laying off of 300 non-nursing personnel due to sagging money.  The Hunter Group had been called in to help.  This almost always means the CEO is replaced by a new one from Hunter.         Top

Fall of Managed Care

Medicare has announced they expect several hundred thousand more people to be dropped from the Medicare HMO ranks this year.  CMS is concerned and is attempting to make the rules more flexible but they still maintain the September 17, 2001 as the date for HMOs to report their next year status.  

The USA Today reports that the next year will see the biggest health care premium rise in a decade.  This is in spite of the failed concept of managed care.  The artificially low prices are now being paid for.  Speaking out of both sides of his mouth at the same time a representative for for a Washington State plan states that "consumers" will pay more to use certain tiered physicians.  He said "We'll never be able to solve the health care cost problem by restricting choices. What we want to do is change the game so physicians and consumers (used to be patients) can make more informed choices about the cost and quality of care."  The tiered medical groups are only on money and not quality. 

In Michigan the Health Alliance Plan (HAP) has announced it will get out of the Medicare HMO business in three counties at the beginning of the year.  Those who remain will get free medication only up to $200 per year as opposed to $1000 per year this year.  Four Henry Ford Hospital physician groups will also drop out. This has forced HAP to limit the amount of insureds.  Multiple other providers have also terminated their contracts with HAP.  During this year two other large HMOs have closed enrollment, one has gotten out and one more is expected to get out next year.   

Blue Cross/Blue Shield of South Carolina is eliminating one of its two HMOs in the state.  HMO Blue will go out of business after all contracts expire.  The organization stated that the market for managed care has reached capacity in SC, which is not a big HMO state.  This had 48,000 enrollees, about half as many as the other Blue Plan, Companion.  A professor at the SC School of Business stated that HMOs do well in areas of transient population but SC people stay for generation and want to see the same physician they have grown up with.   

The California Department of Managed Care has stated that 25% of the state's physician group face insolvency.  They state this shows the grave instability in the HMO system that threatens to affect patients.  The data from the first quarter of this year shows that 25% had assets worth less than 70% of the amount they owed others.  Twenty per cent of the groups had a negative net worth and barely any tangible assets.  The physician groups are fighting the release of the group specific information.  Those with a profit are afraid if the information is released the HMOs will not negotiate with them.  The HMOs state they already know the status of the physician groups as their contracts allow the HMOs to audit the groups. They also believe the public should know the financial status of the groups.  The new Department is looking into what its next step should be.  

North Carolina is looking at a 20% raise in rates for the next year. The last few years have been in the teens.  This is make-up for the artificially low rates in the prior years.  The spokesperson for Blue Cross stated that people wanted more choice, more flexibility and plans that are easier to use.  This comes at a cost.  More employees are now asked to pay part of the cost or to accept higher deductibles and less pharmacy payments.  

Stanford has reached agreement with CIGNA, one of the six HMOs that they dropped to get rid of capitated payments.  CIGNA has agreed to pay on a fee for service basis. 

Cincinnati is getting hit by health insurance premiums increase by up to 50%.  These massive increases are being passed on to the employees by increasing the deductibles to up to $1000.  The employees are also paying a larger percentage of each bill.  The problem is with unions or other bargaining units where their benefits may not be cut or reduced.  Those employers are looking for cheaper insurance in order to survive.  The higher prices will also remind employees not to use their physician offices for every little thing.  As the costs for insurance rise some insurers are making great profits.  Humana has reported its latest quarter earnings increase by 32% with total premium dollar revenue dropping 8%.  Humana is now going to a tiered PPO product to save money on pharmacy costs. 

Boston has always been noted for its top rate hospitals and academic centers.  Now if people wish to use them the HMOs are asking the patients to pay a surcharge.  The employers are asking for this as a way to lower the large increases in health care costs.  The community hospitals are usually less expensive for the insurers than are the medical centers.  The teaching centers are contending that this will hurt some patients who can not afford the high deductible to come to their institution.  

The Texas Children's Hospital of Houston is pulling out of the Texas Children's Health Insurance Program due to low fees.  This will leave 47,000 children without access to the hospital.

California's Health Net's Medicare HMO is dropping Sutter Hospitals and physicians at the end of the year.  This will affect about 25,000 seniors.  The CEO of Palo Alto Medical Group has stated this came without any prior discussion.  This allow the group to contract with PacifiCare for their HMO business.                     Top

Second Opinions

In an interesting move MGH and Brigham have entered into an agreement with a telecommunication company to provide second opinions across the country.  They will charge $600 paid by the patient and will not advertise in any state. If a person searching the web comes across their site they will be told to go to their own physician to have a form filled out and their studies forwarded to Boston.  The consultants will not examine the patient and will give their recommendation to the patient's physician, not the patient.  They believe they can avoid any state teleconference problems doing it this way.  The Cleveland Clinic is also planning to do the same thing but they are planning for their physician consultant to become licensed in the patient's state.  The medical telecommunications company has been in business for five years and has handled about 10,000 patient referrals from overseas.  They state the opinions have changed the care plan in 70% and the diagnosis in 10%.        Top


Another group of physicians are becoming entrepreneurs.  As managed care grows physicians are becoming more willing to become business oriented.  The latest one is a group of 30 cardiologists and cardiac surgeons in Louisiana who are building a cardiac hospital in the retirement community of Lacombe.  The hospital will have four operating rooms, nine surgical beds which act as ICU beds, four cardiac cath suites and a pharmacy.  The $12 million project is to employ 400 people and open next year.  The goal is 450-500 bypasses per year. The expected medical staff using the hospital is 300.  I'm sure the hospitals in the area love it.      

An article about outpatient centers in Colorado states that the outpatient facilities are being owned by physicians. The hospitals are attempting to get back in the business by building their own outpatient facilities.  Some are using the empty outpatient rooms for their inpatient surgery if the outpatient facility is in the hospital.  

In Indian River Hospital, Florida, the CEO has a different idea.  He is using exclusive contracts to force physicians to only use this hospital.  The board is caught in the middle.  They have already gotten rid of the exclusive contracts with the cardiologists and oncologists and are now refusing an exclusive contract with the radiation therapists.  The radiologists are still under the gun as the CEO has requested proposals from several groups for the exclusivity.  Of course, if they get this contract the groups will need to get rid of their current contracts.  Stupidity reigns. They should just get rid of the CEO. 

The radiologist group at Bayfront Hospital in St. Petersburg attempted to enrich their pockets and lost. They wanted extra pay for their getting up at night to read films for trauma victims, many of which had no insurance or money.  The hospital did not renew their contract.  The radiologists still have an outpatient facility next to the hospital and still read the x-rays at the hospital if a specific request for their services is made.  The hospital is paying a high price for an interim group to read films until 11/1.  The new radiology group is currently one person but he will hire seven more to do the work.  The hospital also got smart and started to use teleradiology directly to the radiologists home.  Why they didn't do this with the last group is beyond me.

In the Raleigh area Rex Healthcare the area's second largest hospital has seen the light.  They are selling all but a few practices back to the physicians. Their consulting firm states they can not think of a single place where the concept of hospital owned physician practices has worked. The question is how much will the physicians have to pay to buy back what is theirs.   

In southern Louisiana, East Jefferson General Hospital is getting rid of its medical group. The hospital has lost $16 million each of the last two years on the groups. The hospital will by back the contracts of those physicians with two years or less remaining.  Those who refuse the offer will be allowed to stay until the end of their contracts. This follows the two-year time it has taken Tenet to get rid of its groups in Louisiana, Mississippi and Alabama. They still have 17 physicians but plan to return all to private practice in three years.  HCA has shed over half of its 1500 practices nationally in 1999.  HCA states that owning physician practices are no longer a part of the company's strategy.  The problem comes later when physicians then change practice location and referral patterns. 

The Atlanta Northside Hospital fiasco continues.  Aetna has remained firm of the non-exclusivity of Northside.  Northside has blinked and allowed one other hospital, North Fulton to get contracts. The Insurance commissioner and the other insurers are thrilled with the concession.  The same doesn't hold for all the other people and hospitals left out or who have to travel long distances on crowded freeways due to the antitrust nature of one hospital. Several legislators are also working a bill to prevent exclusive contracts between hospitals and insurers in Georgia. 

Aetna has agreed to allow the largest OB/GYN group in the Atlanta metro area to have an independent contract.  This will allow them to send their patients to North Fulton Hospital.  Aetna is dropping Northside unless they give up their exclusivity to a meaningful extent.  In order to continue with their Aetna contract the physician group which is made up of 53 physicians and who delivered 1/3 of Northside's babies will apply to North Fulton where Aetna also has a contract. This will cost Northside Hospital several hundred deliveries a year and may be the break in the dam.

Another article in the Atlanta newspaper discusses the use of the CON system in Georgia.  This system has helped to create the present non-competition of services.  Georgia is one of the most regulated states in the country considering the amount of services controlled.  The reason for the strict CON, according to the head of the State Community Health, is to make sure hospitals have a good flow of patients and money so they may take care of the 1.3 million uninsured as well as enough material (patients) to help medical education. Top 

Malpractice Insurance

In the ongoing West Virginia medical malpractice tangle, PHICO, a Pennsylvania malpractice company that insures about 100 physicians in W. Va. is not doing well financially. In fact, they have been taken over by Pennsylvania.  Some physicians are afraid to practice without the known backing of the company and have closed their offices.  The State has said that they will being covering the doctors if the company goes under.  They did not state that they will cover them for only $300,000 per incident. The usual policy in W. Va. now is $2 million per incident.  I know I would also close and take vacation until it is resolved.  Why doesn't the medical association start their own company, as what happened in 1975 California?  

In West Virginia it pours, not rains.  The largest medical malpractice insurers in the state, St. Paul, is to begin culling its doctors.  Those to be culled are the high risk specialists, emergency room, general surgery and OB/GYN.  Medical Assistance, the second largest insurer in the state is also raising premiums and cutting off 37 physicians with 262 switching to other insurers.  See above. 

In yet another story from the Mountaineer State there is now a consideration of the "blue flu".  The Governor says that's a bad idea.  The State Medical Assn. states the idea is not coming from them.  Those responses are to be expected.  I would encourage the physicians to take off en masse, leaving only enough to take care of emergencies.  This would force the hand of the Governor and the legislature to put in meaningful reform and also allow the physicians to start their own insurance companies.     Top

Fascinating idea

A large medical group in Cincinnati has begun to charge drug reps $65 for time with the physicians.  This will take the place of bringing in food and meeting with the staff and the physician may or may not show up.  There does not seem to be anything illegal about this and is a win for the physician and for the representative.  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.