Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, June 3, 1994 TAG: 9406030118
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: By LAURA WILLIAMSON STAFF WRITER NOTE: above
DATELINE: LENGTH: Long
Western Virginia is about to get its first HMO.
Known as the least expensive but most restrictive health plans on the market, there are about a dozen health maintenance organizations across the state. The first to emerge in this region will be born out of a partnership between Carilion Health System and Blue Cross and Blue Shield of Virginia, the companies announced Thursday.
The two companies have not yet determined whether the joint venture will be a for-profit or not-for-profit company.
Under the agreement, Blue Cross will provide insurance, sales and administrative support and Carilion will provide health care through its network of 13 hospitals and affiliated physicians.
More than 500 doctors work at Carilion hospitals, President Tom Robertson said. But it will be up to each doctor whether to join the HMO.
"I believe they will be favorable to it," said Dr. Skip Walker, a general surgeon and chairman of the Carilion physician network.
Health maintenance organizations are part of a growing national trend to provide health care through "managed care" systems. HMOs are the most restrictive of managed care systems, which also include "preferred provider" (PPO) networks and "point of service" (POS) networks.
PPOs create networks of doctors who agree to offer discounts to employers in exchange for a volume of patients. Under this system, patients must pay a larger share of the cost if they visit a doctor outside the network.
A POS system works in much the same way, but also uses "gatekeeper" doctors, or primary care physicians, to control or "manage" the type of care a patient receives. Patients are not covered for care given by specialists unless they receive permission from the "gatekeeper" first.
HMOs also use "gatekeepers," but further restrict choice by not covering any care received outside the network. The tradeoff is that patients usually pay only a small amount to visit the doctor, regardless of the type of care they need.
In the Roanoke and New River valleys, only a small percentage of people use managed care systems. The president of Carilion's managed care division, Tom Maxfield, placed the number between 6 percent and 12 percent.
The area has resisted managed care longer than other areas, he said, because people in Roanoke are less mobile and therefore more likely to develop longstanding relationships with family doctors. Until recently, employers have been reluctant to break those ties.
In fact, a federally funded study 20 years ago showed Roanoke would not support an HMO, Robertson said.
But insurance costs have skyrocketed since the 1970s. Traditional insurance plans, in which patients visit the doctors of their choice, are the most expensive.
The move into managed care, Maxfield said, was driven by employers looking for ways to control the cost of health care. He estimates that the market could support as many as three or four HMOs and that, within five to 10 years, everybody who buys insurance in the Roanoke and New River valleys will be enrolled in a managed care plan.
Robertson said he expects the Carilion-Blue Cross HMO won't be the only one in the region.
"We fully expect that there will be competition," he said.
So does Lewis-Gale Hospital in Salem.
This year's business plan anticipates three HMOs in the region by the end of the year, spokeswoman Terri Rush said. But she won't say who the hospital expects to manage them.
Lewis-Gale, she said, has no plans at the moment to create an HMO.
And in the future?
"I think that with managed care, we're open to whatever possibilities are appropriate for the market," she said.
Lewis-Gale, owned by the aggressive Louisville, Ky.-based hospital chain Columbia-HCA Health Care Corp., runs the other private hospital in town. Carilion runs the region's two nonprofit hospitals, Community and Roanoke Memorial.
The Carilion-Blue Cross HMO, which does not yet have a name, will provide services to people in the region west of Lynchburg. Details of the new company and the services it will provide still are being worked out.
The company will have a nine-member board of directors, including at least two physicians and one at-large member. Carilion and Blue Cross each will appoint four members.
Phyllis Cothran, president and CEO of the Virginia Blues, said the HMO would foster a closer relationship with doctors than other managed care plans, which sometimes create tension by "policing physicians."
That, in turn, creates a perception that managed care plans deliver a lower quality of care than other insurance plans, she said. Cothran hopes the Roanoke-area HMO will create a better environment for both physicians and patients.
The Virginia Blues, which will begin marketing the HMO with Carilion in October, will offer the plan to its 324,000 subscribers within the region.
This is the second HMO it has created as a joint venture with a hospital group. The first, Peninsula Health Care Inc., was with the Riverside hospital group in the Newport News area.
That partnership serves 6,000 people and saved policyholders 14 percent in premium costs in 1993, Cothran said. She hopes the Roanoke-based HMO will do the same.
by CNB