Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, June 10, 1994 TAG: 9406170098
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: By LAURA WILLIAMSON STAFF WRITER NOTE: below
DATELINE: LENGTH: Long
At least two more insurance companies are thinking about jumping on the HMO bandwagon headed for Roanoke, and a third could soon be on board.
Cigna HealthCare of Virginia and Southern Health Services, both based in the Richmond area, may join the growing competition in health maintenance organizations coming to the Roanoke and New River valleys next year, the companies confirmed this week.
A spokeswoman for Cigna said there could be a third company joining the game. That would bring to five the number of HMOs exploring a move to this region. At least two- Heritage National Healthplan and a joint venture between Carilion Health System and Blue Cross and Blue Shield of Virginia- have announced their intention to open shop in January.
"I am aware of another organization that is actively recruiting providers" in the Roanoke area, said Rachel Schneider, provider relations manager for Cigna. She would not name that organization.
Nor would she name the company that recruited Cigna to design a health care network that would offer "HMO-type benefits" to its employees, a venture that is still in the negotiations stage. She said only that the company was in the Roanoke area and that a decision likely would be reached within two weeks.
Schneider said the medical network also could be pitched to other employers in the region as a full-fledged HMO if the deal goes through.
HMOs generally are considered the least expensive but most restrictive of health care plans. They save companies money by charging a fixed, annual rate for each employee covered, regardless of how much care that employee receives. Patients typically make a small co-payment for each visit but are not covered for care received outside the HMO network of physicians and hospitals.
Nationally, about 550 HMOs provide care to roughly 45 million people, meaning about 16 percent of the U.S. population gets its health care through these networks, according to statistics provided by the Group Health Association of America.
Until last week, Roanoke was said to be the largest metropolitan area in the country without an HMO. But news of the Carilion-Blue Cross partnership- made public June 2- was quickly followed by an announcement from Heritage, which was lured to the area by a coalition of Western Virginia employers.
Now, it seems like everybody wants a piece of the Roanoke market.
Southern Health Services President Jim Gore said that while he'd had "no substantive discussions" with health care providers in the area, he was quietly mulling the possibility of entering this region. Southern Health is a physician-owned HMO that does business in Central Virginia.
"Obviously we are thinking about expanding and Roanoke's an area we would like to come to, but there's no decision at this point," Gore said.
Southern Health likely will make a decision regarding a Roanoke move in September, he said.
But can the Roanoke market support this much competition?
That all depends.
"Yes and no," said Tom Maxfield, president of Carilion Health Plans, the division that markets health care networks for the parent company of Roanoke Memorial and Community hospitals.
Maxfield said "free-standing" HMOs- the kind that operate out of a central location with a staff of on-site physicians- probably would not survive because of the start-up costs involved. However, existing HMOs that expand their service areas to include Roanoke- but don't require significant additions in administrative or other fixed costs- should have no problem competing.
He counts the Carilion-Blue Cross venture in the latter category, because both companies will use existing administrative staff to run the new business.
"It's not creating everything de novo," Maxfield said.
Lewis-Gale President Karl Miller agrees that there's room in the Roanoke market for several HMOs. His company business plan anticipated at least three in the region before the end of the year.
Lewis-Gale, owned by aggressive hospital chain Columbia-HCA Health Care Corp., has not been involved in the recent flurry of HMO announcements, though Miller said he expects his hospital "to be a player."
"We expect to be a provider in an HMO system," he said. Lewis-Gale has no plans at this time to create its own HMO.
Too many HMOs in the region could mean lower profits for hospitals, which typically agree to accept lower payments in exchange for a guaranteed volume of patients. With an increasing number of people joining discounted, managed care networks, and a shrinking number of people paying with traditional health insurance, there is no one left to absorb the difference in cost, Miller said.
Both he and Maxfield agreed that hospitals will have to learn to manage their costs better if they want to survive in a managed care market.
But who wins the HMO race in Roanoke has perhaps less to do with the hospitals than it does another group of health care providers: the doctors.
There are only so many to go around.
While doctors in the region may join as many HMOs as they like, they are unlikely to join multiple HMOs because each has its own set of rules and regulations, and trying to keep the paperwork straight could become confusing, said Donald White, a spokesman for national HMO trade association GHAA.
And the first question people signing up for an HMO are going to ask, he said, is whether their doctor is on the list. The HMOs, therefore, will have to compete for the best and most popular doctors in town.
Whether they agree to sign will hinge on several factors, said Dr. Newell Falkinburg, a nephrologist and president of the Roanoke Valley Academy of Medicine. Doctors will look at how much of a discount they are asked to provide, the volume of patients they are guaranteed, and the degree to which the HMO may restrict their independence by submitting their clinical judgements to utilization review companies for approval.
Doctors also might be forced into joining an HMO, however, because of the threat of losing patients to another network if they don't, he said.
That's a situation physicians resent.
"What I find repulsive, and what most doctors find repulsive, is somebody pulling my patients away," Falkinburg said. "The relationship you have with a doctor is different from the relationship you have with a plumber."
by CNB