Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, October 5, 1994                   TAG: 9410050095
SECTION: BUSINESS                    PAGE: B8   EDITION: METRO 
SOURCE: SANDRA BROWN KELLY STAFF WRITER
DATELINE:                                 LENGTH: Medium

DEERE TO USE CARILION HMO SIGNS LETTER OF INTENT, LAST STEP TOWARD STATE

A letter of intent signed with Carilion Provider Network is the final step toward state licensing for John Deere Health Care's Heritage National Healthplan, the company said.

The Illinois company expects to bring the first health maintenance organization, or HMO, to Western Virginia. The agreement with Carilion establishes a provider system of seven hospitals and 369 doctors in an area including Roanoke, Bedford, Rocky Mount, Radford and Pearisburg.

An HMO must have health care providers, a fee schedule and even a complaint system in place before it can be licensed.

Heritage had negotiated with both of the provider networks available in the area, Carilion and the Southwest Virginia Health Alliance led by Lewis-Gale Hospital in Salem, said Tom Jones, Deere's Roanoke operations manager.

Jones wouldn't reveal the terms of the final contract with Carilion. However, he and Carilion's chief executive officer, Tom Robertson, both said the fee discount negotiated was smaller than those in areas where HMOs have operated for many years.

"The contract calls for a substantial discount, but certainly not approaching 50 percent as has been rumored in the market," Robertson said.

HMOs have been popular on the West Coast and in most major metropolitan areas, but Western Virginia is untapped territory. In an HMO, users are directed toward a specific network of health-care providers and have to go through a primary care physician to gain access to the network.

An HMO is generally considered the lowest-cost form of health care.

Western Virginia will be Deere's 17th HMO site, although it has been operating nearby in Kingsport and Knoxville, Tenn., and is planning to start an HMO in Bristol, Jones said.

The Heritage managed care plan will be available Jan.1, but Deere expects to begin marketing it in two weeks.

The company will concentrate on selling the 60 or so businesses that are members of The Blue Ridge Regional Health Care Coalition. Jones is a past president of the coalition formed to look for ways to control health costs and lobbied Deere to come to the area. The coalition represents 70,000 workers.

Heritage may be the first HMO on the market in Western Virginia, but another, yet-unnamed plan being created by Carilion and Trigon-Blue Cross/Blue Shield should be close on its heels.

The Roanoke-based hospital system's contract with Heritage at the same time it is a partner in a competitive HMO might appear to be a conflict of interest. But, Robertson said, it isn't.

Providing health care facilities and physicians to an HMO such as Heritage is "wholesale" business, he said. The HMO Carilion is establishing with Trigon is "retail" business, sold directly to consumers.

This is Carilion's first provider contract with an HMO, Robertson said, although the network is two years old and already serves health plans at several companies.