Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, May 21, 1995 TAG: 9505190058
SECTION: BUSINESS PAGE: F1 EDITION: METRO
SOURCE: SANDRA BROWN KELLY STAFF WRITER
DATELINE: LENGTH: Long
HMOs, the most managed type of managed care, have crammed down doctors' fees and driven hospitals into re-engineering, and made millions for their owners, but they're not going away.
Popular among employers across the country, health maintenance organizations cover about 50 million Americans, typically offering a less-expensive alternative to traditional health insurance.
They pay doctors predetermined, negotiated fees for each person covered, regardless of the services required. Patients usually make a small copayment of $5 or $10 for each visit to an approved doctor, but are not covered for services they receive outside the HMO network of physicians and hospitals.
"Health maintenance organizations change the landscape of health care" is a common refrain about this type of arrangement.
But in the Roanoke Valley, the companies selling or planning to sell HMOs are changing more than health care access. They are bringing additional professional jobs to the area and increasing choices from which individuals and businesses can purchase a variety of coverage.
Maybe best of all, the companies have put people in their Roanoke offices who not only tout HMOs because they sell them, but who applaud HMOs because they have experience in getting health care from them.
"I'm convinced you can't get a better health care product than an HMO," said Catherine Harman, Roanoke Valley sales manager for Southern Health of Richmond. The Virginia Tech graduate has had her own health under the care of an HMO for the 3 1/2 years she has been with Southern Health in Richmond.
The preventive care or wellness component of HMOs - cholesterol and blood pressure screenings, mailed reminders for immunizations and mammograms - make members more aware of good health, she said.
On Wednesday, Harman opened the Southern Health office in the Fralin & Waldron complex on Virginia 419. She has been in Roanoke since February and already has hired and trained four employees to work in areas of provider relations, broker services and marketing.
Their job is to introduce Southern Health to employers. The HMO company, which was founded a decade ago by doctors in the Richmond area, since November has been owned by Coventry Corp. of Nashville, Tenn. The company specializes in HMOs and markets them through insurance brokers and agents, instead of directly to employers.
Harman's team will be ready to quote rates as soon as the company completes negotiations to select a hospital system for its members to use. Its choices are the Southwest Virginia Hospital Alliance, with Lewis-Gale of Salem as the leader, or the Carilion Health System that includes Roanoke Memorial and Community hospitals.
In the same Fralin & Waldron complex as Southern Health are the offices for Mid Atlantic Medical Services Inc.
In town since October and already aligned with the Southwest Virginia Hospital Alliance, MAMSI's staff of 12 is working to extend the Rockville, Md., company's influence deeper into Virginia.
Except for Manager Michael Gaultney, who relocated from Fairfax, the MAMSI staff was hired locally. Workers who know the area are especially important, Gaultney said.
Small employee groups, with as many as 250 employees, are MAMSI's main market, but "we're talking to everybody," Gaultney said. The company markets its broad menu of health products, including life insurance, directly to the buyer or through consultants, bypassing the insurance broker community.
A few miles down Electric Road from the Southern Health and MAMSI offices are the Collonade One headquarters for a third HMO marketer, Heritage HealthPlan.
Heritage, which moved here last year, has eight employees, including a Wytheville native, Owen Poole, who was lured from Northern Virginia, where he worked for another health care company.
"No matter whose product it is, an HMO is better than any other plan," Poole said. "It has to satisfy customers more than other plans."
Heritage has a contract with the Carilion Provider Network of doctors and hospitals, but is still waiting for its HMO license from the state's Bureau of Insurance.
The first HMO to be marketed in Roanoke was Trigon Blue Cross Blue Shield's Healthkeepers plan, which uses the Carilion Health System network of doctors and hospitals. Trigon and Carilion have announced a partnership in an HMO, but that structure is not yet in place.
Although as many as 12 companies have been rumored to be interested in selling health care plans in the Roanoke and New River valleys, only these four have established a physical presence.
Partners National Health Plans of North Carolina Inc., the first out-of-state company licensed to sell an HMO in Roanoke, is signing up doctors for its network and is negotiating for a hospital system in Roanoke, but does not have an office here.
"We're talking with employers there," Stuart Veach, Partners' vice president, said last week.
Partners' license allows it to do business in Roanoke, Carroll, Franklin, Grayson, Henry, Patrick and Pittsylvania counties and the cities of Roanoke, Martinsville, Danville and Galax.
It is privately owned and has been in business since 1986. Among the Virginia companies it already serves is the 5,500-employee Bassett-Walker Inc. of Henry County.
Plans for a sixth company to serve the area, a joint venture of the Medical Society of Virginia and PHP Inc., a managed health care company based in Greensboro, N.C., have been announced, but the company will not begin to form until after a mid-June stock-subscription deadline passes.
The company will be owned by physicians.
\ Until the current HMO providers arrived, Roanoke was the largest metropolitan area in the country in which health maintenance organizations were not being marketed.
HMOs already were established in Northern Virginia and Richmond, and to some extent in Tidewater, but the Roanoke and New River valleys were like filet, or "a diamond in the rough," said Susan Hrubes of Woodbridge, who as senior regional manager for Mid Atlantic Medical, oversees its Virginia operations.
The area from Roanoke to Bristol has a half-million potential health care customers. Only a tiny fraction is already in any sort of managed care, but about 30 percent are expected to be in a program in 10 years.
The state's "one remaining sizeable population area" was also logical expansion territory for Southern Health, said James L. Gore, the former Roanoke Valley resident who is the company's president and chief executive officer.
While the companies are here to sell the area's businesses HMOs and a variety of other health care plans, they also are extending their presences in the state so they can be competitive when Medicaid and Medicare patients are herded into managed care.
The state already has experiments going in Tidewater with HMOs for Medicaid patients; Congress is debating whether to require Medicare recipients to use HMOs to save money. Voluntary HMO plans are already available to senior citizens.
HMOs are decades old, but have not been strong in the Southeast, especially not in the less-populated areas.
Virginia's regulations for HMOs went into effect only in 1981. Two of three companies had HMOs in the state prior to then and were regulated under more general insurance guidelines, said Laura Lee Viergever, a senior examiner with the Virginia State Corporation Commission's Bureau of Insurance.
By 1988, the number of registered HMOs had grown to about 20 and held steady until last year, said Viergever, who works in the Financial Regulation Division. Since 1994, the number of companies has grown to 24.
Viergever could not say how many licenses are pending, but she said that it takes a new company an average of six months to be licensed and can take as long as a year.
Among documents that have to be submitted to the state are copies of all contracts, an actuarial workup of proposed capitation (fee per member) or premium, a financial statement, a marketing plan, copy of complaint procedures available to members, description of the geographic area to be served and descriptions of the plan's proposed quality assurance and utilization review programs.
It's less complicated for a company that already is operating in the state and simply wants to expand its territory, she said. It might be able to get an expansion license in about a month from the time all paperwork is complete, she said.
New HMO companies must have a minimum net worth of $300,000 and then deposit an amount equal to the first three months of uncovered expenses before they can be considered for a license. The companies also have to have a network of hospitals and doctors in place.
The state also has mandated language for HMO contracts which says that a patient who uses the system properly cannot be held accountable for any costs beyond the established copayment.
All HMOs must submit a list of provider of care and report financial information quarterly. The information can be required more often if the state has a reason for keeping a closer eye on the company's stability, she said.
By comparison, other insurance companies are encouraged to report, but not required, Viergever said.
HMOs generally operate regionally, which means there are no national guidelines, she said.
However, since regulations were put in place, only one company, in Tidewater, has been forced to quit business and that was because its parent company went bankrupt, Viergever said.
Although HMOs are lumped together as though they are all the same, they aren't. Among the several types in Virginia are the "staff" model, where doctors are employed by the HMO clinic; the group model, where doctors are contracted but not employed; and the most common, the individual practice association, or IPA, model where doctors work at their own locations, but have an association with a hospital or HMO.
\ So far, education has been the main role of each of the four companies that are poised to do HMO business in Western Virginia.
While price is certainly a prime factor - maybe the main factor - in a company's selection of a health care provider - deciding on an HMO requires a different sort of thinking, the marketing people say.
The savings to companies and their employees from participating in an HMO don't come from lower fees, but from lower use. Model HMOs reduce health care services by 19.6 percent compared to fee-for-service indemnity plans, according to a 1992 National Health Interview Survey conducted for the Congressional Budget Office.The individual practice associations, or IPAs, have the potential to reduce costs by reducing services but haven't proved to be as effective as the other models, concluded a February budget office memo on "The Effects of Managed Care and Managed Competition."
An HMO is not for every company, however, and when one is chosen, it's almost always presented to employees along with options of other health care plans. By offering the HMO along with other plans, a company can "move into managed care at its own pace," said Ann Marie Wood, vice president of Trigon's Team Western division, which includes Roanoke.
"Also, I'm not sure managed care will be for everyone in every group," Wood said in an interview last week.
It's impossible to set up an HMO in some of the far southwest reaches of the state, she said, because there are not enough primary care physicians there to meet the state's requirements for a network.
"Most employers are not buying an HMO as a sole offering; they're buying it as a triple choice or double choice product. They're not coercing employees," Wood said.
Owen Poole, manager of marketing for Heritage, suggests that an HMO even requires a particular type of employer.
"It's not for companies who don't like their employees," he said.
An HMO, Poole pointed out, actually controls use of health care. That, in turn, controls costs, but an HMO requires a new way of thinking for employers, he said.
"You have to start looking at claims and what causes claims" and then put programs in place that cut down on those claims, he said.
"They have to believe that happy people are more productive, and healthy people cost less," he said.
by CNB