Florida Warns 40% of State's HMOs It May Force Them Into Receivership

MANAGED CARE July 1997. ©1997 Stezzi Communications

The Florida Department of Insurance has warned 16 of the state's 40 HMOs that it may act against them if they don't resolve their financial difficulties and, in some case, resolve quality-of-care issues."We license ten to twelve plans a year and some of them have problems early on," said Wendy Diehl, spokesperson for the department. "Also, the marketplace has become more competitive as more plans enter the picture."

Richard Dorff, president of the Florida Association of HMOs, said legislative requirements that HMOs offer more benefits to members have hurt the financial performance of many plans. For example, last year the state prohibited insurers from limiting hospital maternity stays.

"When you require someone to stay longer in the hospital than necessary, that can cost an HMO money," Dorff said. "The cost of upgrading areas such as information services and utilization review programs also adds to the financial burden carried by HMOs."

Dorff expects more consolidation in the managed care market. In some areas it is already happening. Recently Humana Medical Plans purchased Health Plans of Florida from the ailing Physician Corp. of America. Humana expects to benefit from this arrangement by gaining PCA's Medicare population.

When the state warns a plan, it allows between 30 and 90 days for rehabilitation. If the plan fails, the department can put it into receivership.

More evidence that managed care effectively reduces utilization comes in a study published in the June 11 issue of the Journal of the American Medical Association. Researchers led by Caroline L. Goldzweig, M.D., M.S.P.H., an internist at the Veterans Affairs Medical Center in Los Angeles, found that fee-for-service beneficiaries were twice as likely to undergo cataract extraction as were prepaid beneficiaries. The analysis of Medicare data controlled for gender, age and diabetes mellitus status.

Unfortunately, the study doesn't address whether the reduction, compared with fee-for-service medicine, was all appropriate, and there are hints that some of it wasn't.

The study looked at beneficiaries who were participating in traditional Medicare, a staff-model plan and an independent practice association.

Theoretically, the urge to operate is greatest in FFS medicine, while staff-model plans are supposed to have a culture of conservative care and IPA plans reward primary care gatekeepers for reduced referrals and utilization.

One unsettling aspect of the report is that women were twice as likely as men in FFS Medicare to undergo extraction, but no more likely in managed care (actually a bit less likely in the unnamed staff-model HMO that was studied, and a bit more likely in the IPA-model HMO).

But recent research indicates that women are 50 percent more likely to develop cataracts than are men. This suggests to the authors that there is underuse of the procedure for women who are enrolled in Medicare HMOs.

Another concern in interpreting the results is the well-reported selection bias of Medicare HMOs: Their enrollees are usually somewhat healthier than traditional Medicare beneficiaries in any given service area.

Working for the American Association of Health Plans, HMOs' largest trade organization, the Lewin Group estimates that managed care may have saved Americans as much as $383 billion in premiums, out-of-pocket health care costs and lost wages.

From 1997 to 2000, the savings for people in private health plans could be between $125 billion and $202 billion, the consulting group says.

Not only are people in managed care plans helped, but so are people in fee-for-service indemnity plans, because cost-saving practices are adopted throughout the health care delivery system.

HMO enrollees may be having difficulty getting the straight dope on their pharmacy benefit from telephone customer service representatives, according to a survey of California health plans.

Citizens for the Right to Know, whose 70 members include organizations representing physicians, patients, pharmacists, consumers in general and disease-support societies, telephoned 48 HMOs and found that 10 percent of the customer service reps could not say what a formulary is. Thirty-five percent of the HMOs said they had nobody available to answer the question, "How can I obtain a copy of your drug formulary list?"

The group reported that:

• 23 percent of the surveyed HMOs said formularies were not available to members and potential members — only to physicians and pharmacists.
• 21 percent of the plans faxed or mailed formularies upon request.

There are a lot of ways to rank health plans. Some widely publicized national reports have emphasized profitability, which is important to investors. A ranking by price would, to some degree, be important to premium payers, mostly employers. Nobody is willing to go out on a limb and rate medical care itself. Sachs Group and Scarborough HealthPlus surveyed 90,000 consumers and rated 215 plans in 30 markets according to four criteria: value and loyalty, medical care satisfaction, plan services satisfaction and network efficiency satisfaction. The consolidated results:

Markets where no plan was statistically significantly above the
market average in any of the four categories: