SECTION: BUSINESS & FINANCE, Pg. 5

LENGTH: 790 words

HEADLINE: HMOs hope to find a sympathetic ear;
 

BYLINE: Mike Stobbe;

BODY:
 

Each week, Blue Cross and Blue Shield of Florida sends out a news release titled "HMO Success  Story of the Week." They tell of HMO patients who were treated right and are willing to be quoted  about it.

I tend to ignore them. It's as if Publix put out a news release each week detailing how some  shopper bought a loaf of bread and got the correct change back. Customer satisfaction is not news -  not yet, anyway.

But I can see why it puts out the releases. HMOs are portrayed as uncaring and money-grubbing in  movies, political speeches and media reports. They would like to be seen as good guys.

Lately there's a new public relations push, painting HMOs not only as good guys, but victims.

Victims, that is, of the federal Balanced Budget Act of 1997, a sort of reform act that sought  to put brakes on Medicare spending.

If you follow health care news, you've no doubt heard hospital chiefs talking about the BBA.  Some hospital chiefs say it is forcing them to cut staff, consolidate services and even contemplate  closing.

It's not just hospital people. Everyone who touches Medicare money has been lamenting the BBA.  That includes folks in the nursing home, home health and air ambulance industries.

Now, the cries of the HMOs.

It's still kind of novel - HMOs complaining about the government. As far back as the early 1970s  and President Richard Nixon, federal officials have spoken glowingly of HMOs and encouraged their  development. Earlier this decade, Medicare officials were particularly positive, seeing HMOs as  cost-saving operations and encouraging senior citizens to join.

Many senior citizens went for them, mainly because the Medicare HMOs offered something regular  Medicare didn't - coverage for prescription drugs.

But then came the tumult of last year, when Medicare HMOs began pulling out of many  smaller-population, rural counties. If you live in Polk County, where all four Medicare HMOs left  town, this is probably a vivid memory for you.

It's continuing. This year, HMOs announced they are pulling up their Medicare stakes in 19  Florida counties.

The HMO people say don't blame them. In Florida, HMOs lost a combined $ 67 million in 1997 and  $ 47 million in 1998. The losses come from multiple sources, but the BBA added by cutting back its  county-by-county payment rates and making it so Medicare HMOs couldn't afford to stay in some  spots, they say.

HMOs say there is another way the BBA is victimizing them:

Congress (through the BBA) called on the Medicare program to implement a risk adjustor for HMOs.  It came out of a concern that some HMOs might be "cherry-picking," i.e., selling to and signing up  the healthiest senior citizens. It is profitable, because you get the same per-patient federal  reimbursement as HMOs with sicker patients but you don't have to pay as much for patient care.

Medicare officials created a risk adjustor based on the theory that the sickest patients are in  the hospital more often so HMOs logging the longer hospital stays should get more.

But the HMO industry says it is more of an ax than an adjustor, projected to cut $ 11.2 billion  from payments to HMOs in the next five years. That will be on top of the $ 22 billion in cuts caused  by the BBA's other HMO adjustments.

The HMO people want the adjustor re-adjusted, and are getting a sympathetic ear from several in  Congress who say they stand by much of what was done in the BBA but did not intend for the risk  adjustor to be a cutting tool.

U.S. Rep. Mike Bilirakis, a Republican who represents parts of Pasco and Pinellas counties, is  co-sponsor of a pending bill to adjust away the $ 11.2 billion in cuts. Bilirakis said he's trying  to work with Medicare officials to get the change without passing the law.

"The legislation is for pressure purposes," Bilirakis said.

But Medicare officials so far are unaccommodating. They say Medicare has been paying HMOs more  than it should and the risk adjustor must get at some of that.

They refer to a U.S. General Accounting Office report that says the Medicare HMO pullouts were  not solely attributable to the BBA. HMOs pulled out of some counties where the payments were not  low but competition made it unprofitable, the report said.

Also unsympathetic is Families USA, an advocacy group that earlier this month blasted HMOs for  ignoring Medicare beneficiaries in rural counties.

Judy Waxman, the organization's director of government affairs, said HMOs are businesses out to  make money and have behaved like it.

Victims? "C'mon," she said. "Give me a break."  Mike Stobbe covers health care and can be reached at (813) 259-7562 or mstobbe@tampatrib.com

GRAPHIC: SIGNATURE

TYPE: GENERAL PRACTICE

LOAD-DATE: October 21, 1999
 
 

SECTION: BUSINESS & FINANCE, Pg. 1

LENGTH: 1283 words

HEADLINE: One-size-fits-all coverage becoming extinct;
 

BYLINE: MIKE STOBBE, of The Tampa Tribune;

BODY:
 

TAMPA - Choosing between an HMO, a PPO and a POS can be tough, even if you know the difference  between them.

If you're a little confused about your health insurance options, you're not alone.

Many people who have work-related health insurance don't know exactly what kind of insurance  they have, according to surveys done by the Employee Benefit Research Institute.

In a 1998 EBRI survey of workers with health insurance, 7 percent said they didn't know what  kind of coverage they had. And many who were in HMOs or other managed care plans mistakenly said  they weren't.

"People just don't pay attention to this stuff," said Paul Fronstin, a senior research associate  at EBRI, based in Washington, D.C.

Adding to the angst, health insurance companies continue to raise prices. Surveys conclude that  employers' average cost of providing health coverage is rising 9 percent this year and is expected  to rise another 9 percent next year, Fronstin said.

What's unclear at this point is whether employers will pass that pinch on to their employees.  The unemployment rate is low, so many companies may swallow the rising costs rather than risk  alienating - and potentially losing - employees.

But some employers may pass on at least some of the increase through higher premiums,  deductibles or co-payments, Fronstin said.

According to Palm Harbor-based Ceridian Benefits Services, which tracks trends in health  insurance premiums, they already are. The average monthly premium paid in August for family HMO  coverage nationally was $ 493.10, up 6.75 percent from a year ago. Non-HMO coverage went up slightly  more.

It's great to be able to understand the difference between an HMO and a PPO and a POS plan, of  course.

But "you need to look beyond the labels. You need to look at the details," said Pete Alles of the  International Foundation of Employee Benefit Plans, based in suburban Milwaukee.

"Do you have access to the doctors you want to go to? What are you going to pay? These are the  types of things you need to know," said Alles, the organization's assistant director for research.

Many employees don't have to worry about choosing between health benefits. They don't have any  options at all. About two out of 10 working Americans between ages 18 and 64 don't have health  insurance, according to EBRI data.

Among employees that do have health insurance, about four out of 10 work for companies that have  only one type of health insurance coverage. So they don't have a choice either.

But for those that do have a choice, the decision can be difficult.

Health insurance terminology can be confusing. And having a firm grasp of the lingo may not help  because not all HMOs are the same, and some health insurance programs blend characteristics of  different models, Fronstin said.

That said, here's a guide to the four most common forms of health benefits offered by U.S.  companies, followed by a list of questions employees can ask before choosing.

First, the types of coverage options:

Fee-for-service is the traditional form of health insurance. You go to whatever doctor or  hospital you want, and after the service is provided, your company health insurance pays the bill  (or, these days, part of it).

But fee-for-service was blamed for allowing health care spending to get out of control, and many  companies turned to HMOs and other forms of managed care to rein in costs. Companies that have kept  fee-for-service options often make employees pay part of the premium and impose daunting  deductibles.

Only about 13 percent of covered employees are in fee-for-service these days, according to an  EBRI survey.

Fee-for-service may be appealing to people who have specific medical conditions, want to ensure  access to certain specialists and are able to pay more for that access, Alles said.

HMOs, or health maintenance organizations, are usually the cheapest health care option.

A health fund or employer pays for care in advance, and an HMO (and its doctors) agrees to  provide all agreed-upon services to the employees. Employees agree to follow certain rules and  conditions, including that they must almost always go through a gatekeeper doctor first for any  kind of care. But they pay only a small co-payment for each doctor's visit and prescription drug  pick-up, and often avoid any part of the premium.

HMOs may be a good choice for young, healthy people who don't expect to use many health services  and don't want to pay much for them. They may also be a good option for people with limited  incomes.

PPOs, or preferred provider organizations, are a little like HMOs. They too have a list of  doctors who agree to prepaid coverage. Employees pay a deductible or other form of co-insurance to  see doctors in the PPO network. Unlike in HMOs, they also have the option of going to doctors  outside the PPO network, although they will pay more in co-insurance and will have to deal with  deductibles.

That means that PPOs generally are more expensive for employees than HMOs.

PPOs often are selected by people who want to have more of a choice of doctors and other health  care providers than that offered by HMOs, Alles said.

POS, or point-of-service plans, are kind of a hybrid between an HMO and a PPO. They have many  of the rules HMOs do, such as having to go through a gatekeeper physician first for in-the-network  care. But like PPOs, POS participants can go outside the network (and, in so doing, pay more in  co-insurance).

Like the PPO, the POS tends to be more expensive than an HMO.

Choosing between a PPO and POS "really boils down to ... whether you think the providers you need  are in the network," Alles said.

. Catastrophic care policies also are offered sometimes. They usually offer low premiums and  very high deductibles, and are designed to address unexpected and severe health needs, like  injuries from a car accident or a severe illness. But check these over carefully, because they may  not cover all - or even most - of the expenses.

Continuing in that vein, here are questions employees should ask:

Which doctors and hospitals will you have access to under each plan? If you have a doctor you  want to keep seeing, you should look for his or her name in the list of providers that the  different plans offer.

What services do the different plans cover? Is the kind of care you need covered?

What are the costs to you? Look at co-payments, deductibles, premiums and any other expenses.

Try to look at the quality of the network providers. If it's an HMO, try to find out if it's  accredited and what the accrediting agency says about it. The National Committee for Quality  Assurance reviews many health plans and provides information on its Web site, www.ncqa.org

"You shouldn't get too hung up on labels," Alles summarized.

"Look at things like access restrictions, coverage, out-of-pocket costs and any tips you can get  on indicators of quality."    (CHART) Rising costs of coverage  Here are recent monthly premiums for various types of employee medical coverage nationally and how  they've changed in the past year.  Coverage type Average premium Percent change   August '99 from August '98  Non-HMO, single $ 193.39 +8.37  Non-HMO, family $ 526.94 +7.61  HMO, single $ 179.39 +7.48  HMO, family $ 493.10 +6.75  Dental, single $ 20.86 +6.97  Dental, family $ 59.67 +6.08  Source: Ceridian Benefits Services  Mike Stobbe covers health care and can be reached at (813) 259-7562.

GRAPHIC: CHART

LOAD-DATE: October 4, 1999
 
 

SECTION: ECONOMY; Pg. D1

LENGTH: 949 words

HEADLINE: Left 'high and dry' ;
Once prized clients, seniors being abandoned by HMOs that, in turn, point finger at Medicare reimbursements

BYLINE: By Ale Pham, Globe Staff

BODY:

   When Joseph R. Sicotte turned 65 last year, health insurance companies peppered him with brochures beckoning him to sign up.

Like most seniors, Sicotte was aggressively courted by health maintenance organizations rushing to get a piece of the fast-growing Medicare HMO market.

Come January, however, the former Army sergeant will no longer be wanted. His HMO, Kaiser Permanente, is pulling out of the entire Northeastern United States as of Jan. 1, and no other Medicare HMO will be doing business in Berkshire County, where Sicotte lives.

"I'm high and dry," Sicotte said. "I don't know what the problem is. We're human; we're people just like everyone else. Why don't they want to insure us anymore?"

HMOs that have sought senior citizens with zeal - sponsoring free lunches, phoning them at home, and deluging them with inch-thick marketing materials - are steadily exiting the market, leaving hundreds of thousands of seniors across the country in the lurch.

On their way out, HMOs are loudly blaming cuts in reimbursements from Medicare, the federal health insurance program that pays HMOs to cover 6.2 million Americans, or roughly 16 percent of all senior and disabled citizens on Medicare.

"The program is in serious crisis," said Karen Ignani, president of the American Association of Health Plans, a Washington, D.C., group representing HMOs. "Unless Congress acts, beneficiaries are going to see" higher premiums, fewer benefits, and fewer choices.

Seniors in Massachusetts are already seeing signs of turmoil. On Jan. 1, Aetna U.S. Healthcare dropped its Medicare program in six states, including Massachusetts. The move left 17,000 Bay State seniors scrambling to find another insurer.

And next year, Tufts Health Plan, which runs the biggest Medicare HMO in the state, said it will charge higher prescription drug copayments and raise premiums for seniors in certain counties. At the same time, Harvard Pilgrim Health Care said it plans to pull its Medicare HMO out of Hampden, Hampshire, and Franklin counties on Jan. 1.

In every case, HMOs cite cuts in Medicare payments.

"A number of health plans found themselves in a situation where costs rose faster than premiums," said Patty Blake, vice president in charge of Tufts' Secure Horizons HMO for seniors. "That's the main thing driving the instability within the industry."

The cuts, enacted by Congress in 1997 to help balance the federal budget, meant HMOs would receive $33.2 billion less than they would otherwise have gotten over a five-year period, according to AAHP.

But the hit isn't felt evenly across the country. Some parts, particularly rural areas, such as Berkshire County, are hit harder. That's because payments to rural counties are relatively low, making them less attractive places for HMOs to do business. For instance, Medicare pays HMOs a base rate of $507.78 a month for each senior in Berkshire County, but $676.30 per senior in Suffolk County. The difference can lead financially strapped HMOs to drop coverage in rural areas, Ignani said.

To be sure, not everyone buys the HMO industry's argument for higher reimbursements. The US General Accounting Office, a congressional watchdog organization, in June concluded that Medicare payments continue to exceed the health plans' costs.

"Substantial excess payments persist," the GAO report said.

Gail R. Wilensky, chairwoman of the Medicare Payment Advisory Commission, which advises Congress on Medicare reimbursement, said the problem is not in the amount of money plans are getting, but how they are getting it. Health plans are reimbursed based on a complex formula that may not reflect their true cost of providing medical care to chronically ill patients, or to patients who live in high-cost areas.

"My recommendation is to really try to deal with it on point, as opposed to just paying more," Wilensky said.

Meanwhile, HMOs feeling the financial pinch have tried to put the squeeze on doctors to charge them less for taking care of seniors. Many doctors are refusing. In Massachusetts, hundreds of physicians this year are declining to sign up with HMOs to care for seniors, saying the payments they get from HMOs are inadequate. Only last week, physicians at Brigham and Women's Hospital said they would sever their contract with Harvard Pilgrim's First Seniority HMO for seniors, forcing hundreds of seniors to find new coverage or give up their doctors.

"Doctors are saying we won't take this anymore," said Stuart Altman, a health policy professor at Brandeis University. "These managed care plans are faced with the need for more revenue. Something has to give. Either we come up with a better payment structure from the government, or health plans are going to be a lot less generous and/or individuals will have to pay a lot more."

Meanwhile, all agree seniors will continue to bear the brunt of the market turmoil.

For Sicotte and many others losing their HMO coverage, the options are limited. Many will have to return to traditional Medicare coverage, which pays only 80 percent of doctor visits, requires members to meet an annual deductible, and does not pay for prescription drugs. To make up the gap in coverage, Sicotte may have to pay nearly $300 per month for supplemental insurance.

"This has a frighteningly destructive impact on seniors," said Geoff Wilkinson, who heads the Massachusetts Senior Action Council, a consumer advocate group in Boston. "HMOs have lured people in with heavy marketing and now they're dumping them. It's very disrupting for seniors to have to choose a new doctor, to cut off relationships with doctors they've seen for years."

GRAPHIC: PHOTO, GLOBE PHOTO/TERRI CAPPUCCI/Pittsfield's Joseph R. Sicotte: "I'm high and dry. I don't know what the problem is. We're human; we're people just like everyone else."

LANGUAGE: ENGLISH

LOAD-DATE: August 04, 1999
 
 

SECTION: ECONOMY; Pg. D5

LENGTH: 417 words

HEADLINE: 2,300 more seniors lose HMO coverage;
Groups of doctors drop Harvard's First Seniority

BYLINE: By Ale Pham, Globe Staff

BODY:

   In the latest of a series of upheavals for seniors enrolled in once-popular health maintenance organizations, about 2,300 seniors in central Massachusetts have learned they will have to search for new insurance coverage on Jan. 1.

The seniors, enrolled in Harvard Pilgrim Health Care's First Seniority HMO, join a growing pool of displaced elders nationwide who have signed up for HMOs only to find themselves dropped by either the health plan or their physician.

In this case, it is the doctors who have bailed.

Physicians at Tri-County Medical Associates and Tri-River Family Health Center along with Milford-Whitinsville Regional Hospital in Milford have announced they will no longer care for seniors enrolled in First Seniority as of next year.

The hospital and physicians cite "substantial losses" from caring for First Seniority patients, coupled with declining reimbursement from Harvard Pilgrim.

"With the losses, we didn't see how we could remain viable," said Mary Layman, executive director for development at Milford-Whitinsville, a 115-bed hospital.

Numerous physician groups and HMOs have announced similar decisions to drop their Medicare HMO business in recent months, citing inadequate reimbursement from the federal government.

Most recently, physicians affiliated with Massachusetts General Hospital and Brigham and Women's Hospital announced plans to drop First Seniority patients.

All told, more than 28,600 seniors in Massachusetts will have to find new insurance coverage or switch doctors within a year's time.

The American Association of Health Plans, an HMO industry group, has predicted that as many as 250,000 elderly and disabled patients nationwide will be affected by such moves.

The changes have hit Harvard Pilgrim especially hard, with the Brookline-based health plan about to lose about 40 percent, or 400 primary care physicians out of 1,000, of its network of doctors who accept First Seniority.

"Health plans, physicians, and hospitals are all operating in an environment where there is simply not enough money to cover costs due to inadequate reimbursement by the federal government," said Patti Embry-Tautenhan, a spokeswoman for Harvard Pilgrim.

For seniors, however, the turmoil means having to uproot potentially longstanding relationships with physicians or return to traditional Medicare coverage, an option that would cost seniors thousands of dollars more because Medicare pays only 80 percent of most medical bills.

LANGUAGE: ENGLISH

LOAD-DATE: August 11, 1999
 
 

SECTION: Business; Part C; Page 4; Financial Desk

LENGTH: 275 words

HEADLINE: MARKET SAVVY;
SAVVY CONFIDENTIAL: A BRIEFING FOR INVESTORS;
HEALTH-CARE MUTUAL FUNDS STILL WEAK PERFORMERS

BYLINE: Paul J. Lim
 

BODY:
      Despite a recent recovery in drug stocks--highlighted by news Wednesday that two of the industry's biggest players, American Home Products and Warner-Lambert, are thinking of merging--shareholders of health-care sector mutual funds continue to suffer.

While the average U.S. diversified stock fund is up more than 10% year to date through Tuesday, the typical health-care fund is down nearly 2%, according to the Chicago fund-tracker Morningstar Inc.

Take out the performance of four funds that invest exclusively in biotechnology companies, including the Rydex Biotechnology fund--which is up more than 34.2% in 1999--and the performance of these sector funds is significantly worse.

Part of the problem is that despite the 19% rise in drug stocks since Aug. 11, the Standard & Poor's index of drug stocks is still off nearly 4% since the beginning of the year. And nearly half of the average health-care fund's assets are tied up in drug stocks.

As of the end of July, 80% of health-care funds held Warner-Lambert stock, while two-thirds of the funds owned shares of American Home Products.

Also dragging down the performance of these funds has been the continuing woes of health-maintenance organizations, or HMOs, whose shares are off more than 13% since the beginning of the year. They're down nearly 30% since hitting their highs on June 16.

And while biotechnology stocks are up nearly 40% for the year, making them one of the best-performing sectors in 1999, the average health-care fund has only a modest stake in biotech. What's more, since peaking on Sept. 9, the AMEX biotechnology index has skidded more than 12%.

LANGUAGE: English

LOAD-DATE: November 4, 1999
 
 

SECTION: Business; Part C; Page 2; Financial Desk

LENGTH: 552 words

HEADLINE: CALIFORNIA;
COURT BACKS MEDICARE ENROLLEES' HMO SUITS

BYLINE: DAVAN MAHARAJ and SHARON BERNSTEIN, TIMES STAFF WRITERS
 

BODY:
      A California appeals court ruled Tuesday that Medicare recipients may sue their health maintenance organizations for punitive damages in state court for denying referrals, tests or certain treatments.

Until the ruling, there had been no appellate decision on whether Medicare enrollees living in California could sue their HMOs in state court. A number of such cases were dismissed on grounds that the federal Medicare law precluded complaints at the state level, and then plaintiffs could sue only for actual damages--the value of services denied.

But the 4th Appellate District Court in Santa Ana ruled that while the federal law applies in many cases, consumers who wish to use the quicker state court process may do so in certain cases.

The ruling comes at a time when Congress is debating whether to give more patients the right to sue managed-care plans.

"This is a fabulous victory for California's Medicare enrollees," said Carol Jimenez, who represented the plaintiff in the case. "It will open up the gates for people to sue when they are denied treatment."

Tuesday's decision grew out of an Orange County case in which a retired Costa Mesa businessman alleged that PacifiCare Health Systems Inc. of Santa Ana and its physician provider group, Greater Newport Physicians Inc., had engaged in fraud and unfair business practices when it denied him a referral for a lung transplant.

George McCall, who suffered from progressive lung disease and has since died, said in his suit that PacifiCare denied him important treatment and repeatedly refused to refer him to a specialist for a transplant.

McCall sued PacifiCare, its medical group and his pulmonologist, alleging fraud and negligent infliction of emotional distress. Last summer, an Orange County Superior Court judge dismissed the suit, holding that it was precluded by the federal Medicare Act.

But writing for the unanimous court, Judge William Bedsworth said federal appeals courts have held in recent cases that claims that do not merely seek reimbursement for Medicare benefits can be filed in state courts.

The appellate panel reversed the Orange County judge's dismissal, allowing McCall's widow, Barbara, to proceed with the suit.

PacifiCare would not comment on the decision, saying that company executives had not yet read it.

"This case has huge ramifications," said Russell Balisok, a Los Angeles lawyer who argued the appeal for McCall, who accused HMOs of underpaying doctors as a way to pressure them to provide less costly care to enrollees.

Jamie Court, a consumer advocate whose organization, Consumers for Quality Care, monitors and participates in legal cases involving managed care, said the decision will make it easier for seniors to demand better access to specialists and treatments.

But the trade group representing the state's managed-care companies cautioned that in the end, health-care premiums would go up if more people were allowed to sue.

Plaintiffs "can potentially win large amounts and the rest of us have to pay for it," said Walter Zelman, who heads the Sacramento-based California Assn. of Health Plans.

Barbara McCall said in a statement that she "hopes that today's ruling means that HMOs will no longer be able to get away with the things they did to George."

LANGUAGE: English

LOAD-DATE: August 18, 1999
 
 

SECTION: ECONOMY; Pg. E1

LENGTH: 341 words

HEADLINE: Insurer urges open Medex enrollment

BYLINE: By Ale Pham, Globe Staff

BODY:

   Seniors stranded by their Medicare health maintenance organizations would be able to sign up for Medicare supplemental insurance from Blue Cross and Blue Shield of Massachusetts next month under a proposal the health insurer presented to state officials yesterday.

The voluntary move would give seniors a chance to buy supplemental insurance outside of the normal open enrollment period, which typically runs from Feb. 1 to March 31 for coverage beginning in March.

Under the Blue Cross proposal, which requires approval from state regulators, seniors would be able to sign up between Oct. 1 and Nov. 30 for coverage effective Jan. 1, when several Medicare HMOs are scheduled to abandon several Massachusetts counties.

All seniors eligible for Medicare would be allowed to sign up for Medex, Blue Cross's supplemental insurance, which pays medical bills not covered by traditional Medicare.

The proposal is not expected to run into regulatory roadblocks, despite state rules that require Blue Cross to give the state a 60-day notice and consumers a 30-day notice before opening enrollment for Medex.

The state's Insurance commissioner yesterday drafted emergency regulations that would waive the requirements. "I would not expect a problem," said state Insurance Commissioner Linda Ruthardt, who earlier this month authorized an open enrollment period in the five counties specifically being dropped by Medicare HMOs. The Blue Cross open enrollment would be statewide.

The invitation to join Medex will be costly, however. Under rate hikes proposed earlier this week by Blue Cross, seniors would pay $312.08 a month next year for Medex Gold, a supplemental insurance policy that pays for unlimited prescription drugs as well as hospital deductibles and copayments.

"Open enrollment is fine, but it's becoming tougher and tougher for people to have insurance," said Phil Mamber, a member of the Massachusetts Senior Action Council, a patient advocate group in Boston. "There are seniors who can't afford it now."

LANGUAGE: ENGLISH

LOAD-DATE: September 24, 1999
 
 

SECTION: ECONOMY; Pg. C1

LENGTH: 800 words

HEADLINE: New Blue Cross plan in peril;
Partners won't participate

BYLINE: By Ale Pham, Globe Staff

BODY:

   In a battle between two of the state's health care titans, Partners HealthCare System Inc. is refusing to participate in a new product now being rolled out by Blue Cross and Blue Shield of Massachusetts, the state's largest health insurer.

The product, called Access Blue, is being heavily marketed by Blue Cross as a health plan that requires no referrals for visits to specialist physicians. Blue Cross had high hopes for Access Blue, estimating that 150,000 patients would enroll in the product within five years.

But without Partners, the region's biggest hospital network, Blue Cross would lose a major selling point - the ability for Access Blue patients to use Partners facilities, including Massachusetts General Hospital, Brigham and Women's Hospital, Faulkner Hospital, Newton-Wellesley Hospital, and North Shore Medical Center, among others. In addition, Access Blue patients will not be able to see more than 900 primary care physicians affiliated with Partners.

Other hospitals throughout the state are considering following the lead of Partners, a move that could spark a nasty legal battle and cripple Blue Cross's plans to successfully draw employers and patients to Access Blue, the insurer's first big new product in years.

Ten days ago Partners notified Blue Cross of its decision to defer for at least one year its participation in Access Blue, said Ellen Zane, president of Partner Community Health Care Inc., a subsidiary of Partners.

"We like the idea of eventually participating in products like this, but we have issues with the design of this particular product," Zane said. "That's why we've deferred our participation. We believe it has design flaws."

Blue Cross said Partners and other hospitals don't really have a choice; all providers in HMO Blue are automatically part of Access Blue, like it or not.

"We don't believe Partners has a legal right to decline," said John Schoenbaum, a spokesman with Blue Cross. "We are going to explore the basis for their concern and hope we can help them resolve those concerns."

Blue Cross began selling Access Blue last month to employers. Members would not need referrals to see specialists, and premiums for Access Blue would be "comparable" to those of HMO Blue, the company's main managed-care plan. To discourage patients from seeking unnecessary specialty care, Access Blue would charge a $30 copayment, roughly three times the typical physician copayment. Members of Access Blue would be able to see 7,500 specialists in its network, Blue Cross promised.

But with Partners leading the way, other hospitals and doctors are beginning to balk at the plan, threatening to unravel Blue Cross's network of health care providers.

"We're beginning to hear from several hospitals raising concerns about this new Blue Cross product," said Andrew Dreyfus, spokesman for the Massachusetts Hospital Association.

"We have some very serious concerns about the way this is being put forward," Paul Taylor, a spokesman for South Shore Hospital in South Weymouth, said of Access Blue. He declined to elaborate, citing ongoing negotiations with Blue Cross.

Blue Cross's position that hospitals in its HMO network are required to participate in Access Blue may throw it headlong into a legal battle with providers.

Dreyfus declined to say whether legal action was imminent, saying only that the hospital association's lawyers were "looking at legal issues raised by this new product."

Partner's complaints regarding Access Blue are fourfold, according to sources familiar with the dispute.

First, payments from Blue Cross would be relatively low, raising fears that Partners hospitals could not recoup expenses related to caring for Access Blue patients. Because Access Blue members are allowed to see specialists virtually without restraint, Partners believes its cost of caring for these members could be inordinately high.

Second, Access Blue could siphon off patients in well-paying traditional fee-for-service plans that allow members open access to all physicians and doctors. Generally, fee-for-service payments are most generous, while HMO payments are lowest. Access Blue would pay hospitals at HMO levels.

Third, Partners doctors would be on the hook for collecting the $30 copayments. Physicians have historically had a very difficult time getting patients to make copayments.

Finally, hospitals fear Access Blue is not a viable product because high medical expenses would soon outstrip the plan's low premiums.

Blue Cross vigorously defended its new product.

"We put a lot of time and thought into the design of Access Blue. We consulted with experts and we listened to consumers," said Schoenbaum. "We think it will be a successful product for us and for providers."

LANGUAGE: ENGLISH

LOAD-DATE: September 09, 1999
 
 

SECTION: ECONOMY; Pg. E1

LENGTH: 792 words

HEADLINE: Market's new worry: lawsuits;
Analysts believe wave of litigation just beginning;
BOSTON CAPITAL / STEVEN SYRE/CHARLES STEIN

BYLINE: By Steven Syre and Charles Stein, Globe Staff

BODY:

   Investors already have plenty to worry about: inflation, rising interest rates, a weak dollar, Y2K.

Here's a new aggravation to add to the list: a wave of major lawsuits. The suits, modeled after the tobacco litigation, have just been filed against health maintenance organizations and the makers of lead paint. In both cases stocks in the affected industries tumbled sharply after the news broke.

Maureen Allyn is not the only person on Wall Street who thinks there may be more to come.

"It is a threat that could be extended to a lot of different industries," says Allyn, chief economist at Scudder Kemper Investments. "As shareholders we ought to be taking this issue seriously."

The suits can be thought of as spinoffs of the tobacco lawsuits. When those suits were settled, the tobacco companies agreed to pay $246 billion over a period of years. Most of the money went to the states, but a chunk of it went into the pockets of a small group of law firms.

Emboldened and enriched by their success, the lawyers have gone out in search of new dragons to slay.

"These lawsuits are a growth industry," says Dan Troy, a lawyer affiliated with the American Enterprise Institute in Washington, a conservative think tank. "These firms are investing and developing new causes of action. It is a rational business model."

The HMOs may have a different opinion. Two of the nation's largest publicly traded HMOs, Humana and Aetna, were hit with class-action lawsuits earlier this month. As a group, HMOs are only slightly more popular than tobacco companies. Doctors and patients have complained - often on the basis of anecdotal evidence - that HMOs give priority to profits rather than patient care; Congress is contemplating giving patients the right to sue HMOs for bad care.

The lawsuits don't deal directly with medical questions. Instead they accuse the HMOs of failing to disclose financial incentives aimed at reducing cost. The HMO industry says the suits have no merit.

"Trial lawyers go for deep pockets," groused Richard Huber, Aetna's chief executive, after his company was targeted. Many analysts think the lawyers will have trouble making the suits stick.

Still, no one can say for sure what will happen, and on Wall Street, uncertainty is trouble.

"Until we get some clarity, I think the attitude of some investors will be, 'I don't need to own these stocks,' " says Linda Miller, manager of John Hancock's Global Health Sciences Fund.

Rhode Island last week went after another potential deep pocket - the former makers of lead paint. In a suit filed against a group of companies, the state is seeking to recover the cost of providing health care to victims of lead poisoning. The suit also demands that the corporations pay to strip lead paint from private and public buildings in Rhode Island, a big job, even in a little state.

The lead-paint suit is being financed by a South Carolina law firm, Ness Motley, that was active in the tobacco litigation. If Rhode Island prevails, the law firm will get a portion of the winnings. The day after the suit was announced, the stock price of one paint maker, NL Industries, lost 15 percent of its value.

Business executives aren't the only ones alarmed by the latest wave of lawsuits. Judyth Pendell, director of the Center for Legal Policy at the Manhattan Institute, another conservative think tank, argues that the suits represent an attack on the separation of powers laid out in the Constitution.

"You are transferring to the courts matters that should be decided by regulators or people in legislatures," she says.

On the political front, the issue could turn out to be a major point of contention between the presidential candidates. Democrats tend to be sympathetic to trial lawyers; Republicans generally are in favor of tort reform that would limit the impact of suits.

For investors, the problem is more practical: How can you be sure that one of the stocks in your portfolio won't be the target of a lawsuit?

Dan Troy, no friend of trial lawyers, suggests investors could be in for a rough time.

"The list of potential suits is almost endless," he warns. "Guns, foods, alcohol - almost any business that entails risk on the part of the consumer. This is a very dangerous development for American business. It means their fate could depend on the whims of an individual jury."

The Red Herring

Moving up: Affiliated Managers Group Inc. of Boston yesterday promoted Sean Healey to president and chief operating officer. Healey, who had been an executive vice president, takes over the titles held by chief executive Bill Nutt. AMG holds stakes in 15 investment firms with a combined $74 billion in assets under management.

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LOAD-DATE: October 20, 1999
 
 

SECTION: Section A; Page 1; Column 6; Business/Financial Desk

LENGTH: 1253 words

HEADLINE: BIG H.M.O. TO GIVE DECISIONS ON CARE BACK TO DOCTORS

BYLINE:  By MILT FREUDENHEIM

BODY:
   The United Health Group said yesterday that it was returning decision-making power over patient care to physicians, breaking with a longstanding element of managed care that has infuriated many doctors and frustrated their patients.

United, one of the nation's biggest managed care companies, said that a patient's doctor would be able to decide without the insurer's interference whether to admit health plan members to a hospital or provide other treatment.

That does not mean the company, which is based in Minneapolis, is giving up cost controls. The company will still review decisions after the fact and urge doctors not to exceed certain averages. When persuasion does not work, doctors can be dismissed from the company's network of approved physicians -- thus forcing patients to transfer to other doctors -- but the company said that sanction was rarely used.

United, which insures 14.5 million people, including 8.7 million in health maintenance organizations and other managed care units, said the rules were being phased in nationally. United has 1.1 million members in New York, New Jersey and Connecticut.

With the decision, United, which said it approves 9 out of 10 care decisions anyway, will save about $100 million, much of which will be spent elsewhere. It also gets a chance to smooth relations with doctors and patients, attract more customers and perhaps avoid some future legal liability as health plans battle a backlash against managed care in Congress and the states and a series of class-action lawsuits. Those suits generally contend that managed care companies misrepresent that clients are getting the best possible care when in fact, the suits say, the cost of care is the determining factor.

The announcement by United is one of several changes by insurance companies that analysts attribute to the backlash. United, Aetna Inc. and several Blue Cross plans have separately offered their members the right to appeal denials of care to an independent panel outside the company. Such panels would be required in the Congressional measures and are already required in 30 states, including New York.

And several big nonprofit H.M.O.'s, like Kaiser Permanente, based in California, and Harvard Pilgrim in Boston, have long relied on doctors to decide when care is considered medically necessary.

Other managed care companies declined to comment on the United announcement, which was reported yesterday in The Dallas Morning News. Spokeswomen for Oxford Health Plans, Aetna U.S. Healthcare, and Empire Blue Cross said they had not seen United's official account.

Physicians and consumer advocates hailed United's move yesterday.

"It's a response to the consumer and political backlash," said Ken Jacobsen, a health care expert in New York at the Segal Company, a consulting firm. "This is a big, significant step."

Explaining its decision to stop requiring doctors to get prior approval for care, United said it was "no secret that state and federal lawmakers want to put an end to much of this practice."

But officials of the American Association of Health Plans, a managed care trade group in Washington, disagreed that the changes being made by health plans were prompted by developments like the "patients' rights" legislation that is awaiting action by a Senate-House conference committee. Provisions include the right to sue health plans for medical malpractice, the right to appeal denials of care to independent review panels and guaranteed access to specialists.

Susan Pisano, a spokeswoman for the trade groups, said the United announcement was "the next stage in the evolution of health care, the edge of a wave of change."

John Stone, a spokesman for Representative Charles Norwood, Republican of Georgia, who sponsored the House bill, said that managed care companies that turned over medical decision-making to physicians would not be liable to medical malpractice lawsuits under the bill.

Republican leaders in the House and insurance company lobbyists have argued that the right to sue the companies would increase costs for health plan members. But Mr. Norwood said in a statement yesterday that his bill would "very likely result in lower costs." He said, "the best care in the long run is less expensive than cutting corners."

"This action is historic," said Dr. Thomas Reardon, president of the American Medical Association. He said it was "a long overdue victory for American patients and the care they receive."

Jeffrey Roth, a Manhattan dermatologist, said the change would "help re-establish a sense of trust between the insurers and the doctors" and reduce burdensome paperwork in doctor's offices that they denounce as "the hassle factor."

Health care experts and critics of managed care said the prior review system had outlived its usefulness and was actually costing the companies more than they saved. "This is a confession that H.M.O. bureaucrats cost more than they save," said Jamie Court, a spokesman for the Foundation for Taxpayer and Consumer Rights, an advocacy coalition.

Wall Street investors reacted to the news by driving United Health Group stock up $2.375 yesterday, to $54.9375.

Robert Hoehn, a health care analyst with ING Barings, said that the higher stock price may reflect the belief of traders that the new policy would give United "an advantage over other companies in terms of marketing" and "further insulate them from the risk of litigation."

Dr. Archelle Georgiou, chief medical officer of the United Healthcare unit of the company, said that it had been spending $100 million a year to respond to requests for approval of care, which were almost always granted.

Some of the money saved will go toward programs for patients, she said, like telling patients what to expect in the hospital and keeping tabs on them so they get appropriate care promptly and can return home.

The company will still track doctors' decisions after they are made and urge physicians who exceed the average costs on certain types of health care to bring their practices in line. "When we are talking to physicians and not calling to deny a service, they are so much more willing to listen," Dr. Georgiou said.

"Doctors will still have to be mindful of economic outcomes," Mr. Jacobsen, the consultant said.

Like other health care companies, United will still negotiate discounts on payments to doctors and hospitals. And it will continue to try to minimize expensive hospital stays by reminding members with chronic ailments like asthma, diabetes and congestive heart failure to take their medication and closely follow their doctors' orders.

Mr. Hoehn, the analyst, said that managed care had succeeded in bringing health costs down. Fifteen years ago, he said, reviews like those being dropped by United played an important role in holding down costs. "Now quality and access to care are taking precedence," he said, as prior reviews could no longer show savings.

Dr. Lee Sacks, a family physician in Oak Brook Ill., said he was "encouraged that United is trying to figure out how to work with physicians and patients to provide the best care." Dr. Sacks, a senior executive of Advocate Health Care, a group of 2,700 doctors, said that previously United had approved the group's requests for prior approval of care "in 99 out of 100 cases."

Helen Darling, a senior health care consultant with the Watson Wyatt consulting group, said that "health plans, for the most part, are approving everything."

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LOAD-DATE: November 9, 1999
 
 

SECTION: MONEY; Pg. 1B

LENGTH: 1337 words

HEADLINE: Prescription for problems Insurance contracts mean some doctors foot bill for patients' drugs

BYLINE: Julie Appleby

BODY:
   Doctors may have to change their profession's creed from "first,
do no harm," to "first, write as few prescriptions as possible."
 

That's what some fear as insurers increasingly require doctor
groups to share the expense of providing prescription drugs.
 

The idea is simple, but controversial: Control rapidly rising
drug spending by giving doctors financial incentives to prescribe
the lowest-cost, most effective medications. Here's how it works:
Doctors agree to accept a flat monthly fee ranging from as little
as $ 9 to more than $ 15 per patient enrolled in their practices.
That money is used to pay for medications needed by the group
of patients.
 

Insurers pay the fee to doctors even if their patients use no
drugs at all that month. If the spending for all patients in the
group is less than the payment, the doctors make a profit. If
the total spending goes over, it costs the doctors.
 

"It makes the physicians stakeholders in the process," says
Glenda Owens, spokeswoman for Prescription Solutions, a pharmacy
management subsidiary of insurer PacifiCare.
 

Yet bonuses, penalties and other financial incentives worry lawmakers
and consumer groups, who say putting doctors at risk of losing
money because they're writing prescriptions creates an ethical
dilemma. Some doctors agree.
 

"You're wondering, 'Well, should I give them this medicine? If
I give them this medicine, I could lose money.' You shouldn't
be thinking that way," says Richard Hubner, a solo practitioner
in Springtown, Texas, who has stopped accepting such pharmacy
contracts at his office. But refusing the contracts can be a gamble,
some doctors say, because they risk being dropped from the insurance
plan and losing patients.
 

Despite the controversy, pharmacy risk-sharing contracts are on
the rise. Nationwide, about one-third of health maintenance organizations
(HMOs) polled for the 1999 Novartis Pharmacy Benefit Report said
they offer such financial incentives, up from 24% in 1996.
 

"In the Midwest, it's picking up steam, and on the West Coast,
it's a given," says Bill DeMarco of DeMarco & Associates
in Rockford, Ill., a consulting firm that works with doctors groups
and insurers. "In the Northeast, it's not as popular."
 

Supporters hail cost cuts

Pharmacy payments to doctors are generally in addition to the
set monthly fees, called "capitation" payments, that many physicians
already accept from insurers. Out of those monthly fees, the doctors
are expected to provide most medical care.
 

About 36% of all doctors nationwide accept capitation payments,
according to the American Medical Association. In some states,
such as California, the majority of doctors accept such fees for
all or some of their patients, instead of being paid "fee-for-service,"
that is, a payment for each visit or procedure.
 

Supporters say preset monthly payments encourage doctors to keep
patients healthy, while avoiding unnecessary tests or procedures.
Pharmacy contracts also encourage doctors to shift patients to
generic substitutes and to cut down on the overuse of antibiotics,
supporters say.
 

"In general, patients have been pressuring physicians to write
prescriptions for things they don't need," PacifiCare's Owens
says.
 

Some doctor groups have done quite well with pharmacy contracts
-- if they pay close attention to their expenses and the contract
language itself, consultant DeMarco says.
 

He doesn't think capitation contracts are necessarily less ethical
than paying doctors for each visit or procedure, which critics
say encouraged overuse of tests, drugs, surgery or office visits.
 

"The ethical argument is an assumption that in fee-for-service,
physicians always do the right thing for their patients," DeMarco
says. "That's not a correct assumption."
 

But critics fear capitation incentives could lead doctors to skimp
on medical care, prescriptions or referrals to expensive specialists.
 

Some doctors losing big bucks

Initially, many doctor groups wanted to share financial risk with
insurers, believing it would return some of the control they felt
insurers had wrested from them.
 

The doctors expected to limit costs and come out ahead. Yet medical
groups in heavily managed care states such as California are now
struggling -- and many blame capitation arrangements for their
predicament.
 

Even medical groups that are doing well financially say that it
is hard to break even when sharing pharmacy costs with insurers
because prescription prices are rising and new, expensive drugs
are constantly coming on the market.
 

Others complain that the amounts paid by insurers are too low.
 

Family practitioner Mike White saw his Joshua, Texas, practice
lose $ 50,000 over 10 months because his prescription-writing exceeded
the $ 11 a month per patient paid to him by Harris Methodist, an
insurer based in Arlington, Texas. The other six doctors in his
small group lost an additional $ 35,000.
 

Even with more than 1,200 Harris patients enrolled in his practice,
expenses exceeded the monthly payment, White says. All it took
was a few patients with severe chronic illnesses to bump him into
the red.
 

White says he had one patient recovering from a kidney transplant
who needed $ 1,000 a month of a prescription anti-rejection medication.
Three cancer patients needed about $ 500 worth of monthly drugs
each. Other patients with chronic illnesses -- diabetes, hypertension,
depression and attention deficit disorder -- added to the monthly
tab.
 

On top of those expenses came drug costs for new diagnoses, along
with medication charges incurred when White referred patients
to specialists, such as cardiologists.
 

"For every dollar we went over budget, we wrote them (insurer
Harris) a check back for 30 cents," White says. "That's supposed
to make you modify your behavior or give cheap drugs to patients.
I wouldn't do that. But if I'm taking care of my patients, I don't
want to worry (about) going in the hole by providing good care."
 

In California, the 130 doctors in the Beaver Medical Clinic in
Redlands had to return a total of $ 1.6 million to insurers last
year because they went over their pharmacy budget. Another southern
California medical group sued insurers, claiming their pharmacy
contracts were unfair, after it lost $ 2.5 million one year.
 

The California Medical Association, the doctors' lobbying group,
backed unsuccessful legislation that would have made it difficult
for insurers to continue offering pharmacy contracts. The CMA
also wanted lawmakers to increase capitation payments, the flat
monthly fees made to doctors.
 

In Texas, White and other doctors got their money back after the
state's Department of Insurance fined Harris Methodist $ 100,000
last summer for allegedly violating a state law that bars insurers
from using financial incentives that might encourage doctors to
limit care.
 

"Our position was that because the pharmacy budget was so low,
it was going to operate as an incentive to limit medically necessary
services," says Janet Dewey, staff lawyer for the Texas Department
of Insurance.
 

As part of the settlement, Harris Methodist also agreed to refund
$ 3.4 million in physician penalties and rewrite its pharmacy contracts.
A Harris spokesman declined to comment because the company is
in the process of being sold.
 

With drug spending rising rapidly each year -- double-digit annual
increases for most insurers -- and pressure on insurers from consumers
to limit premium increases, pharmacy contracts aren't likely to
go away.
 

"We don't have an unlimited amount of money," says Owens, speaking
of the health care industry. "There are just so many dollars
to go around."
 

But scrutiny and opposition will continue.
 

"It's unethical," says family practitioner Hubner. "It puts
us in a position of choosing to make money by denying people care.
That doesn't go with being a physician."
 

GRAPHIC: PHOTOS, Color, Shelly Katz for USA TODAY (2); PHOTO, B/W, Shelly Katz for USA TODAY; Costly work: Dr. Mike White, third from left, saw his practice lose $50,000 in 10 months on drug costs. The other six doctors in his group lost $35,000. Other members of Family Medicine Associates, from left, nurse Ava Land, student Jay York and Dr. Robert Miller.

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LOAD-DATE: September 23, 1999
 
 

SECTION: BUSINESS, Pg. 12B

LENGTH: 489 words

HEADLINE: FORUM TO TACKLE HEALTH-CARE COST, QUALITY ISSUES

BYLINE: CHET BRIDGER; News Business Reporter

BODY:
 

How does a community find the delicate balance between unlimited quality health care and limited resources?

Local and national medical experts will grapple with this sticky issue confronting Western New York and most other American communities during a forum in Buffalo Nov. 17.

The lineup is loaded with headline speakers including Nancy Snyderman, medical correspondent for ABC's Good Morning America and 20/20; Michael Millenson, a principal with the health benefits consulting firm William M. Mercer and author of "Demanding Medical Excellence," and nationally syndicated columnist George Will.

Leaders of Buffalo's three largest hospital networks and heads of the local health maintenance organizations will match wits in panel discussions moderated by Lewis Mandell, dean of the School of Management at the University at Buffalo.

The event is presented by the Independent Health Foundation. Joanne Way, executive director of the foundation, said the forum is designed to improve the dialogue between area hospitals and doctors which provide care, businesses which pay for care through health benefits, and insurance companies which manage care.

"We can work closer together instead of blaming each other. This whole thing is designed to open up a dialogue," Way said.

Much of the dialogue between local hospitals, insurance companies and consumers has been angry over the last two years.

Hospitals have struggled to balance budgets with shrinking Medicare reimbursements and negotiated contracts from health maintenance organizations. Insurance companies have tried to answer the business community's call to hold down health care premiums by controlling utilization.

Those moves by insurance companies to limit members to restricted networks of doctors, hospitals and pharmacies have spawned consumer backlash.

Millenson believes many answers lie in improving health care quality. He cites recent studies by the Institute of Medicine and a presidential advisory commission on health care which show vast discrepancies in the quality of care being provided.

"In health care, we haven't looked at improving value yet," Millenson said. "What we have here is a situation where the public believes every provider is equal, and they're not."

He believes effective performance measurement, such as New York State's effort to grade the quality of coronary bypass surgery being conducted in hospitals, will begin driving efficiency into the marketplace.

"Once we have effective performance measurement, then I think people will begin demanding better care," Millenson said.

Members of the community can learn more about the forum and submit questions for the discussion at www.wnyhealthforum.com. The event will be held from 8 a.m. to 5 p.m. Nov. 17 in the Adams Mark Hotel downtown. The forum is open to the public and tickets cost $ 80, which includes continental breakfast, lunch and refreshments.

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LOAD-DATE: November 2, 1999
 
 

SECTION: Section C; Page 8; Column 1; Business/Financial Desk

LENGTH: 448 words

HEADLINE: Hospital to Form Venture With Consultants

BYLINE:  By JENNIFER STEINHAUER

BODY:
   The First Consulting Group, a health care consulting firm, plans to form a venture with New York Presbyterian Hospital to run the hospital's information-technology and telecommunications departments, executives said yesterday.

Under the terms of the agreement, which will be announced today, the hospital will pay First Consulting $228 million to manage its information technology under a new unit, FCG Management Services, of which the hospital will own 15 percent.

The deal, which will almost double First Consulting's revenue on paper -- payments will be made in installments during the next seven years -- is less significant in dollar terms than the trend it represents: health care networks turning their increasingly complicated technical functions over to other parties.

As managed care has increased paperwork, hospital administrations have been strained. People with the necessary expertise tend to gravitate toward higher-paying industries. "As a nonprofit health institution, we found it difficult to attract good business-planning people," said Louis F. Reuter, an executive vice president at New York Presbyterian, who added that many of the best people left for companies that could offer perks like stock options.

Other hospitals are almost sure to form similar deals or contract out their information-technology departments, health care experts said. "The hospitals are behind the times in many respects in their technical abilities," said Henry S. Moyer, who heads the Moyer Group, a benefits consulting firm in New York.

Hospitals, hurt in recent years by cuts in Medicare reimbursements and by managed care plans, have not invested as much as they needed to, the experts said. What is more, while many hurried to correct any Year 2000 computer problems earlier in the year, they have since slowed investments in that area. That has hurt companies like First Consulting, whose stock has been somewhat volatile. Its shares rose 56.25 cents yesterday, to $10.1875, well under its 52-week high of $25 in January.

"Hospitals have really hunkered down, and there was a significant drop-off in their spending," said James Ackerman, an analyst at Friedman, Billings, Ramsey & Company in Arlington, Va. New contracts like this one would strengthen the earnings picture for First Consulting, he added.

Luther J. Nussbaum, the chief executive of First Consulting, which is based in Long Beach, Calif., said that the joint venture with New York Presbyterian signaled the direction he hopes to take his company in. "This is a very important venture for us," Mr. Nussbaum said. "Going forward, we see this as the beginning of a trend for the industry."

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LOAD-DATE: November 9, 1999
 
 

SECTION: Section 3; Page 2; Column 3; Money and Business/Financial Desk

LENGTH: 190 words

HEADLINE: PRIVATE SECTOR;
Soft Words, Tough Words

BODY:
   There is a soft side and a hard side to Richard L. Huber, Aetna's chief executive, both recently in evidence.

The soft side: "Here we are in probably the most unprecedented period of prosperity this nation has ever had, and there are still numerous pockets of poverty," he said after serving as a host to President Clinton in Hartford, where Aetna is based, last Thursday. The president was there promoting inner-city economic development. Mr. Huber has moved into a gritty neighborhood, fixed up surrounding buildings and attracted scores of other residents.

The hard side: "I wonder what Mr. Slugs does when he gets home and looks at the mirror," Mr. Huber said in an interview just published in MCO Executives Online. He pointedly mispronounced the name of Richard Scruggs, a lawyer working on patients' suits against Aetna and other managed-care providers. "You know what he does for personal enrichment is to make vital services and goods more expensive." Mr. Huber's comment that another lawyer is a "skillful ambulance chaser" prompted a defamation suit. "I thought 'skillful' was complimentary," he said last Friday.

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LOAD-DATE: November 7, 1999
 
 

SECTION: Section C; Page 5; Column 1; Business/Financial Desk

LENGTH: 418 words

HEADLINE: Health Insurer Shares Fall on Threat of Suits

BYLINE:  Bloomberg News

DATELINE: HARTFORD, Sept. 30

BODY:
   Shares of Aetna Inc., the United Healthcare Corporation and other major health insurers fell amid reports that trial lawyers were preparing lawsuits on behalf of managed-care patients.

Aetna, the nation's largest health insurer, fell $10.5625, to $49.125, an 18 percent drop. United Healthcare, the No. 2 health insurer, fell $11.50, or 19 percent, to $49.

Lawyers who gained high profiles in tobacco litigation and other cases are preparing to sue managed-care companies and seek class-action status after some large legal judgments against the insurers, The Wall Street Journal reported today. Such lawsuits could hurt companies' ability to control health costs, analysts said.

"People in the investment community have their suspicions that it could be a large negative, but you can't quantify either the potential monetary liability or the time frame," said Greg Crawford, a health care analyst at Fox-Pitt, Kelton. "A lot of this is saber-rattling stuff from the attorneys."

Shares of the Cigna Corporation, the third-biggest health insurer, fell $8.6875, to $78.3125. Pacificare Health Systems Inc. fell $2.4375, to $43.625. The Morgan Stanley Health Care Payer Index, which tracks the performance of big health insurers, fell as much as 10 percent.

Among lawyers working on the suits is Richard Scruggs, who led the litigation against tobacco companies that resulted in a $206 billion settlement, The Journal reported. Also involved is David Boies, the lawyer who is leading the Justice Department's litigation against the Microsoft Corporation, the paper said.

Managed health care plans, like health-maintenance organizations are a form of health insurance in which insurers limit their coverage of doctors, hospitals, procedures, drugs and other parts of health care to hold down costs. Some patients, physicians and consumer groups have complained that the plans go too far in their limitations, putting profit before the well-being of patients.

Industry critics say the health plans skimp on care to improve profits. Employers, however, credit health-maintenance organizations and other forms of managed care with bringing their rising health costs under control while starting to institute measures of quality to compare the performance of health plans.

"What's different about this and tobacco is patients have a great deal to lose if we go away," said Karen Ignagni, chief executive of the American Association of Health Plans, a health insurance industry group.
 
 

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LOAD-DATE: October 1, 1999
 
 

SECTION: Section C; Page 2; Column 1; Business/Financial Desk

LENGTH: 826 words

HEADLINE: Economic Scene;
Rebates could smooth the way for a Medicare reform plan.

BYLINE:  By Michael M. Weinstein;  This is Michael M. Weinstein's final Economic Scene column. He is returning to The Times' Editorial Board.

BODY:
   IS a flawed experiment in redesigning Medicare better than no experiment at all?

No, says Karen Ignagni, who represents managed care plans that are fighting to block demonstrations intended to foster competition. The problem, she says, is that the demonstrations, scheduled to begin in 2001, "leave out the Government's fee-for-service plan, tilting competition unfairly against private plans."

Len Nichols, an economist at the Urban Institute and a member of the committee of independent experts that designed the demonstrations, disagrees. He acknowledges that the proposed competition, at Congress's instruction, is far from ideal. But, he says, the demonstrations "can still yield invaluable lessons for Congress as it ponders a national fix of Medicare."

Private plans and physicians are lined up behind Ms. Ignagni. Economists line up behind Mr. Nichols. Congress is on the verge of siding with the industry, putting the demonstrations on hold. But Mr. Nichols thinks he has a way out of the impasse if Congress acts soon.

Congress ordered the Administration in 1997 to create demonstrations to test ways to make Medicare competitive. The competition that already exists between private managed care plans and the Government's fee-for-service plan is crimped because the Government decides how much to pay private plans. Sometimes it pays too little, driving private plans out of local markets. Sometimes it pays too much, creating waste at taxpayer expense. The demonstrations would use market forces to reveal the right price rather than letting the Government flail about for the right price.

Congress prohibited the committee from subjecting the Government-run plan to competition. That, says Ms. Ignagni, "means that private plans will be paid less than the Government plan, forcing the private plans to crimp on benefits while the Government plan goes unscathed."

"That's unfair competition," she said.

That is no doubt true. The issue that separates Mr. Nichols from Ms. Ignagni is whether the flaw is fatal.

The committee chose Phoenix and Kansas City as the first two demonstration sites. Political opposition exploded. In many regions, the cost of fee-for-service medicine is sky high because doctors are in the habit of prescribing costly drugs, tests and procedures. In these high-cost regions, the Government automatically dishes out more money to private plans. The plans use the revenue windfall to draw the elderly away from the Government plan by offering them additional benefits, like drug coverage and low co-payments.

The plans are delighted with the cozy arrangement. So, too, are their physicians and patients. But the plans are understandably petrified by competitive bidding, flawed or otherwise. Once firms are driven to compete for business by setting low premiums, the largess under the current system could evaporate. The committee's goal is to reduce premiums to a level sufficient to cover guaranteed benefits and not a penny more. That is Ms. Ignagni's worst nightmare.

Mr. Nichols provides a powerful rejoinder to Ms. Ignagni. The demonstrations, he said, "can still reveal how to create vigorous competition among plans and provide an inkling about potential savings from competition." He compares the demonstration to the methods used by major employers to control health care costs. "Take a General Motors that decides to add managed care to its fee-for-service offering," Mr. Nichols said. "It would not think to tie payments to managed care plans to the bloated costs of running fee-for-service. Instead, it would solicit bids. That is what the demonstration proposes to do."

But Mr. Nichols acknowledges that under current law, private plans have too few tools to attract enrollees. Toward that end, the committee met last week and decided to ask Congress to allow plans to offer rebates -- in the form of lower monthly Medicare premiums. Rebates can provide powerful recruiting tools and perhaps give beneficiaries in demonstration sites something tangible if the demonstrations go forward. That could dissolve some of the opposition.

The notion of providing rebates to enrollees who choose low-cost private plans is hardly heretical. It lies at the heart of President Clinton's plan as well as the plan proposed by Senator John Breaux of Louisiana and Representative Bill Thomas of California. The prominence of those plans might soften Congressional opposition to the idea.

It is ludicrous for Congress to overhaul Medicare without first testing its ideas. Yet it looks increasingly clear that political opposition from vested interests will continue to block demonstrations. Last week's initiative by the committee offers a way to convince beneficiaries to become allies rather than opponents of reform. If so, then the Congressional delegations from Phoenix and other demonstration sites might turn a tad less resistant to a first, important step in redesigning Medicare.
 

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GRAPHIC: Drawing (Niculae Asciu)

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LOAD-DATE: September 23, 1999
 
 

SECTION: Section C; Page 2; Column 1; Business/Financial Desk

LENGTH: 960 words

HEADLINE: Economic Scene;
The grading may betoo easy on health plans' report cards.

BYLINE:   By Michael M. Weinstein

BODY:
   NOTHING spurs college students to improve mastery of history or math as does the prospect of getting an F. And the same principle holds true, it seems, for health care plans, opening a huge opportunity for businesses to get better health care for their employees.

The National Committee for Quality Assurance, a nonprofit organization, grades about 400 health maintenance organizations covering about 75 percent of the 80 million patients enrolled in these plans nationwide. The grades, generally based on self-reported, independently audited data, cover each plan's performance on dozens of preventive and treatment measures. The committee recently released its third annual report card, and the trends are revealing.

The percentage of patients given beta blockers to reduce the risk of further problems after heart attacks rose to 80 in 1998 from 62 two years earlier, for example, and the portion of children who received a vaccination for chicken pox before their second birthday increased to 52 percent in 1998 from 40 percent just one year earlier. In nearly all categories, overall scores rose sharply or stayed about the same. Clearly, the students are learning to perform to the test.

Yet the gap in the scores among plans remains huge. The Blue Cross plan in Portland, Me., treated almost 100 percent of its heart attack patients with beta blockers. HIP of New York provided them to only about 54 percent. The Kaiser plan of Honolulu provided eye exams for almost 80 percent of its adult patients with diabetes; the figure for NYL Care of Greenbelt, Md., was only about 7 percent. The Kaiser plan in Denver provided booster shots for measles, mumps and rubella to about 50 percent of its patients by age 13; the figure for the Cigna plan of Cleveland was less than 1 percent.

The disparities should ring alarms among plan members. Performance matters. The National Committee estimates that more than 4,000 lives could be saved annually if the low-performing plans administered beta blockers as routinely as the high-performing plans did. It estimates that 3,000 diabetics could be spared blindness if all health plans provided eye exams as routinely as the best plans did. And there would be almost 60,000 fewer cases of relapse into major depression if every plan managed antidepressant drugs as well as the best plans did, the group calculates.

With the stark results of a national committee's research right there on paper, why hasn't the market weeded out the bad performers? There are at least two reasons.

First, the report cards are woefully incomplete. They grade treatment, not outcomes. Outcomes are what most patients care about; knowing how many breast cancers were caught early and how many women recovered successfully generally matters to them more than how many women received mammograms.

Some plans acknowledge that they can be held accountable for prescribing the right medicines, but they argue that they should not be held accountable for patients' unhealthy behavior, which they do not control. Why should they be penalized, they ask in effect, for asthma patients' refusal to give up their pet cats?

Dr. David Lansky, president of the Foundation for Accountability, a nonprofit organization that designs medical report cards, disagrees with that line of reasoning, however. "Until health plans are held accountable for outcomes," he said, "they are unlikely to take the necessary steps to make sure patients get healthy."

Another reason that health plans balk at producing data on the quality of medical treatment is that collection and analysis can be hugely expensive -- $20,000 or more for each major health problem that researchers want to study.

The National Committee does not focus on outcomes in part because it cannot venture beyond the data that health plans are willing to submit voluntarily. That limitation creates a second problem: few employers pay attention to medical report cards, according to a recent survey by KPMG. In part, that is because incomplete reports provide an unreliable guide to quality. In the survey, over 70 percent of large companies said cost was a major determinant of their choice of health plan, but less than 10 percent said data on the quality of medical care was very important.

Because employers pay little attention to data on medical outcomes, Dr. Lansky said, health plans "see no business advantage in spending the money." So plans do not produce ample report cards because employers do not use them; and employers do not use ample report cards because the health plans do not produce them.

There might be a circuitous way out of this. Some employers and local governments have asked Dr. Lansky's group to go straight to patients to seek information about the performance of their health plans. Data provided by patients, however, present problems of reliability. Also, Dr. Lansky points out that patients can turn to the Internet to solicit reviews of a doctor's treatment of their illness from independent physicians or, perhaps, patients with similar medical problems. Congress could step in, demanding that managed care and traditional fee-for-service plans provide data on outcomes. Workers could demand more information from employers.

Colleges grade students -- an unpleasant, time-consuming process -- because the best ones insist on a concrete record of their performance to show to potential employers or professional schools. In health, the best plans could also be expected to demand grades, providing the necessary data for employers to examine.

But first, employers must demand rigorous data. So far, few have. Health plans can be counted on to learn to the test. But as long as the test remains simple, there will not be much to learn.

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CORRECTION-DATE: August 28, 1999, Saturday

CORRECTION:
   The Economic Scene column in Business Day on Aug. 19 about the grading of health care plans by the National Committee for Quality Assurance included an erroneous report from the committee about the kinds of inoculations received by patients in the Kaiser Permanente plan in Denver and the Cigna plan in Cleveland. The Kaiser plan provided a booster shot for measles, mumps and rubella, three hepatitis B vaccinations and one chicken pox vaccination to about 50 percent of its patients by age 13; the figure for the Cigna plan was less than 1 percent. The figures did not refer solely to shots for measles, mumps and rubella.
 
 
 
 

LANGUAGE: ENGLISH

LOAD-DATE: August 19, 1999
 
 

SECTION: Section C; Page 8; Column 5; Business/Financial Desk

LENGTH: 768 words

HEADLINE: Small Employers Describe Health InsuranceConcerns

BYLINE:  By ROBIN TONER

DATELINE: WASHINGTON, Oct. 28

BODY:
   The rising cost of health insurance is hitting small employers particularly hard, with premiums for the smallest companies rising 9.2 percent last year, according to a new survey.

Researchers said this was one of several ominous trends in employer-based health insurance. "The fact that we really haven't seen any change in the percentage of employers offering coverage during an all-time boom economy is cause for worry," said Drew Altman, president of the Kaiser Family Foundation, the health research group that co-sponsored the survey of 1,939 companies. "This is as good as it gets."

Sixty percent of all small firms offered their employees health insurance in 1999, a percentage that was statistically unchanged from 1996, the survey found. Virtually all big employers -- defined as those with 200 employees and more -- offered health benefits.

The study, released at a news conference today in Washington, provides an annual snapshot of health insurance provided through the workplace, which is how most Americans get their health benefits. It showed that the managed care revolution has all but overwhelmed conventional, fee-for-service coverage: only 9 percent of Americans with job-based coverage are enrolled in a traditional plan, down from 73 percent in 1988.

By comparison, 28 percent were enrolled in health maintenance organizations and 38 percent were in preferred provider organizations, the most popular type of health plan last year. In contrast to H.M.O.'s, preferred provider organizations allow patients to go beyond the plan's list of participating doctors, if they are willing to pay more, and do not require patients to go through a primary care gatekeeper to see a specialist.

The shift to managed care is widely credited for having helped control health care costs for several years, but the survey confirmed that premium prices are beginning to rise again. Over all, in the year ending in the spring of 1999, premiums for employer-sponsored health coverage increased 4.8 percent, the biggest jump since 1994. Researchers said this was relatively modest compared with the double-digit increases of a decade ago, but still more than double the rate of inflation.

Moreover, said Larry Levitt, a Kaiser analyst, "the most fragile part of the health care system is getting hardest hit." Companies employing three to nine workers reported the highest increase in premiums: 9.2 percent. By comparison, companies with more than 200 employees reported a 4.1 percent increase in premium costs.

Mr. Altman said, "These increases will make it even harder for small businesses to provide health insurance for their employees in the future." Several researchers said that such strains in the employer-based system help explain why policy makers in Washington are searching for alternative means of helping the uninsured. The Census Bureau reported last month that 44.3 million people are uninsured.

Researchers also found that companies who finance their own health insurance reported substantially lower premium increases than the firms that bought it from insurance companies. Jon R. Gabel, one of the researchers, traced this to "catch-up pricing," with insurers trying to restore their profitability after several years of "underpricing" to get a bigger share of the market.

The survey released today was based on telephone interviews with human resource and benefit administrators at a random sample of companies and had a margin of sampling error of plus or minus 3 percentage points. For several years the survey was conducted by KPMG Peat Marwick, but was turned over last year to the Health Research and Educational Trust, a nonprofit research group, which now conducts the survey with Kaiser.

Researchers also asked employers about the "patients' rights" proposals being debated in Congress this year, and found that a majority supported such measures as the right to external review, when a health plan denies care, and even the right to sue. But support was generally higher among small employers, particularly on the right to sue, which was backed by 61 percent of small employers, while more than half of the biggest firms opposed it.

Nearly three-fourths of all employers said they were worried that health care costs would rise faster than they could afford, and 65 percent said they were "somewhat" or "very" worried that they would have to switch health plans because of costs. By contrast, only 26 percent said they were "somewhat" or "very" worried that they would have to switch because of concerns about the quality of care.
 
 
 
 
 

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LANGUAGE: ENGLISH

LOAD-DATE: October 29, 1999