Florida's 33 HMOs and 220 hospitals could save patients millions of dollars in unnecessary costs if they developed more effective utilization management programs, according to a new study.
"This analysis raises serious questions about the desire of HMOs in Florida to aggressively pursue managed healthcare savings," said John Cookson, an actuary with Milliman & Robertson. The Radnor, Pa.-based actuarial firm conducted the study, the first of similar research it plans in other states.
A spokeswoman for the Florida Hospital Association, responding to the study's findings, cited evidence that hospitals and HMOs have reduced length of stays and costs through improved utilization control (See related stories, p. 42).
For example, Florida's HMOs averaged 255 hospital days per 1,000 residents in 1993, a 9% decrease from 280 per 1,000 in 1992, said Kim Streit, the FHA's vice president of information services. Hospital days per 1,000 residents is a standard measurement of efficiency.
"Hospitals (and HMOs) are ratcheting those days down," Ms. Streit said. "Some states like California are farther ahead than Florida. But hospitals are starting to put those methods in place where we will get lots of savings."
Despite Florida's improvement, those numbers are far higher than what Milliman & Robertson calls a "well-managed HMO," which averages 175 hospital days per 1,000 members, Mr. Cookson said.
To conduct its study, Milliman & Robertson used 1992 non-Medicare, diagnosis-specific inpatient data provided by the state. It compared the combined performance of Florida's HMOs with private insurers and Milliman & Robertson's own "well-managed-HMO" national standard.
Milliman & Robertson plans to conduct a study next year in Florida to determine if there were improvements in 1993, Mr. Cookson said.
HMOs and providers may be encouraged to reduce costs as a result of Florida's innovative managed-competition plan, which was approved in 1993 and will begin this year.
Besides the group purchasing of healthcare services aspect of the plan, managed-care providers and hospitals are being encouraged to use more sophisticated utilization controls to hold down costs, said Edward Towey, a spokesman for the state Agency for Health Care Administration.
"By making the market attractive to managed care, we hope Kaiser (Permanente) and other distinguished HMOs will come to Florida," Mr. Towey said. "They have historically avoided Florida because of (provider) hostility to managed care."
Mr. Towey said as more efficient HMOs enter the Florida market, competition will increase, quality will improve and costs will decline.
"Florida's plan will improve the efficiency and make costs and premiums more affordable," Mr. Cookson said. "Whether they can reverse the level of healthcare costs remains to be seen."
As in most states, except California, the HMOs in Florida have relied more on negotiating hospital discounts than developing sophisticated utilization controls such as case management, education of physicians and patients, and primary care, Mr. Cookson said.
He also said Florida needs more hospital support services to reduce reliance on inpatient care such as home-health services, outpatient surgery sites and infusion therapy.
Ms. Streit said a recent FHA survey shows many changes are occurring.
The number of hospitals that have signed at least one capitated contract with an HMO or PPO doubled to 18% in 1993 from 9% of some 100 hospitals surveyed in 1992, Ms. Streit said.
Florida HMOs also have reduced inpatient costs, Ms. Streit said. In 1993, HMOs reduced expenses for inpatient care to 21% of their total costs of $1.1 billion from 24% of $879 million in 1992, which indicates greater utilization control, she said. In addition, physician costs rose to 31% in 1993 from 28.9% in 1992, indicating greater use of outpatient care, she said.
Florida ranks fourth in the nation in total HMO enrollees, with 1.8 million, or 13% of its population, enrolled. Top-ranked is California, with 9.7 million HMO enrollees, or 32% of its population. Overall, 38 million people are enrolled in HMOs, or about 15% of the total U.S. population.
Nationally, Milliman & Robertson estimates that efficiently managed-care programs can save nearly $45 billion a year in healthcare costs. The nation spent nearly $1 trillion on healthcare in 1993.
The study also found that:
More aggressive managed-care programs in Florida hospitals could have saved Florida non-Medicare patients $2.3 billion in 1992.
More than one-third of non-Medicare hospital days in Florida are unnecessary and could be cut by more effective management.
Florida's HMOs showed a length of stay 45% longer than the nation's most-efficient HMOs.
On a standardized case-mix basis, the average length of stay for HMOs in Florida is less than 5% shorter than private payers. Compared with "well-managed HMOs," the average Florida length of stay is 46% longer (4.69 vs. 3.22 days).