LUZERNE COUNTY, Pa.-Managed-care battlefields are materializing in the most unlikely places.
In Luzerne and Lackawanna counties, Mercy Health System of Northeastern Pennsylvania is rolling out the heavy artillery as part of a carefully researched strategy to secure patients.
Through contractual relationships with such recognizable names as Aetna Health Plans, Greater Atlantic Health Service and U.S. Healthcare, Mercy intends to defend and build its turf.
"What we're trying to do is be a conduit of choice for northeastern Pennsylvania," said John Nespoli, the regional health system's president.
It will have to outmaneuver two HMOs that already have staked out the region. They are Geisinger Health Plan, the managed-care arm of Danville, Pa.-based Geisinger Health Care System, and HMO of Northeastern Pennsylvania, a Wilkes-Barre-based HMO operated by Blue Cross of Northeastern Pennsylvania.
The Geisinger plan serves 175,000 enrollees in 25 counties of central and northeastern Pennsylvania. HMO of Northeastern Pennsylvania has 102,000 enrollees and operates in 10 counties.
Eighteen months ago, less than 5% of the commercial market in northeastern Pennsylvania was in an HMO, Nespoli said. Now it's closer to 25%, and the Medicare market is virtually untapped, he said.
Mercy's regional system only recently has taken shape. Nespoli had been president and chief executive officer at Mercy Hospital of Scranton (Pa.) when he was tapped last December as regional president.
The parent company, which represents two acute-care hospitals, a long-term-care hospital, a nursing home, a home healthcare system and a primary-care group practice, was formed just a few months ago. An office will be established in Moosic, Pa., and a regional board will meet for the first time next month.
Mercy's primary market area of 500,000 people is defined by its acute-care hospitals in Scranton and Wilkes-Barre. Some 1 million people live in the larger, nine-county area of northeastern Pennsylvania, which Mercy intends to tap (See map).
Two key events triggered Mercy's push into managed care.
First, Blue Cross signed exclusive provider agreements with three Mercy competitors: Community Medical Center in Scranton, Wilkes-Barre General Hospital and Nesbitt Memorial Hospital in Kingston, Pa. Wilkes-Barre General and Nesbitt Memorial are operated by Wyoming Valley Health Care System.
Second, Geisinger signed an exclusive contract with Moses Taylor Hospital in Scranton.
"What used to be our patient base was slowly but surely being siphoned away," said Ed Wallburn, Mercy's director of managed care.
In defense, Mercy Managed Care, a physician-hospital organization representing some 500 physicians, was created to negotiate contracts with HMOs.
Mercy also formed First Choice, a PPO. The plan, which now covers 8,000 people, is offered to self-insured employers in the region.
Nespoli would discuss few details of the contracts with Aetna, Greater Atlantic or U.S. Healthcare. Signing with well-known HMOs that seek a statewide presence was part of the strategy. Meeting employers' demand for the best deal also is part of it. "All of these products are going to be competitively priced," he said.
Under the contracts, primary-care physicians will be capitated, specialists will receive a percentage of charges, and hospitals will receive a combination of per-case and per-diem payments, he said.
Mercy is negotiating with one or more of the HMOs about the system taking an equity position in their companies, but no agreement has been reached, Nespoli said. He declined to say how much Mercy might be willing to invest or how much business the new contracts will generate.
Entering the market in third place behind Geisinger and HMO of Northeastern Pennsylvania doesn't faze Nespoli.
"Mercy has a great name. We've done the research," he said. Furthermore, managed-care penetration of the market remains in its early stages, he explained.
Meanwhile, Nespoli's competitors stand ready for battle.
"It'll be more competition for us," said Lisa Hartman, communications coordinator for Geisinger Health Plan.