A Detroit company whose managers pioneered the field of Medicaid HMOs in the 1970s is successfully parlaying its expertise in new markets.
United American Healthcare, which was started to manage OmniCare Health Plan in Southeast Michigan, has expanded to four states with projects under way in three more.
United American learned how to provide efficient healthcare delivery to the poor-through improved access and preventive care-when other companies wouldn't touch Medicaid.
Company officials said they've also developed patience and flexibility in dealing with often volatile state regulations.
"We call ourselves the experts as far as Medicaid and managed care," said Julius Combs, M.D., a gynecologist who is United American's chairman and chief executive officer.
The company is operated by a team of African-American managers who launched OmniCare, originally called Michigan HMO, in 1973.
They tried to convert the HMO into a for-profit concern, but state regulators wanted several million dollars in charitable contributions. Instead, they created a for-profit management company, and the state approved the arrangement in 1983.
As states begin to mandate HMOs for Medicaid, United American has positioned itself for that business.
In 1994, it began long-term contracts to manage OmniCare Health Plan-Tennessee and Ultramedix in Florida. It has submitted a proposal to participate in Pennsylvania's Medicaid managed-care initiative and started management companies in Georgia and Louisiana to explore opportunities in those states.
It also formed alliances with Healthscope Administrative Services and Catholic Medical Services Center in New York City to enroll Medicaid recipients in managed care.
Jeffrey Neal, a vice president with Morgan Stanley in Chicago, said United American was relatively unknown on Wall Street three years ago.
"They've come a long way in a relatively short period of time," he said. "They've had a good track record up to this point, both on increasing service base and on (financial) performance."
The company has had steady revenue gains, from $25.3 million in fiscal 1992 to a projected $68.7 million in fiscal 1995 ended June 30. Net earnings increased from $4.6 million to $9.5 million during the four-year period.
Still, United American suffers from its status as an oddity.
The company manages HMOs but doesn't own them. It's compensated on a fixed percentage of plan revenues, ranging from 10% to 17%. It has equity positions in the for-profit HMOs it manages of 30.4% in Florida and 50% in Tennessee.
On Wall Street, United American is grouped with HMO companies, some say unfairly.
When HMO stocks plunged last spring on lower-than-expected earnings, United American also dropped, forcing it to cancel a secondary stock offering. As a result, the company may have to delay some expansion plans, said Ronald Dobbins, president and chief operating officer.
"We are not an HMO," he said. "In every instance our earnings have met or exceeded expectations."
The problem surfaced again in June, when Florida announced it would cut payments to Medicaid HMOs. United American released a statement that the impact on the company would be minimal, since the company holds only a 30.4% share in Ultramedix.