Battling a wave of HMO mergers in California, four provider systems-with a former top purchasing executive at the helm-have obtained an HMO license.
The HMO, called Western Health Advantage, is owned by physicians and hospital administrators at University of California-Davis Health System; Mercy Healthcare, Sacramento; and two other integrated systems.
It received a license to serve recipients of Medi-Cal, the state's Medicaid program, in three counties. It also plans to offer products to employers by July 1 and to obtain a Medicare risk contract from the federal government.
"From a purchaser's point of view, it is not beneficial for the market to be controlled by a few large HMOs. It reduces negotiating leverage and consumer choice," said Tom Elkin, Western Health's chief executive officer.
As former healthcare chief of the California Public Employees Retirement System, Elkin won multiyear rate rollbacks from HMOs as well as agreements to target improved service and quality.
"Increased consolidation of HMOs into a few large plans is a major concern for providers as well," Elkin said. HMOs are now getting provider contracts that are often "below the cost of providing quality care," he said.
The HMO's formation comes as state regulators are scrutinizing the mega-mergers of four California HMOs (See related story, p. 8).