Most people associate the northern Rocky Mountain states with stunning vistas of lakes and mountains. But until recently, managed-care companies have seen little but badlands.
Residents and physicians of such states as Idaho, Montana and Wyoming historically have shunned managed care. They are driven by a perception that HMOs are large, merciless and impersonal, according to industry observers. Add to that a populace scattered throughout mostly rural areas and sizable pockets of physicians who have migrated from other states to escape HMOs, and managed-care penetration remains stubbornly mired in the low single digits.
But rising costs for employers, along with relatively low salaries and high deductibles for employees, are beginning to break down resistance to managed care.
The few established plans are experiencing solid growth, while some fledgling plans are making inroads by having doctors and hospitals as partners rather than adversaries.
"They're still midgets in terms of penetration, but there has been an accelerated growth," said Mark Harrison, a principal with Shattuck Hammond Partners, a New York-based investment banking firm that specializes in healthcare. "All of these areas are high utilizers, and they are theoretically ripe for an HMO-type product."
John F. Tiscornia, partner in charge of the western region healthcare practice of consulting firm Arthur Andersen, noted that fee-for-service payments to doctors and hospitals in the Northern Rockies have been discounted in recent months, "and that's usually the first sign before managed care comes."
In Idaho, among the most populous of the area's states, Blue Cross of Idaho has experienced vibrant growth in its managed-care product, HMO Blue. Enrollment was at 34,000 people earlier this month, compared with only 19,000 in 1995. Premiums from that line of business ballooned to $36 million last year from $2 million in 1991.
"Employers have made a decision they want to bring managed care in because of the cost factor," said Tracy Andrus, the Blue Cross plan's vice president of communications.
While most employers in Idaho offer an HMO or point-of-service product only as an option, Andrus believes many employees warm to it when they find out they no longer have to pay a $400 or $500 annual deductible. "They've heard the tabloid horror stories, but when they get in, they find out they get a lot more for their money," she said.
While the cost differential is proving a lure on the purchaser end, providers also are mulling things over and deciding that making some allowances for managed care is not such an evil idea and can even work to their advantage, according to investment banker Harrison.
"Along those lines, the providers know the idea is coming regardless of what they think, and if it is, they think they might as well control it," he said.
Wyoming appears to be a textbook case of that phenomenon with its first managed-care plan, provider-controlled WIN Health Partners. The year-old plan is a 50-50 partnership between United Medical Center in Cheyenne and Southwest Wyoming Preferred Physicians, a local independent practice association. WIN (which stands for Wyoming Integrated Network, a statewide consortium of hospitals) has signed up more than 50 companies representing 2,800 enrollees-an impressive number for a city of about 50,000-and 30% more first-year enrollees than projected by management. Restricted to doing business in Laramie County, WIN has a request pending with the insurance department to expand statewide.
"The idea has been really well-received," said Beth Wasson, WIN's executive director. She joined the plan in February 1996, lured away from Denver's Primera Healthcare, where she was director of operations.
Wasson noted that WIN was able to persuade doctors in Cheyenne to join partly because of good timing. "Hospitals were forming a joint venture around the state, physicians around Cheyenne were forming their own IPA, and it seemed to make sense to move forward with a venture to move premium and take risk," she said. Cheyenne doctors also were smarting from the chunk of indemnity business they lose to Denver, which is little more than an hour's drive south and burgeoning with specialists. Now, 90% of Cheyenne's 110 doctors belong to the WIN network.
However, Wasson believes the plan won't sell as well in Casper, Gillette and Sheridan, the other major cities in the central and northern part of the state. "We don't expect this to be an easy task.*.*.*.*Cheyenne was really the only city willing to go the whole nine yards," she said.
A joint venture involving providers is also taking place in Montana, where the state's largest insurer, Blue Cross and Blue Shield of Montana, joined forces with Great Falls (Mont.) Clinic, which includes about a third of the city's doctors. They began selling a point-of-service product called MontanaCare only last month but already have enrolled nearly 1,000 people in a city of 57,000. The Blues is also "within a breath" of announcing a similar joint venture with a large clinic in Missoula, said Charles Butler, the Blues' vice president of government and public relations.
Asked if such deals help allay Montana doctors' suspicions about managed care, Butler barked a short laugh. "What has become really obvious watching what's going on in Montana is that a partnership with doctors would be really better than a contract.*.*.*.*They are sitting here at the table with us, and leading the discussion in terms of management protocols and all the continuum-of-care issues," he said.
That isn't to say the Blues has not had success with other managed-care products. Its HMO Montana, begun a decade ago, has 21,000 enrollees and a network of 250 primary-care physicians. But growth has been flat the past couple of years, and Butler said an alternative was needed.
"We could have continued to grow HMO Montana in membership, and we still have doctors wanting to sign up and participate," Butler said. "But did we want to take it to a new level and start contracting with specialists? We felt we couldn't get a true managed-care program going that way."
Whether managed care eventually makes significant inroads into the Northern Rockies remains to be seen.
Most of the managed-care enrollment is through point-of-service products, rather than pure HMOs. Idaho lawmakers just mandated that all plans offer a point-of-service option (June 16, p. 14).
Given those factors, Shattuck Hammond's Harrison believes a market penetration of 20% is a realistic goal, but any number above that is unlikely.
"You might see a higher penetration rate if you carve out the urban centers, but these are small employer markets and people are traditionally wed to the indemnity product experience," he said.
Arthur Andersen's Tiscornia is more optimistic. He believes public organizations like municipalities and school districts-typically the largest employers in rural states-will find managed care an attractive option, and market penetration could reach 35% or more.
"There is a resistance factor, but I think the employers are going to push for more cost reductions," he said. "The providers are definitely getting prepared."