Somebody has finally figured it out. As Lori Price, an analyst at Oppenheimer & Co., said in the Dec. 1 article "PacifiCare does an Oxford" (p. 4): "PacifiCare is very skilled at sharing risk and shifting risk onto providers -- where they fall short is they're not adept at direct medical management of providers. What they inherited (with FHP International) are health plans that are far less capitated, and more medical management is required. They aren't up to the task."
From 1960 to 1990, FHP was one of the finest vertically integrated staff-model HMOs in the country. It was the essence of accessible, quality healthcare with all services under one roof. It included physician care, hospital care, ambulance service, mental health, preventive care, prescription drugs and other services.
In the 1980s, FHP modified its direction to include independent practice associations as a marketing effort to enter new markets, backed up with staff-model units. This gave FHP the opportunity to jump ahead of the rest of the industry. The competition -- contract HMOs -- simply were reinvented insurance companies and offered nothing in the way of innovative solutions to the problems of rising healthcare costs and effective delivery of healthcare. Some of the FHP innovations included acute-care hospitals backed up with subacute hospitals, integrated obstetrical services with nurse-midwives making routine deliveries, specialized hospital-based internal medicine physicians and other cost-containing, quality-enhancing concepts.
The integrated staff-model IPA system allowed FHP to enter markets and compete with other IPAs, but without their limitations. This was because pure IPAs lacked capacity and the ability to expand, since they could use only the doctors who were already there. FHP, on the other hand, would place staff models with salaried doctors in areas that needed additional healthcare services, providing for unlimited expansion potential while taking advantage of the contracted provider systems for marketing purposes.
In Utah, FHP was almost entirely a staff model, since Intermountain Health Care was in control of a large proportion of the doctors and hospitals. When PacifiCare attempted to alter the staff model and turn it into an IPA, the plan tanked in Utah because it couldn't deal with the providers there. FHP had built its reputation and enrollment on one-stop, staff-model healthcare, not the usual insurance program. PacifiCare's management lacked experience with staff-model healthcare delivery and was unable to take advantage of that major competitive asset of FHP.
Robert Gumbiner, M.D.
Founder, former chairman and chief executive officer