Hospitals in Pennsylvania found that their HMOs had a tough time making money last year.
Financial data for the health plans, obtained by MODERN HEALTHCARE from the Pennsylvania insurance department, paint a discouraging picture for the new healthcare beasts responsible for both insuring and treating patients.
The granddaddy of provider-owned health plans in Pennsylvania got a new name last year, but that wasn't enough to make up for a disappointing financial performance.
The hospital merger that created the Penn State Geisinger Health System last July resulted in the rechristening of the Geisinger HMO as the Penn State Geisinger Health Plan.
The Danville-based HMO still managed to eke out a profit of $523,000 for the year, but that was down sharply from $2.7 million in net income in 1996.
Underscoring the plan's problems, profits fell to razor-thin levels at the same time revenues soared 29% to $326 million and enrollment rose 15% to 191,000.
Growth on both counts came primarily through booming sales of Penn State Geisinger's Medicare products. At the end of 1997, the Medicare products had 30,900 enrollees, up from 20,900 in 1996.
That turned out to be both good news and bad news.
"We're talking about very thin margins here, and our reimbursement is not increasing substantially to take care of Medicare enrollees," said Douglas Savidge, vice president for health plans marketing and sales. "Our challenge is to continue to manage care-both cost and quality. That's the only way we can win."
In direct response to shrinking margins, Penn State Geisinger has launched comprehensive disease management programs to lower costs from three care-intensive diseases: asthma, congestive heart failure and diabetes, Savidge said.
Further east, Health Partners of Philadelphia, an HMO founded in 1985 under the umbrella of Keystone Blue Cross and independently licensed in 1995, slightly narrowed its losses to $3.6 million on revenues of $225 million from losses of $4.3 million on revenues of $203.3 million in 1996.
Health Partners is the only provider-owned player among the four Medicaid HMOs in Philadelphia.
It is owned by a consortium of Philadelphia-area hospitals comprising Albert Einstein Medical Center, Allegheny University Hospitals, Episcopal Hospital, Frankford Hospital of the City of Philadelphia, the Hospital of the University of Pennsylvania, St. Christopher's Hospital for Children and Temple University Hospital.
Starting in February 1997, metropolitan Philadelphia became the first region in the state to implement mandatory managed care for Medicaid recipients in a program called HealthChoices. Area hospitals have complained, however, that the payment rates set by the state department of public welfare are too low.
Health Partners won a rate increase in January, although the plan declined to disclose the amount for proprietary reasons. But the expected increase in revenues as well as efforts to cut administrative and medical costs are unlikely to put the plan in the black this year.
"We're looking at a two-year turnaround here," said Deborah Tortu, a spokeswoman for Health Partners.
Losses also continued at HealthCentral HMO in Harrisburg, Pa.. It is controlled by Ephrata (Pa.) Community Hospital, the Lancaster (Pa.) Health Alliance, Harrisburg-based PinnacleHealth System, Reading (Pa.) Hospital and Medical Center, Chambersburg, Pa.-based Summit Health and York (Pa.) Health System.
For 1997 the plan had a net loss of $3.8 million on revenues of $21.1 million. By comparison, in 1996 HealthCentral reported a loss of $5.1 million on revenues of $6.4 million. Enrollment more than doubled in 1997 to 19,536 enrollees from 8,920 the year before.
Pennsylvania providers could take some consolation in the troubles of for-profit plans.
HMO pioneer Aetna U.S. Healthcare, based in Blue Bell, Pa., for example, had paltry net income of $256,328 in 1997-a cosmetic improvement from $77,807 in 1996. Revenues for the plan rose 11% to $1.5 billion in 1997 over the previous year, while enrollment grew 2% to almost 1 million.