When Crozer-Keystone Health System applied to become a Medicare Choices demonstration site, we already had history with managed care. The experience had been painful, but we learned from it (See related stories, p. 58).
Our system, in suburban Philadelphia, consists of five acute-care hospitals, four skilled-nursing facilities, a network of 140 primary-care and specialist physicians, and a licensed HMO, called Health Plans of Pennsylvania. To participate as a demonstration site, we were required by the Pennsylvania Department of Insurance to have an HMO license.
When Crozer-Keystone was founded in 1990, we joined a neighboring provider to buy a California-based HMO that had declared bankruptcy. We bought it to keep from losing inpatient admissions from the HMO. For two years we ran the HMO with the same objective: to protect our inpatient hospital business. It didn't work. By 1992 the HMO was bankrupt again, and Crozer-Keystone voluntarily paid off $6 million in unpaid claims to local physicians and hospitals.
We learned a lesson: Managed care isn't about preserving the traditional hospital business of caring for the sick. You have to accept the loss of hospital revenues to gain the managed-care revenues that can come from keeping people well. The better you manage the health of a defined population, the less often hospitals are needed and the more often primary care is used. The trade-off is that what you are no longer spending on inpatient care is available for management of care. We knew we had to incorporate this thinking into a new paradigm.
Also helping us prepare for the provider-sponsored organization was our first countywide "community health assessment," which was completed in 1992 and has been repeated every two years. The assessments provide a statistically valid sample out of Delaware County's 550,000 people to give us a picture of the community's health. They also compare the health of the sample with HHS' "Healthy People 2000" goals.
Our first assessment showed that two women were dying of breast cancer every week in a county that had 10 mammography units. Despite federal funding, the rate of low-birth-weight babies and the lack of prenatal care for teen-age mothers in the city of Chester rivaled data from emerging Third World countries.
This proved to us that if you build it, they won't necessarily come. We knew we had to do more than just offer technology. We needed to find patients at risk. We had to get all patients involved in their own health and get healthcare professionals to be more proactive.
With the lessons of 1992 in mind, Crozer-Keystone decided to tempt managed-care fate again in 1995 and applied to participate in the demonstration project. But by then, we were a very different organization.
We had invested $150 million in information systems and telecommunications. We wanted to develop a system that would provide us with lifetime clinical records, or longitudinal health records, of our patients and enrollees. Most record-keeping is episodic, which poses a real problem in managing care. I sometimes say that I have better access to comprehensive information about the health of my two golden retrievers than the health of my three sons.
A lifetime clinical record allows us to manage care and gives our members access to their records so they can track their health over time. The system, which we consider a work in progress, allows caregivers to summarize pertinent clinical data using common language.
Through fiber optics, we also linked our physician network to our major points of care. We now act as a single system.
One year into marketing our plan, MedCarePlus, we have 3,100 members. Disenrollment has remained under 2%. Our growth target is 15,000 members in three years and a minimum of 25,000 in five years. A major employer has offered MedCarePlus to its retirees, and we expect others to follow. Our medical loss ratio-the amount of the Medicare premium spent on providing health services-is about 95%. Our target is 92%.
Through our Healthy Behavior Rewards program, we've formed a partnership with our members. If members complete an initial health assessment, get an annual flu shot and follow simple health management assignments based on their clinical track, they can earn an annual $100 bonus, which can be spent on extra benefits, such as hearing aids, glasses or credit toward a health club membership. The idea came from focus groups in which seniors said they wanted to benefit from their efforts to stay healthy.
Equally important, the PSO compels us to partner with our physicians. We talked to our physicians about how much of the total premiums pot should go where. The discussions weren't fun or easy, but we negotiated the premium split between primary, specialty and hospital care, and prescription drugs.
Then we talked to physicians about why they should make clinical judgments and how we could reduce bureaucracy. Doctors know what their patients need more than insurers do. When we have more data, we'll compare utilization and step in only when necessary.
Our PSO also has given us a new chance to partner with neighboring systems. These relationships allow us to expand our coverage area without developing the infrastructure.
Despite the potential benefits, PSOs are not for everyone. They require a high level of integration between health systems, hospitals, physicians, physician networks and other community providers, such as nursing homes and home health agencies.
The providers running the PSOs must understand how to manage risk, and they must meet requirements for net worth and reserves. In addition, local market conditions must be examined before deciding to form a PSO. In markets with low managed-care penetration, it may be hard to convince beneficiaries to give up fee-for-service coverage.
In addition, providers must have developed all the pieces of the continuum of services. We had developed claims management, actuarial sciences, and member and provider relations. These are natural areas for providers, but we usually deal with them from the other side.
PSOs require rethinking our business. But for those who prepare and are willing to make new commitments, they are opportunities to benefit your system and your community.
McMeekin is president and chief operating officer of Crozer-Keystone Health System, Springfield, Pa.