Two provider-owned HMOs in North Carolina together lost nearly $16 million last year, the latest in a series of hospitals struggling with their own managed-care businesses.
QualChoice of North Carolina is owned by Wake Forest University Baptist Medical Center in Winston-Salem. The HMO lost $14.1 million in 1997, the second-greatest loss of any plan in the state that year.
Wellness Plan of North Carolina, owned by Charlotte-based Carolinas HealthCare System, lost nearly $1.8 million in 1997. The plan's premium revenues from 1997 were not available from the North Carolina Department of Insurance.
Last year, 13 of 29 plans lost a collective $87.4 million, according to the state insurance department. The losses are noteworthy because North Carolina was widely viewed as fertile ground for managed-care plans looking for new markets.
The insurance department has issued 13 HMO licenses in the past five years.
Tim O'Brien, Wellness Plan's chief executive officer, said the plan was close to breaking even when Carolinas, a regional powerhouse of five hospitals, decided to merge Wellness with another HMO it owns, Atlantic Health Plans.
Atlantic, according to the state insurance department, posted net income of $1.3 million on $32.9 million in premium revenues in 1997.
O'Brien said he expects the merged plans to generate a modest profit and to double enrollment to 100,000 by 1999.
Terry Brewster, vice president of sales and marketing at 4-year-old QualChoice, explained why the hospital launched a Medicare HMO. "Our rival in the county (Partners health plan) already had a Medicare risk product, and we felt we needed to have our own product, or we would lose referrals."
QualChoice's Medicare HMO is in the red because utilization is higher than the plan anticipated, Brewster said. QualChoice's total premium revenues in 1997 were $39.2 million.
"The cost of the drug benefits exceeded our plan," he said. "That's one of the things we learned as we went. We need to get those costs under control."
However, Brewster said, QualChoice's enrollment is 75,000 and growing, and the company is revising its plan for growth. Under its current plan, QualChoice expects to break even in January 2000.
QualChoice is not considering selling the plan, "because the owners want to control their own destiny," Brewster said. "It's a learning lab on how to best deliver care and work on medical costs."
Another provider-owned plan in the state, Carolina Summit Healthcare, also reported a loss, $209,000, for 1997. The plan is owned by Pitt County Memorial Hospital in Greenville.
Randy Madry, the plan's CEO, said the young HMO has not begun marketing yet and has no enrollees.
Pitt bought the HMO license less than two years ago, but the state's approval process took about eight months, and changing the Medicaid HMO license to a general HMO license took another eight months.
The hospital plans to pump about $3.9 million into Carolina Summit before the plan starts to break even, Madry said.
Pitt is offering stock in the plan to physicians and other hospitals. So far, 33 hospitals and more than 2,000 physicians have expressed interest, Madry said.