Harris Methodist Health Plan, one of the largest provider-owned HMOs in the country, is losing nearly $3 million per month, but the deep pockets of the HMO's hospital system operator are keeping it afloat.
The Arlington, Texas-based health plan has lost $17.1 million through the first six months of this year, according to figures obtained by MODERN HEALTHCARE from the Texas Department of Insurance. That was on premium revenues of $290.5 million over that period.
The pace of the loss has yet to slow, said a spokeswoman for the plan, which is owned by 15-hospital Texas Health Resources, based in Irving.
Because the plan can rely on the $2 billion hospital system to bail it out each month, she said, the plan's losses have not affected its operations.
At deadline, it wasn't known how much the system is paying to keep the 325,000-enrollee HMO afloat.
Plan spokeswoman Lisa O'Steen said the health plan's shortfall was expected.
"We've had expansion of our Medicaid product and Medicare product, which has meant hiring of staff, advertising campaigns, marketing expenses and expenses connected with getting approval from the state," she said.
To stem the plan's losses, several large, multiyear contracts up for renewal this year will see premiums rise by an average of 10%, a hike that O'Steen said is comparable to the local market.
The plan's third-quarter losses will be steeper, reflecting a settlement with the Texas Department of Insurance over physician incentives meant to keep prescription drug costs down. The department had alleged that the incentive-which made doctors financially responsible for certain budget deficits-improperly penalized doctors for providing medically necessary services.
In the Aug. 18 consent order, Harris did not admit to wrongdoing but agreed to repay $3.4 million to its doctors and pay a $100,000 fine to the state.
Harris Methodist Health Plan also is restructuring its physician contracts as required by the settlement.
"The bonus and withholding structure has been taken out of the contracts, and we are going back to the basics of managed care with a preventive-care emphasis, which keeps profits up in the long run," O'Steen said.
The health plan is talking with Blue Cross and Blue Shield of Texas about forming a "strategic partnership," she said.
A spokesman for the Texas Blues would confirm only that discussions about its possible acquisition of the health plan have been "positive and productive" and that completing them is a "high priority."
The Texas Blues plan itself is moving forward with an anticipated merger with its Illinois counterpart.