HCFA has reprimanded a North Dakota hospital for spreading false and misleading information to Medicare beneficiaries about a competing hospital's new Medicare HMO.
The competing hospital subsequently pulled out of the venture, and the 4-month-old Medicare HMO is going out of business Dec. 31.
The negative marketing campaign did not seem to significantly affect enrollment in the new Medicare HMO, which met projections, said Heather Knoll, director of the HMO, called Blue Care. But she said it caused confusion and led a few seniors to change their minds about enrolling.
The situation reveals the underbelly of Medicare risk contracting. Hospital industry leaders lobbied Congress last year to let community-minded hospitals form Medicare provider-sponsored organizations, arguing that they would enter markets deemed financially undesirable by other insurers. But in Minot, N.D., competition, not community spirit, apparently dictated behavior.
That competition took the form of letters circulated to patients by 251-bed Trinity Medical Center in Minot and some of its affiliated physicians. The correspondence was designed to counter the new Medicare HMO, which had been launched with the participation of other local providers.
Those providers included 160-bed UniMed Medical Center, Trinity's chief competitor and the only other acute-care facility in Minot.
UniMed formed Blue Care in September with Noridian Mutual Insurance and North Dakota's Blue Cross and Blue Shield plan. The Medicare HMO had enrolled just 164 beneficiaries as of earlier this month. After UniMed pulled out of the deal, the other partners pulled the plug on the venture (Dec. 7, p. 6).
Blue Care's exclusive providers are UniMed, which is owned by Brentwood, Tenn.-based Quorum Health Group, and Medical Arts Clinic, a 34-member multispecialty physician group in Minot that is affiliated with Nashville-based PhyCor.
Both compete with Trinity and its affiliated physicians.
HCFA's concerns centered on a letter mailed to patients by Trinity's president and chief executive officer, Terry Hoff. The letter correctly warned patients that care provided at Trinity would not be covered by Blue Care. An accompanying brochure compared coverage and costs for various Medicare options at Trinity and Blue Care.
Trinity spokesman Randy Schwan said 2,000 brochures were printed and placed at the hospital and physicians' offices for patients to take. In addition, several thousand letters went out from Hoff and at least 15 physicians, he said.
After the materials were distributed, Blue Care marketers met resistance when they tried to schedule information meetings at local senior centers, Knoll said.
"It definitely put a level of doubt in subscribers' minds," Knoll said. "Who are you going to believe-the insurance company or your own physician, whom you've been seeing for a number of years?"
Schwan said the marketing materials were prepared because patients had called Trinity with questions. "They were confused and unsettled about the lack of information concerning this product. We felt we had a responsibility to inform them. We didn't portray (the HMO) as a bad thing; we just wanted them to be very careful about making their choice."
Schwan added that Trinity "didn't try to discourage them from enrolling."
A HCFA Region 8 spokesman, Wil Alston, said the Blue Care situation could mark the first time the agency has admonished a provider for marketing against a Medicare HMO.
HCFA has no jurisdiction over marketing materials circulated by providers. Therefore, the Nov. 4 letter to Trinity asked the medical center only to validate information in the future (See box).
Schwan said Trinity has agreed to verify Medicare information with HCFA before circulating it in the future.
In its letter to Trinity, HCFA cited inaccuracies including the following:
Calling Blue Care a "pilot project."
Using an envelope stamped "IMPORTANT MEDICARE INFORMATION," which could have led beneficiaries to believe the mailing had been approved by HCFA.
Failing to include the cost of Medicare supplemental coverage in a comparison chart.
Implying that Blue Care required a primary-care physician's referral for an annual physical.
Implying that Blue Care may deny charges or require pre-authorization for necessary emergency services.
Directing beneficiaries to call Trinity's physician services hotline if they have questions about Medicare.
Knoll said Blue Care decided not to counter Trinity's campaign by attacking the medical center, in part because it is a partner with Noridian on other products.
In addition, HCFA approval is required for all marketing materials used by Medicare HMOs. "Even if we were going to counteract, it would have taken 30 to 45 days to get anything approved by HCFA," Knoll said. "We might have been dead in the water before we got something out."