The two hospital systems in Sioux Falls, S.D., are gunning to become the first systems in the state to offer Medicare risk products despite the area's relatively low reimbursement rates.
Both are crossing their fingers that HCFA and Congress eventually will boost rates to rural areas like South Dakota.
The Sioux Valley Hospitals and Health System expects to launch the state's first Medicare HMO by early summer. It has been operating Sioux Valley Health Plan, a commercial HMO with 10,000 enrollees, since Jan. 1, 1998.
Avera Health, formerly Presentation Health System, expects state approval of a commercial HMO license by April. It hopes by the end of the year to gain the 5,000 commercial enrollees required to win approval for a Medicare product.
Both systems intend to market their Medicare HMOs in northwestern Iowa, southwestern Minnesota, western Nebraska and eastern South Dakota-areas that contain their networks of hospitals, physician clinics, nursing homes and other facilities.
They would provide care for a HCFA payment of $380 per enrollee per month-half as much as Medicare HMOs in some urban areas. Many Medicare HMOs have pulled out of rural markets, citing losses.
So far, three other commercial HMOs operating in South Dakota don't share the Sioux Falls systems' enthusiasm for Medicare risk.
DakotaCare, South Dakota's largest commercial HMO, with 25,000 enrollees, has no plans to enter the Medicare arena, said Senior Vice President Kirk Zimmer. Reimbursement levels are too low and the Medicare population too small and dispersed, he said.
South Dakota had 118,000 Medicare beneficiaries as of July 1997, according to HCFA.
"We have looked at the Medicare risk market continually over the last several years and have made a conscious decision not to enter that market," Zimmer said. DakotaCare is based in Sioux Falls.
Sioux Valley President and Chief Executive Officer Kelby Krabbenhoft said he holds out hope for a rate increase in future years.