Two of Colorado's three hospital-owned HMOs turned a profit last year, and the third lost less money than it did in 1997.
Most hospitals across the country are losing money running their own managed-care business, but the results in Colorado show that under the right circumstances, profits are possible.
Interestingly, the state's largest insurer, Blue Cross and Blue Shield of Colorado, lost $34 million last year, and it's the object of a bidding war by out-of-state health insurance giants (See story, p. 17).
The three hospital-owned Colorado HMOs have little in common.
A consortium of safety-net providers in Denver operates Colorado Access, a 91,672-enrollee plan that serves largely Medicaid clients.
The owners include 329-bed University of Colorado Hospital, 303-bed Denver Health Medical Center, 198-bed Children's Hospital and Colorado Community Managed Care Network, a group of 14 community health centers.
Colorado Access has posted a profit every full year since its inception in December 1995. Last year, it earned $4.6 million on $100.2 million in revenues, according to Colorado Division of Insurance filings.
Elaine Martinez, the plan's vice president of finance, said the profits are plowed back into the plan to develop enrollment and new lines of business. But the HMO benefits the sponsoring hospitals' bottom lines.
"We operate as a vehicle for pulling (government) funding in and passing it to the providers," she said. "Indirectly, the providers benefit."
The three hospitals put up a combined $2.5 million to establish the plan, plus $2 million in subordinated debt that the plan has since paid back, Martinez said.
Sloans Lake Health Plan, meanwhile, needed a little help from its Denver-based parents to finish in the black last year. Centura, a 10-hospital system co-owned by PorterCare Adventist Health System and Catholic Health Initiatives, operates the 30,000-enrollee plan, which reported a $1.1 million profit on $33.8 million in revenues, according to state records. That's compared with a $2 million loss on $19.4 million in revenues in 1997.
Neil Waldron, Sloans Lake's president and chief executive officer since mid-1997, acknowledged that the turnaround of the for-profit was achieved only with the help of its hospital sponsors. Sloans Lake's holding company, which is owned by Centura, gave the HMO a discount of about 30% on its management fees.
ProActa Health Partners is owned by 122-bed Longmont (Colo.) United Hospital. The 1,758-enrollee plan lost $208,646 on revenues of $2.7 million compared with a loss of $228,733 on revenues of $2.2 million in 1997, according to state records.
Created with an original infusion of $2 million from the hospital, ProActa now covers its costs but does not pay the hospital interest on its loans, said Dan Palmquist, the hospital's chief financial officer.
The plan's losses have not impeded other hospital projects, including a $25 million addition scheduled for completion in August, he said.