SEATTLE-Group Health Cooperative, Washington state's largest managed-care organization, is pulling out of 14 counties in Washington and northern Idaho in response to continuing losses in those largely rural areas.
More than 215 contracts with hospitals, medical groups and other providers in eastern Washington state and Idaho will be canceled as a result of the pullout, which takes effect at year-end. Clallam County, on Washington's Olympic Peninsula, is also affected. Overall, Group Health's move will force about 21,000 of its 610,000 enrollees to find new insurance coverage.
Most of the impact will fall on enrollees and small businesses insured by Group Health, not hospitals, according to John White, administrator at 74-bed Newport (Wash.) Community Hospital.
"Unless people become uninsured as a result, it shouldn't have a negative impact on us," White said. Newport is in Pend Oreille County, one of 10 affected counties in eastern Washington. Group Health contracts with 20 acute-care hospitals in the affected counties.
Even after the exits, Seattle-based Group Health will cover one in nine Washington residents, officials said.
The plan is working with insurance commissioners in both states to secure approval for the market exit but doesn't expect any problems, officials said. Group Health President Cheryl Scott characterized the not-for-profit company's decision as part of a broader commitment "to improve Group Health's financial stability." She also cited the difficulties in providing managed care in a rural setting for the pullout.
The counties that Group Health is exiting have contributed "a disproportionate share" of Group Health's financial difficulties for several years, according to Scott (See chart). "We've spent three years trying to make this work," she said.
Jim Stevenson, a spokesman for the Washington insurance commissioner, agreed that the exodus has a lot to do with "the realities of rural healthcare" and with retreats from more inclusive state healthcare initiatives in the mid-1990s.
"The problem here is one for public policymakers to look at," Stevenson said.
Group Health posted a loss of $19.7 million last year on net revenues of $1.3 billion. But in the first quarter of 1999, it bounced back, posting net income of $8.5 million on $339 million in revenues.
Among other steps taken to turn things around, Scott said, Group Health raised premium rates in the "low double digits" this year. In addition, it's considering moving about 1,500 employees from offices in downtown Seattle to another site within the city limits or in a nearby suburb. Finally, a small number of the organization's 7,200 full-time-equivalent jobs have been eliminated, including about 60 through recent layoffs.
Officials at Oakland, Calif.-based Kaiser Permanente, which has a loose affiliation with Group Health, declined comment on Group Health's retrenchment efforts.
The two not-for-profit health plans collaborate on regional and national marketing efforts and public policy but on little else at this point, officials said. Each plan operates independently, with separate assets and financial obligations.
Last fall Kaiser and Group Health retreated from tighter financial and administrative ties in what Group Health officials described at the time as a "mid-course correction" (Nov. 2, 1998, p. 3).
Kaiser has 124,000 enrollees in Washington.