West Virginia's largest hospital system is getting out of the managed-care business, joining the growing ranks of hospitals that have found that running their own HMOs is costing them millions of dollars.
Last week, Camcare, the parent of Charleston Area Medical Center, agreed to sell its money-losing HMO to Coventry Health Care, a managed-care company based in Bethesda, Md., for $8 million.
"The decision to sell was based upon the reality that to stay in this market long term was going to involve significant long-term capital financing," said Phil Goodwin, Camcare's president and chief executive officer. "We just felt that we had too many other priorities and needs within the system."
Camcare has operated the HMO, Carelink Health Care Plans, for five years. It has 58,000 enrollees and has accumulated more than $35 million in losses since its inception, according to the West Virginia Insurance Commission.
In 1998 alone, Carelink lost $14.3 million on revenues of $91.6 million, and so far in 1999 it has lost about $4 million, according to system figures.
Earlier this year, Carelink raised its premiums by an average of 15% to try to reverse its financial plight.
Goodwin said he did not anticipate the losses would ease anytime soon, given managed care's shaky foothold in West Virginia.
As of September 1998, only 10.6% of West Virginians were enrolled in one of the state's seven licensed HMOs, according to the West Virginia Hospital Association. For the first nine months of 1998, the state's HMOs experienced an aggregate net loss of $13.5 million.
"In regard to this plan particularly, the greatest difficulty from a financial standpoint is that it is a very slowly materializing marketplace," Goodwin said. "The degree to which you're selling at managed-care prices and marketing at managed-care prices but paying fee-for-service rates is a really tough formula."
Meanwhile, with the acquisition, Coventry will become the largest managed-care plan in the state, with a total of about 94,000 enrollees. Its own plan in West Virginia has an enrollment of 36,000.
The sale is expected to close by year-end, pending state and federal regulatory approval.
Under the deal, 818-bed Charleston Area Medical Center will become a contracted healthcare provider for Carelink's enrollees, and Carelink will continue to be the managed-care plan for Camcare's employees for at least three years.
Goodwin said he is disappointed that Camcare has been forced to exit the managed-care business, but that the situation could have been worse.
"A lot of plans that are provider-based are facing similar types of situations," he said. "A lot of them are finding the only alternative they have is winding those plans down and getting out of the business."
In addition to its flagship hospital, Camcare operates 30-bed Braxton County Memorial Hospital in Gassaway, W.Va., and 79-bed Plateau Medical Center in Oak Hill, W.Va.
The system lost $56.4 million last year on total revenues of $517.3 million.