A fledgling HMO co-owned by several Vermont hospitals and the state's Blue Cross and Blue Shield plan is seeking at least $2 million in investments to shore up its capital reserves.
Vermont Health Plan, launched in January 1997, is neither provider fish nor insurer fowl.
Half-owned by Blue Cross and Blue Shield of Vermont, the Vermont Health Plan uses the Blues plan for most of its administrative services.
The other owners are 84-bed Rutland (Vt.) Regional Medical Center, 382-bed Fletcher Allen Health Care, Burlington, Vt., and the Hitchcock Alliance, a network of hospitals in Vermont and New Hampshire, anchored by 343-bed Mary Hitchcock Memorial Hospital in Lebanon, N.H.
The health system co-owners provide services under full-capitation contracts with the HMO, a bit of a self-induced shock to the healthcare system in bucolic Vermont.
Managed care remains a pretty new concept in the Green Mountain State. HMO penetration in Burlington, Vermont's largest city, stood at just 20.4% in 1997, according to data from the NIHCM Health Care System Datasource, 1999 edition. More recent estimates by the Vermont Blues peg statewide penetration of managed care at about 30%.
The idea behind Vermont Health Plan was to combine decentralized medical decisionmaking controlled by providers with the administrative backbone and deep pockets of a seasoned insurer. Along the way both sides expected to learn how to shift from indemnity payment to true managed care.
Started with $7 million less than two years ago, the plan has lost about $2.3 million over its short life. As of August the plan provided benefits for 27,000 enrollees. In 1998 the plan had $22.1 million in premium revenues. Through the first seven months of 1999 it had $23.3 million in premium revenues.
With its reserves low and in anticipation of new business, the HMO wants its owners to kick in a combined total of $2 million or more. The owners expect to work out the details within the next the six weeks.
The HMO's business plan called for it to break even by year-end, said Kevin Goddard, vice president of marketing and external affairs at the Vermont Blues.
"Losses have exceeded expectation," he explained, driven up partly by higher-than-expected prescription drug expenses and outpatient utilization.
The plan, along with others in the state, charged premiums that were inadequate, said Thomas Huebner, president and chief executive officer of Rutland Regional Medical Center.
Because of continuing losses, Kaiser Permanente, the largest HMO in Vermont with about 100,000 enrollees, decided in July to pull out of the state as part of its departure from the Northeast (June 21, p. 4).