One of Florida's largest healthcare systems has pulled the plug on its money-losing HMO.
Eight-hospital not-for-profit Orlando Regional Health System said last week that it is closing its 15,600-enrollee Community Health Care Systems after racking up $8.2 million in losses over the past 18 months.
The HMO hasn't turned a profit since its founding in 1996.
"We're getting out of the commercial risk business (and getting) back into our core operation," said Orlando Regional spokesman Joe Brown. "We're returning to a more concentrated focus on acute care."
In July, Orlando Regional said it was dropping the Medicare-risk component of its managed-care plan by year-end. The plan insures 3,200 Medicare beneficiaries.
Like other hospital systems around the country, Brown blamed Medicare spending limits mandated by the Balanced Budget Act of 1997 for forcing Orlando Regional to dump money-losing lines of business to cut costs.
"This shouldn't be a surprise to anyone," Brown said. "The level of reimbursement is just not there."
Brown said Orlando Regional could no longer afford to keep the HMO afloat. He said the system itself lost $20 million on 1998 revenues of $663 million.
Brown said Orlando Regional, like many other hospitals and health systems, got into the managed-care business for competitive reasons: Their rivals were doing it.
"It was seen as a way to extend our market reach," he said.
Most of Florida's nine provider-owned HMOs have taken a beating the past few years.
According to the Florida Department of Insurance, seven of the nine finished in the red, losing a collective $18.4 million in 1998.
State regulators noted that Community Health Care Systems failed to market broadly or successfully beyond its 11,000 employees, which made up the bulk of the plan's enrollment.
"They never really achieved a critical mass," explained Jim Bracher, chief of the Florida insurance department's bureau of managed care.
He said provider-owned HMOs face a harsh truth: Hospitals make money by putting patients in a hospital, and HMOs make money keeping them out of the hospital.
"If you're a success in one half of your business, often you're doomed to fail in the other half," Bracher said.
Kim Streit, the Florida Hospital Association's vice president for healthcare research and information, said hospital-owned HMOs are having a difficult time providing affordable coverage and balancing that against the costs they are incurring.
"Several years ago everyone thought that creating integrated delivery systems was the answer," she said. "Hospitals just have to go back and focus on their core business."