In an unusual show of support, community leaders and physicians on Washington state's Olympic Peninsula have united to rescue a physician-run health plan.
But the operation won't be painless.
KPS Health Plans, Bremerton, Wash., last week announced it will lay off almost half its 150-member staff by February 2000 as part of a turnaround effort.
KPS, also known as Kitsap Physicians Service, had more than 200 employees when it was seized by state Insurance Commissioner Deborah Senn's office Aug. 2 for failing to meet a statutory net worth requirement of $3 million (Aug. 9, p. 3).
The plan also has ended a long-held commitment to Medicaid managed care, which it helped pioneer in the state. Under state control, it dropped state contracts serving more than 20,000 Medicaid beneficiaries, low-income residents and state employees that helped to generate $12.1 million in losses over three years. Those enrollees were switched to another plan.
KPS lost $2.8 million on premium revenues of $98.7 million in 1998.
The plan is expected to have 46,000 enrollees by year-end, down from 72,000 in August.
Senn, a Democrat who is challenging Republican Slade Gorton for his U.S. Senate seat next year, responded to strong community interest in saving the 53-year-old not-for-profit plan. Her office has asked the Thurston County (Wash.) Superior Court to approve a rehabilitation blueprint crafted with the assistance of community leaders and doctors (See box).
Backers of the carrier include Bremerton Mayor Lynn Horton; state Rep. Phil Rockefeller, a Bremerton Democrat; Harrison Memorial Hospital CEO David Gitch; and business leaders.
"It was a shock to the community to realize that KPS was in such serious financial straits," Senn said in a written statement. "KPS was a major employer and a good corporate citizen over the years, and its loss would be a serious blow for the area."
Deputy Insurance Commissioner Jim Odiorne, who heads the team operating KPS, said the plan will retain 85 staff members and will keep 94% of its commercial enrollees.
"With community support, expense reductions, and the stronger business plan under development, we feel comfortable with this staff size and KPS' outlook for the future," Odiorne said in a written statement.
A spokesman for the insurance commissioner's office, Jim Stevenson, said a search is under way for a new chief executive. An advisory board of physicians and community leaders has also been appointed.
However, Stevenson said it will take several months before the plan has a chance of emerging from state control.
The plan's 315 contracted physicians have agreed to waive payments for services rendered for the remainder of the year to help recapitalize the plan, said Paul McCullough, a Bremerton orthopedic surgeon who sits on the advisory board.
McCullough said it will cost each physician an average of about $15,000. But as the plan's guarantors, the physicians had little choice, he said.
"We've had to accept the fact that (there were) problems with management and perhaps the industry as well," he said. Physician services, he said, would have gone unpaid anyway if the state had decided to liquidate the plan.
McCullough said the physicians could be repaid with interest if the plan ever regains its footing.
He said the rehabilitation plan calls for KPS to emerge from receivership with a nine-member board, five of whom are physicians. Previously, the board had six physicians. "The issue really is whether physicians will support the plan. If it's physician-controlled, they will," he said.