As part of the continuing fallout in Louisiana's health insurance market, five Louisiana hospitals are selling their money-losing managed-care company to an out-of-state turnaround firm.
Venture Health Partnership Group, a Newton, Mass.-based limited liability company, last week agreed to buy 470,000-enrollee SMA Health Plan from its hospital owners.
Terms of the sale, which is expected to close by Jan. 1, weren't disclosed.
Venture Health was created by Scheur Management Group, run by managed-care consultant Barry Scheur.
SMA is the 11-year-old joint venture of five not-for-profit organizations-East Jefferson General Hospital in Metairie, Slidell (La.) Memorial Hospital and Medical Center, Terrebonne General Medical Center in Houma, Tulane Educational Fund in New Orleans and West Jefferson Medical Center in Marrero.
SMA operates a 400,000-enrollee PPO and a 70,000-enrollee HMO. Some 12,000 enrollees in the HMO are Medicare beneficiaries.
The HMO, started in 1994, lost $5 million on $110 million in premiums in 1998, according to the Louisiana Department of Insurance.
For the first half of this year, SMA lost a total of $13.9 million, Scheur said.
The hospital owners brought in Scheur's group in April to manage the health plan. In the quarter ended Sept. 30, SMA lost $4.8 million.
"So you can see already we've made progress," said Nancy Belle, Scheur's spokeswoman.
Peter Betts, chairman of the SMA board of directors and president and chief executive officer of East Jefferson, said in a written statement that the hospitals created SMA to offer products "that were sensitive to the needs of our patients as well as our physicians, and not be responsive primarily to insurance companies."
However, the owners have come to see that "the business of health insurance and the business of healthcare are quite different," the statement said. "Each business has its own mission, financial requirements and objectives, and requires different expertise in order to be successful. We need to refocus our attention as hospitals to our core business."
A written statement by Terrebonne General attributed the managed-care company's losses to "predatory pricing" by large national managed-care companies "with an eye toward forcing locally owned HMOs out of the picture."
Terrebonne cited the failure this year of two Louisiana provider-sponsored HMOs: Advantage Health, owned by three hospital groups, and Patient's Choice, founded by physicians.
The state's largest HMO, provider-owned Ochsner Health Plan, is also losing money (See story, p. 26).
"I feel sorry for the hospitals that got into this business," Scheur said. The health plans are "undercapitalized, poorly managed, with no idea of the conflicted role they're in."
Last year, Slidell Memorial CEO Monica Gates predicted a market shakeout. In an October 1998 interview, she anticipated that "instead of having 14 managed-care companies each getting a bid, over the course of next year, we'll see that 14 drop down to seven."
This shakeout, market watchers say, could force consolidation in the hospital industry.