Capitation can be a dicey business. Just ask the doctors and hospital officials in northern Louisiana.
The Louisiana commissioner of insurance intervened last week to force a provider-sponsored health plan to pay $10.2 million in overdue claims to a large physician-hospital organization.
It's the second time in recent weeks that a provider-owned HMO has gotten into trouble for late payments to providers. The Penn State Geisinger Health Plan in Harrisburg, Pa., last month paid a $150,000 fine for not paying providers on time as required by a new state law (Oct. 25, p. 14).
Ochsner Health Plan, based in Metairie, La., must pay the money through the insurance commissioner's office to satisfy debts owed to the North Louisiana Physician Hospital Organization. The PHO represents 450 physicians and 11 hospitals in northern Louisiana. It is owned equally by Christus Shumpert Medical Center in Shreveport, La., and by a subset of physicians in the PHO. Some bills have been overdue since April.
That's when Ochsner delegated the claims payment function to the PHO, which was supposed to pay providers, said plan officials. Ochsner resumed that function Nov. 1.
"The PHO was not paying claims, and they had been delegated to do it," said Ochsner Chief Financial Officer Terry Shilling. "If they're not paying claims with the money you've already given them, why give them any more?"
Connie Baer, Ochsner's marketing director, declined to specify the reasons for the dispute, saying only that proper documentation had not been received from the PHO.
"None of this should have happened," Insurance Commissioner Jim Brown said in a written statement. "We do not want to see this type of situation develop again and will continue to monitor negotiations between the two parties."
He said his department got involved after numerous complaints from physicians who were not getting paid and from patients whose care was disrupted.
The key to the settlement is recreating clear lines of responsibility, said Brown: who provides services to enrollees and who pays claims. Brown has appointed an intermediary to oversee claims payment.
Ochsner Health Plan is the largest HMO in Louisiana, with 230,000 enrollees. It's co-owned by the not-for-profit Alton Ochsner Medical Foundation and the for-profit Ochsner Clinic. The foundation operates 392-bed Ochsner Foundation Hospital, New Orleans.
Like many provider-sponsored plans, Ochsner's HMO has been suffering financial difficulties. It lost $8.2 million in 1998 on premium revenues of $472 million, according to state insurance department figures. It's rated "E+," or very weak, by Weiss Ratings, an independent solvency rating agency in Palm Beach Gardens, Fla.
"Their biggest problem is they're severely undercapitalized," said Melissa Gannon, Weiss vice president. "The company has $472 million in premiums that's supported by just over $2 million in capital. Even if the parent is assuming their losses, they're still undercapitalized."
Shilling said the Ochsner foundation and clinic injected $15 million in capital into the HMO in the first nine months of this year, with additional unspecified payments in the final quarter. "We have a contingency capitalization plan approved by the Department of Insurance that will allow us to move forward," he said.
Baer said the HMO has paid its bills to other providers, including the Ochsner hospital and physicians. "This was an isolated problem with the Shreveport PHO," she said.
As part of its turnaround plan, the health plan has dropped 16,800 Medicare beneficiaries from its Total Health 65 plan, because Medicare reimbursements were well below costs in northern and central Louisiana.