Presbyterian Health Plan is taking a hard look at its troubled Medicare risk business, which the biggest HMO in New Mexico blamed for much of its staggering $25.9 million loss last year.
"We have an internal policy of trying to get each of our (product) lines profitable on a stand-alone basis. And if we don't think we're successful, we have to map a Draconian policy, including even the possibility of withdrawing from certain lines," said PHP's chief financial officer, Mike Henderson.
The for-profit health plan is owned by Albuquerque-based Presbyterian Healthcare Services, a not-for-profit system that operates eight hospitals in New Mexico, including flagship 424-bed Presbyterian Hospital in Albuquerque.
The health plan's loss is expected to drag the entire hospital system into nearly break-even status for 1999 when final financials are reported later this year, officials said. Presbyterian's health plan, hospitals and medical group combined turned an $8.1 million profit in 1998 on revenue of about $781 million.
Henderson said an internal review committee is trying to determine what to do with PHP's 24,000-enrollee Medicare HMO, known as Secure Horizons, formerly part of PacifiCare Health Systems. PHP acquired PacifiCare's New Mexico operations in 1997 and fully merged them into its operations in 1999. PHP has another 299,000 enrollees in commercial and Medicaid plans and through third-party administration contracts.
The Medicare plan's fate is expected to be known by June. On Feb. 15 PHP halted most new Medicare enrollment. PHP also has stopped its Medicare HMO advertising campaign.
Presbyterian officials said Medicare reimbursements are well below the company's costs for delivering care to enrollees, although officials could not provide exact numbers.
PHP's overall medical expenses increased $98 million in 1999 to $553 million; the bulk of that is attributable to Medicare enrollees.
If Presbyterian remains in the Medicare program, it is likely to trim benefits for its enrollees, Henderson said. It will also try to wring more money out of HCFA, which pays the HMO an average of $430 per member per month.
PHP has already exacted steep premium increases of 15% or more for its 137,000 commercial managed-care enrollees this year, compared with an 8% average increase in 1999.
PHP also is seeking a premium increase from the New Mexico Department of Human Services for its 112,000 Medicaid managed-care enrollees.
PHP's troubles are common among HMOs with Medicare enrollees. Since the beginning of 1999, some 650,000 Medicare managed-care enrollees throughout the country have lost their coverage when at least 109 health plans closed or pulled coverage from selected markets (July 5, 1999, p. 3).
Despite the commonality of PHP's Medicare woes, last year's losses came as a surprise. As late as December 1999, health plan officials told MODERN HEALTHCARE|they projected breaking even for the year, after losing $5.3 million in 1998. However, that figure omitted a $7.6 million 1998 loss posted by the New Mexico operations of PacifiCare.