Cimarron Health Plan Chief Executive Officer Garrey Carruthers, a former governor of New Mexico, likes to talk about his days as the state's CEO.
He likes it a little too much, some of his business rivals will jokingly tell you.
"I've heard his `recovering politician' talk wherever he goes," says David Scrase, M.D., CEO of Presbyterian Health Plan, New Mexico's largest HMO. "He starts every speech with that comment, and I told him he needed to pay me a quarter the next time I heard it."
During a business meeting in Gallup, N.M., as Carruthers was giving a speech, he tossed a quarter to Scrase, who was in the audience.
Such lightheartedness is common among New Mexico's business leaders. With few large ventures in a state where most white-collar jobs are on government payrolls, top executives in particular sectors know one another pretty well. And with stints as politician, scholar and business executive, Carruthers probably knows as many people as anyone.
Rapid growth. Those connections seem to have paid off for Las Cruces, N.M.-based Cimarron, which is by far New Mexico's fastest-growing HMO. As recently as 1996 it had only 4,000 enrollees. It has 121,000 today, with Cimarron's parent company, Albuquerque-based Health Care Horizons, managing another 12,000 members connected to self-insured businesses.
Cimarron's business plan calls for the HMO to grow to more than 200,000 enrollees statewide within the next three years, targeting the state's enormous payroll of public employees. That would leapfrog the plan from the state's fourth-largest HMO to the second-largest, over Albuquerque-based Lovelace Health Plan, with 185,000 enrollees, and Blue Cross and Blue Shield of New Mexico, with 210,000. Only Presbyterian, with 324,000, would be larger.
Based on those figures, about 50% of New Mexico's 1.5 million citizens are in managed-care plans, most of which operate on a discounted fee-for-service basis, although capitation is becoming more common. Most of the state's roughly 150,000 Medicaid recipients are also enrolled in HMOs.
Cimarron has accomplished much of the booming growth through two deals: securing a Medicaid managed-care pact with the state government in 1997 and acquiring QualMed of New Mexico in early 1999.
At a time when hospital systems have been bailing out of the HMO business, two Albuquerque providers, the University of New Mexico's Health Sciences Center and St. Joseph Healthcare, have willingly partnered with Cimarron, serving as its major provider networks.
"Without St. Joseph and UNM, my main option would be running for office again," jokes Carruthers, 60, whose nearly legendary reputation for affability is reinforced during a lengthy interview.
Gerald Landgraf, CEO of Health Care Horizons, believes Carruthers has played a vital role in growing Cimarron so quickly, particularly in securing its first big pact: the Medicaid managed-care contract that two years ago caused the HMO to balloon to more than 50,000 enrollees from less than 5,000.
Cimarron works with 271-bed University Hospital, Albuquerque, the state's primary indigent provider, in delivering care to Medicaid enrollees as well as offering a separate program for the uninsured.
"He's been very helpful to the company. He's brought a wealth of expertise in terms of dealing with the state government, and in resolving problem issues," Landgraf says.
Steve Smith, CEO of St. Joseph Healthcare, a regional subsidiary of Denver-based Catholic Health Initiatives, calls Carruthers "a win-win negotiator," both because of his vast knowledge of how the state government works and the fact that he's an honest businessman. "Our organizations share the same core values," Smith adds.
St. Joseph partially bankrolled Cimarron in its second major expansion, the acquisition of 30,000-enrollee QualMed of New Mexico from parent Foundation Health Systems.
Cimarron has managed until recently to sidestep much of the mayhem many rapidly growing firms inflict on their bottom lines in exchange for snagging market share. Carruthers credits that achievement to continual attempts to keep expenses in check while improving billing and recordkeeping.
Though Cimarron lost $465,000 on revenue of about $120 million in 1999, Carruthers attributes the loss to a series of one-time charges totaling $1.2 million. They included unexpected assessments from the state for a publicly funded catastrophic health insurance program and a write-off pertaining to the QualMed transaction, among others. He projects Cimarron will earn nearly $4 million this year.
In 1998 it reported net income of $2.8 million on revenue of $112.7 million, more than double its 1997 net income of $1.3 million. Revenue in 1997 was $35.6 million.
"Usually when you leave the rough and tumble of politics, you calm down and you get your golf game in shape," Carruthers says. "However, I've always wanted to be instrumental in building a business from the ground up."
First stop: academia. Carruthers notes he would have preferred to run a business first, then enter politics and then teach. He started out more than 30 years ago as a scholar, earning a master's degree in agricultural economics from New Mexico State University and a doctorate in economics from Iowa State University. He then returned to New Mexico State to teach agricultural economics.
He dryly notes that performing those tasks in the opposite order means his stint at Cimarron may fund his retirement as much as fulfill his aspirations.
Yet Carruthers' original plans didn't involve Cimarron at all. The opportunity came to him purely by chance. After joining a venture capital firm called Wheeler Peak Capital Corp. in 1991, he put together a financing package for an insurance broker to buy a third-party administrator called Martin Group Claims Service for $1.2 million. The broker was required to put up a share of his business as collateral for the loan. However, he had given away so much stock that he no longer held a majority share, and the deal fell through.
With financing already in place and a desire to avoid what Carruthers called "egg on our faces," his firm acquired the company. Carruthers was dispatched to run the new acquisition.
Not long after that, Wheeler Peak sold Martin Group to Health Care Horizons, which specialized in starting up and managing health plans and was looking for a third-party administrator. Carruthers' stint as an insurance executive appeared short-lived, until a group of doctors in Las Cruces approached him a few months later, looking to start an HMO. Carruthers again hooked up with Health Care Horizons, and Cimarron was licensed in late 1993 as one of the company's operating subsidiaries, just days before changes in state law would have required the fledgling company to have a much larger amount of start-up capital.
The combination of good fortune and planning were hallmarks of Carruthers' previous career. Although a skillful politician with a track record of supporting educational reform, he probably would not have become governor if he hadn't been at the right place at the right time.
Carruthers' post leading up to the governorship, as an assistant secretary in the U.S. Department of the Interior, appeared less than ideal. Carruthers' boss was James Watt, the Reagan administration's secretary of the interior, who was forced to resign in 1983 for making insensitive remarks about minorities and the disabled. Although Watt's departure helped end Carruthers' career in Washington, it helped lead him to the governor's race in 1986.
The winner's circle. Carruthers seemed a long shot at best. Although a former chairman of the New Mexico Republican Party, he had never run for elective office, and Democrats had held the governorship since 1970. But he caught a big break from outgoing Gov. Toney Anaya, a liberal Democrat whose job performance had earned low approval ratings from his constituents. Allegations that Anaya governed with an ideological agenda and had mismanaged state finances so alienated voters that Carruthers received a large crossover vote, enabling him to beat his Democratic opponent by 6 percentage points.
Carruthers didn't seek a second term in 1990. Although he was considered for various Cabinet-level posts in the Bush administration and for head of the national Republican Party, he didn't win any appointments.
Most observers agree though that Carruthers' political reputation helped him in building Cimarron quickly. Brian Sanderoff, president of Albuquerque-based Research and Polling, observes that "being governor has helped Garrey out in the business world," although he declined to provide specifics.
More blunt observers are split on whether Carruthers provides Cimarron with instant credibility or just an enormous foot in the door.
Controversial contract. One of the most important-and controversial-events in Cimarron's short life was its securing part of the state's Medicaid managed-care program, known as Salud. Cimarron has 49,000 Medicaid members, representing 40% of its total enrollment. There is little doubt that Salud has `'made" the health plan, since Cimarron had only 4,000 enrollees before the program's debut two years ago. All five of the state's HMOs bid on the business, although the New Mexico Blues dropped out of the bidding because its management believed it couldn't offer services at a competitive price.
Based on a point-rating system, Cimarron finished last in the bidding process in every technical category, including quality assurance, patient access to care, benefits offered and management of its health plan. However, State Human Services Secretary Reuben "Duke" Rodriguez revised the criteria in the pricing category and awarded extra points to Cimarron for having the lowest cost when the bids were evaluated on a composite basis. As a result, Cimarron, which had scored last in the original pricing category, had the highest score in that category.
Charges of impropriety were never substantiated in connection with Cimarron's Salud contract, but two members of the contract review committee, William Wiese, M.D., and William Reilly, wrote letters objecting to Rodriguez's changes. Reilly couldn't be reached for comment. Wiese didn't return phone calls seeking comment.
Rodriguez says criticism is part of the process of moving Medicaid recipients into managed care. He also notes that if Cimarron had been excluded from Salud, the University of New Mexico hospitals, a Cimarron partner in the deal, also would have been excluded. "You could not award this bid by cutting out the largest Medicaid provider in the state," he says, adding that he had the prerogative to make changes to the bidding process.
Carruthers also defends the change, saying the revisions more fairly gauged the cost of the services Cimarron would be providing. "Duke is justified in what he did, and there is no way he could have done what he did otherwise," he says.
However, Rodriguez's impartiality in handling government contracts has been questioned. He resigned his government post just months after the Salud controversy surfaced, after the Albuquerque Journal reported that a company he formed got $30,000 in sales commissions from another firm that did business with the government department he ran. Rodriguez, now president of a fledgling chain of audiology centers in Scottsdale, Ariz., says the article misrepresented the situation. He denies wrongdoing.
Gerald Ortiz y Pino, a director of Albuquerque's Department of Family and Community Services/Administration and former director of the New Mexico Advocates for Children and Families social services agency, is a vocal critic of both the Salud program and its bidding process. He believes Cimarron won its contract based more on price than on the quality of care.
"There was nothing overtly wrong with what went on, but it was still a pretty weak decision," he says. Having Carruthers at the helm "couldn't have hurt" Cimarron's chances of getting the contract, he adds.
Lagging behind. Indeed, Cimarron is far from a quality leader among New Mexico's health plans. In the National Committee for Quality Assurance's 1998 Quality Compass survey, which surveyed such things as a health plan's ability to conduct preventive health screenings, prenatal care and antidepressant medication management, Cimarron scored a 38% satisfaction rating, compared with 57% for plans nationwide and 56% for plans in the New Mexico region.
Carruthers says that a major in-house effort is under way to improve Cimarron's quality, focusing in particular on outreach efforts to members. However, he doesn't believe the health of Cimarron's members has suffered, even though "one of our big problems has been responding to customer complaints," he says. National accounting and consulting firm PricewaterhouseCoopers has been hired to address the shortcomings. And last year, Carruthers and Landgraf offered employees an incentive to reduce a claims backlog: They would shave their heads when the backlog was reduced.
Carruthers emphatically denies assertions that his political past has boosted Cimarron's fortunes. He notes that as governor he didn't tolerate noncompetitive bidding, and he contends Cimarron may face a little tougher evaluation than other health plans because of his presence. But he does concede that controversies may be part of the baggage he carries as a former governor. "Having me involved in the company can be both a positive and a negative," he says.
Looking to the future, Cimarron recently secured a portion of yet another government contract, this time for 170,000 public school employees and retirees statewide. Carruthers believes the contract will add another 25,000 enrollees. The health plan will also start marketing itself as a plan that offers greater provider choice than its competitors, thanks to its relationships with the University of New Mexico and St. Joseph Healthcare.
"We have a number of synergies working collaboratively with them," Carruthers says.