Eleven Ohio hospitals are relinquishing ownership of a 5-year-old HMO, leaving a 12th hospital as the plan's sole operator.
Under a reorganization plan submitted to the Ohio insurance department, the 11 hospitals are expected to liquidate their ownership stakes in the 30,000-enrollee Community Health Plan of Ohio by June 30.
The HMO was effectively run as 12 plans, each with slightly different benefits and premium structures, unified through a centralized accounting and claims office. Each hospital will receive a share of the liquidated assets in proportion to the number of enrollees in its service area.
The remaining owner of the plan will be 239-bed Licking Memorial Hospital in Newark, Ohio, the HMO's founder.
Ten of the 11 hospitals pulling out will stop offering plan coverage to their employees and marketing it to employers in their service areas. Memorial Hospital, a 114-bed facility in Fremont, will continue to market the plan.
Community Health's enrollment is expected to drop to 13,000.
Last year, Community Health had eked out an overall profit of $13,254 on $74.3 million in revenue, according to figures from the state insurance department. In 1997, the HMO lost about $4 million. An accounting change led to its posting a $745,000 profit in 1998.
Enrollment and financial performance varied by hospital owner and site, however, and owner defections reportedly began with hospitals that were losing money on the plan.
Some hospital owners said 161-bed Adena (Ohio) Regional Medical Center's decision to terminate ownership and pull its employees out of the plan touched off the run. With 3,700 members, Adena is the second-largest site in the network. Licking has 11,000 members.
Allen Rupiper, Adena's chief executive officer, declined to comment.
Joe Barylak, vice president of business development at 86-bed Berger Hospital in Circleville, said that savings on employee premiums more than made up for the losses his site had taken on the plan.
Once Adena pulled out, though, Berger couldn't continue to offer the plan to its roughly 700 enrollees who had counted on having both hospitals in the network, he said.
Hospitals that bought into the plan in 1995 did it both to get experience in managed care and to retain control over care in a managed-care context, according to interviews with representatives of several hospitals. They pulled the plug on the plan this month because they no longer saw its strategic relevance.
"Strategically, it appeared (in 1995) that managed care was going to make a significant impact on our markets, and we wanted to get ahead of the curve and have a little more say in how it is managed," said Larry Willard, administrator of 92-bed Hocking Valley Community Hospital, Logan, one of the hospitals pulling out. "The curve never hit."
The inherent conflict of interest in being both a provider of care and an insurer was difficult to balance, Willard said. Still, he said, the 630-enrollee site was profitable, and the hospital hadn't intended to withdraw.
"But when the other hospitals decided that they no longer wanted to participate, we no longer had the critical mass," he said.
Bob Littelmann, executive director of the physician hospital organization at Memorial Hospital, said doctors like it because it doesn't use traditional utilization review to ration care.
Instead, he said, the plan helps doctors keep costs down by acting as a source of information on patient treatment: "(The plan) has afforded us an opportunity to see the impact of the fat in the system, of ordering unnecessary tests, of staying in the hospital too long."
The insurance department expects to complete its review of the restructuring proposal by April 29.