For healthcare providers, owning a managed-care plan is not for the faint of heart. For any insurer, contracting with Medicare for care to beneficiaries is a high-risk undertaking.
But for the University of Pittsburgh Medical Center, getting into the Medicare risk-contracting business is a very gutsy move.
Last week, HCFA approved the 16-hospital system's application to have its 2-year-old commercial HMO, the UPMC Health Plan, begin accepting Medicare enrollees on Jan. 1. "We believe Medicare is a business that health plans need to be in," said Mark Kriscunas, UPMC Health Plan's vice president of government programs. "Several employers have said they want to be able to offer a Medicare HMO to their retirees."
Specifically, the UPMC Health Plan will begin offering Medicare HMO coverage in seven Western Pennsylvania counties outside the Pittsburgh metropolitan area. In addition, HCFA approved UPMC's application to sell supplemental Medigap policies to beneficiaries, which help seniors pay for medical services that aren't covered under traditional Medicare.
UPMC's CompleteCare product will compete with the Medicare HMO offered by UPMC's nemesis, Highmark Blue Cross and Blue Shield. Highmark's plan, called SecurityBlue, has been selling HMO coverage to Medicare beneficiaries in the region since May 1995. It has 152,000 enrollees.
Ironically, UPMC owned a 20% stake in Highmark's SecurityBlue. But the hospital system sold its interest to Highmark in February after deciding to launch a Medicare product of its own. Since then, tensions have mounted, with UPMC doctors threatening to pull out of SecurityBlue amid heated contract disputes.
UPMC Health Plan won't be able to market its Medicare HMO in the six-county Pittsburgh area before early 2002 because of a noncompete agreement with Highmark.
Still, UPMC officials said they believe their system can fare better on its own.
"We have a dramatically different model--one that puts physicians instead of insurers in the driver's seat--which has worked well us for us in the commercial market," Kriscunas said. "We think this strategy will also help us become a credible player in the Medicare business, both in market share and financial stability."
The UPMC Health Plan should break even or turn a modest profit this year, Kriscunas said. It lost $18 million in 1999, according to Pennsylvania's Department of Insurance. At deadline a premium revenue figure wasn't available. UPMC Health Plan has 240,000 commercial and Medicaid enrollees. The entire health system earned $64.5 million on net revenue of $2.7 billion in 1999.
To round out its product line and stem its losses, UPMC Health Plan is turning to the Medicare program. The program's allegedly skimpy payment rates to contracting HMOs have forced dozens of commercial insurers and provider-owned plans to get out of the Medicare risk-contracting business in whole or in part (See chart, p. 6).
"Providers have been looking at their marketplace and questioning whether they want to take up the risk," a HCFA spokesman said. "It seems they've gotten more than they bargained for."