Hospital systems from Hawaii to Tennessee left the managed-care business in droves last week as they found buyers for their struggling plans or decided to shut them down altogether because no one wanted them.
Queen's Health Systems, Honolulu, agreed to sell the military portion of its Queen's Health Care Plan to a unit of Woodland Hills, Calif.-based Health Net. The deal is subject to a due diligence review. Financial terms weren't disclosed.
The 556-bed, two-hospital system had initially agreed in September to sell the HMO/PPO hybrid and a second plan, Queen's Hawaii Care, to Lifemark Corp., a Phoenix-based company that provides care-management services to high-risk and chronically ill patients. That deal fell through early this year, said Queen's spokesman Joel Kennedy, who declined to discuss specifics.
Queen's Health Care Plan serves a total of 118,000 members. If the sale closes on June 30, as expected, Health Net Federal Systems will take over service to the 90,000 enrollees covered under the Tricare program with the U.S. Department of Defense.
The remaining 28,000 members will still be covered through Queen's parent company, Queen's Health Management Corp., until a buyer for that portion is found, Kennedy said. The company also is seeking a new buyer for Queen's Hawaii Care, a Medicaid HMO.
Health Net, formerly known as Foundation Health Systems, provides managed healthcare to 5.5 million enrollees, including 1.5 million military members in 11 states through Tricare. Queen's Health Care Plan has been a Hawaii subcontractor to Health Net's military unit for several years.
Queen's, which runs Hawaii's largest hospital, 526-bed Queen's Medical Center in Honolulu, ceased operations on March 31 for two other commercial insurance plans, Queen's Island Care and Queen's Preferred Plan.
The not-for-profit health system decided last year to exit the insurance business to focus on providing medical services (Oct. 9, 2000, p. 12).
At the time, it was struggling with rising pharmacy costs and competition from larger insurers, such as Kaiser Permanente and the Hawaii Medical Service Association.
Meanwhile, a hospital and an independent practice association in northwestern New Mexico last week decided to throw in the towel on their 18-month-old HMO.
Life Course Health Plans is a 50-50 joint venture of 130-bed San Juan Regional Medical Center in Farmington and the San Juan IPA, which has about 120 physicians. It will cease operations by September 2002, hospital spokeswoman Karon Lyon said.
Steve Altmiller, president and chief executive officer of San Juan Regional, told Modern Healthcare earlier this year that running the 3,000-enrollee HMO was more expensive than anticipated. The hospital and IPA spent $610,000 in January to bring the plan into compliance with New Mexico's minimum net worth requirement of
$1 million (Feb. 5, p. 12).
In Michigan, the parent corporation of struggling OmniCare Health Plan of Michigan will stop providing cash infusions to the 99,000-enrollee plan, putting the plan's future in further jeopardy. Earlier this month, seven-hospital Detroit Medical Center sought and received a 30-day extension from the Michigan Office of Financial and Insurance Services to continue due diligence regarding its proposed noncash acquisition of OmniCare (May 21, p. 21). If the deal goes through, the DMC will be required to contribute $13.3 million to pay OmniCare debts.
Last week, OmniCare's parent, Detroit-based United American Healthcare, decided it can no longer support the plan in light of recurring financial losses, said William Jackson, chief financial officer at both companies. Jackson said OmniCare lost $5.8 million in the most recent quarter ended March 31. United American has loaned OmniCare $18 million during the past three years to ensure its compliance with state capitalization requirements, according to the company's latest filing with the Securities and Exchange Commission.
Finally, Vanderbilt University Medical Center in Nashville has completed its exit from the HMO business with the long-awaited management buyout of its 14,000-enrollee Medicaid managed-care plan. Windsor Health Group, a corporation founded last year by three executives who managed Vanderbilt's three health plans, purchased VHP Community Care for undisclosed terms.
The sale was completed on March 30, but the parties didn't announce the sale until last week.
Last year, Vanderbilt transferred 36,000 enrollees in its commercial HMO to UnitedHealthcare of Tennessee, a subsidiary of the Minneapolis-based managed-care company United Healthcare, for an undisclosed amount. The academic medical center also shut down its 14,000-enrollee Medicare HMO at the end of last year.