SOLVENCY STANDARDS. More than half of the California medical groups that reported financial data to the state failed to meet minimal financial standards.
California's Department of Managed Health Care oversees the state's Financial Solvency Standards Board, which has set regulations for medical groups. The board's authority stems from laws passed last year that are aimed at curbing disruption to patients when medical groups close and keeping a closer eye on medical groups that are in financial trouble (see May, page 3).
About 10 million Californians receive care from health plans via medical groups. Groups that cover about 7.5 million enrollees reported their financial information to the DMHC, whose officials don't know why the remaining groups didn't report.
Of the groups that reported, about 55% failed to meet at least one of the solvency standards. It isn't clear what kind of, if any, penalties medical groups will face for either failing to report or failing to meet standards.
How many medical groups are in financial straits and how many have filed for bankruptcy remains a serious bone of contention in the California healthcare industry.
TRANSFER DENIAL. The Department of Managed Health Care has denied Blue Shield of California's request to pull 10,000 enrollees from San Jose Medical Group. Blue Shield officials say they filed the transfer request after becoming concerned about the medical group's financial solvency. Blues officials say they were initially granted approval, which was subsequently taken away.
DMHC officials say they want to develop a "global solution" for San Jose Medical Group and that approving the Blues' request would have a "debilitating effect" on the group's chances for survival.
"A comprehensive approach to this situation is likely the most effective method to ensure continuity of care . . . and to ensure that no diminution of services occur with any alternate medical providers as a result of the strain that a failure of San Jose would assuredly place on these organizations," DMHC officials wrote in their order.
Medical group officials declined to comment except to say they were in negotiations with Blue Shield.
CAROLINA BLUE. Blue Cross and Blue Shield of North Carolina agreed in June to purchase Partners National Health Plans of North Carolina, the largest stand-alone HMO in the state, from not-for-profit hospital operator Novant Health of Winston-Salem and Charlotte, N.C. Terms of the deal were not disclosed.
The long-rumored acquisition, expected to close this fall, will add more than 400,000 enrollees in North Carolina, South Carolina and Virginia to the 2 million the Blues already cover. The Chapel Hill, N.C.-based Blues plan will operate Partners as a stand-alone entity and will remain a not-for-profit company, contrary to some published reports, says Blues spokesperson Lynne Garrison. Officials say they may consider converting to for-profit. Under state law, the Blues can keep its not-for-profit status as long as it does not acquire any for-profit assets.
DRUG TRENDS. The rate of increase in prescription drug costs actually slowed in 2000, according to independent studies released in June by two of the nation's three largest pharmacy benefits managers. But one firm says the decline may not last.
Merck-Medco, which serves 65 million patients, says drug spending increased by 14% last year, down from 16.4% in 1999. However, the Irving, Texas-based subsidiary of Merck & Co. forecasts drug spending to more than double by 2006.
Competitor Express Scripts, based in St. Louis, reports a 16.2% expansion in drug spending among its 45 million enrollees, vs. 17.4% during the previous year. Express Scripts attributed the slowdown in part to the fact that no new "blockbuster" pharmaceuticals were introduced in 2000.
The two companies disagree on which age group would be most responsible for higher per-patient costs in the future. Express Scripts predicted those age 65 and older will cost three to four times that of younger enrollees, while Merck-Medco predicts the 40-to-55 age group will lead in higher costs.
TENNCARE SAFETY NET. Tennessee is trying to shore up its ailing TennCare by launching a safety net of sorts for the program, itself a safety net for the state's Medicaid and uninsurable population. Beginning operations July 1, TennCare Select is a self-insured HMO intended to close gaps in the existing network of TennCare HMOs.
TennCare Select initially will serve 78,045 enrollees with special needs, including children in state custody and disabled children enrolled in the federal Social Security Insurance program.
The new program also will act as a backup in rural areas of the state that other TennCare HMOs cannot adequately serve.
Also on July 1, BlueCross BlueShield of Tennessee, which previously had announced its complete withdrawal from TennCare, became a regional participant in the program, serving up to 300,000 enrollees.