After some of its owners refused to fund ongoing losses, WellCor America has become the latest provider-sponsored managed-care company to announce that it will cease operations.
The Oklahoma City-based company said last week it will terminate its two insurance products. HealthCare Oklahoma, the state's third-largest commercial HMO, will close by March 31, 2002. The plan has 55,000 members. A 2,600-member Medicare HMO, called Perfect Harmony, will close by the same date.
In a written statement, WellCor cited poor financial performance, increased regulatory requirements and consumers' desire for less-restrictive healthcare plans. According to documents it filed with the Oklahoma Department of Health, the company had a net loss of $2.8 million on revenue of $56.2 million for the first six months of this year.
WellCor board Chairman Stanley Hupfeld said the hospital owners have no regrets about trying to run an HMO, even though it's been a financial drain.
Hupfeld is president and chief executive officer of Oklahoma City-based Integris Health, a 14-hospital system that is the health plan's majority owner. Other owners are Mercy Health Center in Oklahoma City, which is part of Sisters of Mercy Health System-St. Louis; Deaconess Hospital in Oklahoma City; Hillcrest HealthCare System in Tulsa, Okla.; and local physicians.
Hupfeld said Integris Health has provided at least $15 million in capital funding to the plan, which began operating in January 1995. The plan has never had a profitable year.
Hupfeld said he believes the provider-owned plan kept managed-care companies from becoming dominant players in the state and allowed hospitals to negotiate higher rates.
"In my opinion it was worth the effort and the energy and the resources that we put into it," he said.
Lajuana Wire, director of managed-care systems at the state health department, said tight competition and Oklahoma's rural character make it difficult for HMOs there to achieve profitability. But she said inexperienced management was also at fault in the plan's demise. She said regulators began to suspect problems last year, when ambulatory surgery centers and nonowner hospitals that contracted with the plan began to complain that claims were not being processed. Wire said the company's systems were inefficient, and managers "did not appear responsive to provider unhappiness."
WellCor spokeswoman Kim Decker denied that inefficiency was a problem. She said the plan met with providers and was able to resolve the complaints, which she said stemmed from a variety of problems including inaccuracies in provider billing systems and disagreements over the interpretation of contracts.
WellCor brought in new management earlier this year. A turnaround effort was begun, but that effort was halted when some of the owners decided they would no longer provide funding. Hupfeld said Integris Health became the "major contributor" to capital calls.
Decker said some potential buyers looked at the plan but made no offers. Other provider-owned HMOs in the state have been profitable this year. CommunityCare, which is owned by St. John Medical Center and Saint Francis Hospital, both in Tulsa, had net income of $90,832 in the first six months of the year on revenue of $122.6 million. Heartland Health Plan of Oklahoma, in Oklahoma City and owned by the University of Oklahoma, had net income of $588,000 on revenue of $88.7 million for that period. And Prime Advantage, a Medicaid HMO run by the Comanche County Hospital Authority in Lawton had net income of $1 million on revenue of $9.5 million.
The state's two largest HMOs, operated by Santa Ana, Calif.-based PacifiCare Health Systems and CommunityCare, stand to gain business, which could make them stronger, Wire said. "An HMO going out of business is not always a bad thing," she said.