The recent announcement that QualChoice of North Carolina, Winston-Salem, will drop its last health plan and go out of business next year illustrated two downward trends in the number of Medicare+Choice plans overall and in the number of health plans owned by providers. QualChoice is a subsidiary of five-hospital North Carolina Baptist Hospitals.
In a written statement, QualChoice said it is folding its 12,800-member Medicare HMO, its only remaining insurance product, at year-end because costs are expected to rise faster than reimbursements. QualChoice as a whole made a slight profit last year, but since 1997, the health plan has lost nearly $60 million (See chart). The move would leave North Carolina with just two Medicare+Choice plans in 2003, down from five in 1999, according to the North Carolina Department of Insurance. Nationwide, 157 health plans are offering Medicare HMOs in 2002, down from 346 plans in 1998 (Oct. 8, 2001, p. 4).
Last November, QualChoice announced that it would end its employer-group coverage. That product's phase-out ended earlier this month. Officials with the insurance department and the North Carolina Hospital Association indicated that QualChoice's demise would leave the state with just one hospital-owned commercial health plan, First Carolina Care, owned by three-hospital FirstHealth of the Carolinas, Pinehurst, N.C. For 2001, the plan earned $199,235 on $19.1 million in net premium revenue and ended the year with 6,186 members, according to the insurance department.
Doug Atkinson, vice president of networks at North Carolina Baptist, said the model of primary-care physicians as gatekeepers who make referrals to specialists "looked like a marriage made in heaven" when the system launched QualChoice in 1994. But managed care failed to take hold with consumers in Winston-Salem, or in much of the Southeast. Low government payments under the Medicare HMO program compounded the problem, he said.
"The lesson learned there was that, unfortunately, the federal government was speaking out of both sides of (its) mouth," Atkinson said, trumpeting better options for Medicare beneficiaries but failing to pay for those benefits.
Overall, the QualChoice experience made it clear that provider-owned health plans only work as part of a tightly integrated delivery system because the physician relationships are tricky, Atkinson said. That's especially true for North Carolina Baptist, he said, because its flagship is an academic medical center, 770-bed Wake Forest University Baptist Medical Center, Winston-Salem.
Last year North Carolina Baptist's local rival, Novant Health, sold its managed-care business, Partners National Health Plans of North Carolina, for $202 million to North Carolina Blue Cross and Blue Shield. Novant's move came after Carolinas HealthCare System, Charlotte, N.C., folded its Wellness Plan. In 2000, Duke University Health System, Durham, N.C., sold WellPath Community Health Plans for $25.5 million to Coventry Health Care, Bethesda, Md.
Academic medical centers may be in the worst position among providers that also run health plans, said Tom Robertson, vice president of business strategies and tactics at the University HealthSystem Consortium, Oak Brook, Ill. About 80 academic medical centers are members of the group. Hospitals in general seem to draw members who use more services than unaffiliated health plans, he said, and academic medical centers draw the sickest patients because they offer the most medically complex-and expensive-services.