News in brief - Aug. 28, 2000

Mayo to discontinue its HMO - Consumer drug ads to top $2 billion - Jumbo Calif. group finds the money - Aetna: more choice, higher co-pays - R.I. Blues reports surplus - Patients' co-pays rising

Aug. 28, 2000.

Mayo to discontinue its HMO

The Mayo Clinic in Rochester, Minn., will discontinue its 8,800-member HMO by the end of 2001.

Mayo said the plan made a small profit over 15 years but incurred a $1.6 million loss in 1999, with another loss expected this year. The blame is being put on the higher costs of drugs, technology and doctor visits.

Consumer drug ads to top $2 billion

Spending on direct-to-consumer ads for prescription drugs is expected to top $2 billion for 2000, according to Scott-Levin consultants.

Leading the list for the first quarter: Merck spent $67 million on Vioxx, a COX-2 inhibitor; AstraZeneca spent $42 million on Prilosec, an ulcer therapy; and Schering-Plough spent $34 million on Claritin, an antihistamine.

Jumbo Calif. group finds the money

KPC Medical Managementhas secured a rescue package from HMOs worth more than $30 million, said KPC owner Kali Chaudhuri, MD.

He said the new package of loans and higher capitation rates will address a financial crisis that has forced KPC to suspend payments to many contracted physicians. KPC bought practice assets in Southern California from MedPartners, which had decided to close its physician practice management operations.

Aetna: more choice, higher co-pays

Aetna recently filed a rider with regulators in some states that would allow members to use specialists without getting referrals.

Aetna officials also indicated they will raise some co-pays, such as those for emergency department visits.

Meanwhile, the company says it will phase out capitation for all primary care physicians in Connecticut. Aetna already agreed in May to eliminate capitation for Connecticut primary care physicians who serve 100 or fewer Aetna members.

R.I. Blues reports surplus

Blue Cross & Blue Shield of Rhode Island has reported a $29 million surplus for the first six months of this year. The plan had been suffering severe losses in the 1990s.

President and CEO Ronald Battista said the insurer will need to use the surplus to build up reserves and help ensure its long-term survival. That translates into no increased reimbursements for physicians and other providers and no lowered premiums for subscribers.

In 1996, 1997 and 1998, Blue Cross lost a total of $73.2 million. Battista said he expected to be in the black by $60 million to $70 million by the end of the year.

Patients' co-pays rising

Due to rising costs, 70% of HMOs and pharmacy benefits managers have imposed a three-tier co-payment system, compared with 50% in fall 1998, according to a survey by Scott-Levin consultants.

Under the system, patients pay the least for generic drugs, more for formulary brand-name drugs and the most for nonformulary drugs -- raising co-pays for those drugs.