News in brief - Oct. 9, 2000

Mixed financial results for HMOs - Ads linked to rising drug sales - Need protocols for failing IPAs - Premiums up more than costs - Watchdogs eye Blues pact - Mass. gathers health care data - N.C. doctors will drop contracts - County society sharing complaints

Mixed financial results for HMOs

Although HMOs lost a total of $186.6 million last year, plans with more than half a million members made total profits of $753.5 million, Weiss Ratings reports.

HMOs in California were the most profitable, and those in New York and New Jersey were mostly in the black. But plans in Texas were least profitable, and big aggregate losses also were reported in Massachusetts and North Carolina.

In particular, the 53 Blue Cross Blue Shield plans recorded a $171.8 million profit on their underwriting businesses in 1999, compared with a $788.3 million loss in 1998.

Nearly one-third of that turnaround was attributed just to Empire Blue Cross & Blue Shield of New York, Anthem Insurance Cos. of Indiana and Health Care Service Corp. of Illinois.

Ads linked to rising drug sales

Advertising for pharmaceuticals rose from $1.3 billion in 1998 to $1.8 billion in 1999, while retail spending for prescription drugs shot up to $111.1 billion from $93.4 billion, according to the National Institute for Health Care Management.

The study said heavy drug advertising persuades consumers to "push for newer, costlier medicines when less expensive drugs would work just as well."

Need protocols for failing IPAs

With California independent practice associations closing at a rate of one every two or three weeks, the California Medical Assn. is asking the state Dept. of Managed Health Care to institute a standard transition plan for such closures to ensure continuity of care.

Specifically, the proposal says HMOs should contract directly with physicians on an individual basis and pay on a fee-for-service basis until a new IPA contract begins.

Meanwhile, the CMA is asking the 13 health plans that contract with Family Health Care to loan the San Fernando Valley independent practice association $3 million so that it can recover from financial losses.

The CMA helped to negotiate a bailout package of $11 million from health plans for KPC Medical Management, which was just finalized recently.

Premiums up more than costs

In a survey by Deutsche Banc Alex. Brown, large companies said health insurance premiums had risen 9.25% this year and would rise 10.5% in 2001 -- surpassing projected medical cost increases of 7.5% for 2000 and 8.5% for 2001.

Insurers attribute the rise to an aging population, higher quality care and prescription drugs, but analysts say they will have to prove they are worth the steep hike or lose business.

Watchdogs eye Blues pact

States may lose millions in charitable assets if they hastily approve a recently announced affiliation between Seattle-based Regence BlueCross BlueShield of Oregon and Chicago-based Health Care Service Corp., which owns Blue Cross and Blue Shield of Illinois and Blue Cross and Blue Shield of Texas, two consumer groups warn.

San Francisco-based Consumers Union and Boston-based Community Catalyst said that in past similar mergers, states had lost millions that could have gone to charitable foundations for health care because they failed to note Blues plans' gradual transition from nonprofit to for-profit status.

Mass. gathers health care data

Beginning in January 2001, the state of Massachusetts and the University of Massachusetts will open a new Web site that pulls together existing public information on the financial health of hospitals and HMOs in the state.

Officials hope to catch problems early on and avert another financial crisis like that of Harvard Pilgrim Health Plan earlier this year.

N.C. doctors will drop contracts

Cornerstone Healthcare, a multispecialty practice comprising about half of the physician population in High Point, N.C., and Piedmont HealthCare, a large medical practice with offices in Davie County, separately announced they would terminate their contracts with Blue Cross and Blue Shield of North Carolina.

Blue Cross accused both practices of going to the press to better their bargaining position, but they denied the allegation.

County society sharing complaints

New London County Medical Assn. in Connecticut will share complaints against HMOs it receives from its members with state Attorney General Richard Blumenthal.

Blumenthal recently filed a class action lawsuit earlier this month against four managed care companies for a variety of alleged violations, including late payments and making arbitrary coverage decisions.