BUSINESSAetna losses not seen as physicians' gainAs the insurer cuts workers in a profit-driven effort, doctors wonder if they'll have to shoulder some financial load for the nation's largest HMO.By Bob Cook, amednews staff. Jan. 7, 2002. Aetna Inc., known to physicians as the big, bad bully of managed care, is struggling to get back up after being knocked on its back financially. On Dec. 13, 2001, the insurer announced that it would cut about 6,000 jobs this year, on top of the 5,000 it already cut in 2001. This came a month after reporting a $54.4 million loss for the third quarter of 2001, putting Aetna's losses at $92 million through September. No other major, publicly traded health plan is reporting losses; most are reporting profits of more than $2 per share, compared with Aetna's loss of 64 cents per share for the first three quarters for the year. Doctors long have worried about the power of a healthy Aetna -- the nation's largest health plan in terms of revenue ($19 billion through September 2001). Now they fear that a wounded Aetna will try to use physicians, not in a good way, to heal itself. "If [Aetna's] alleged financial difficulties result in further reducing reimbursement or further tying the hands of physicians regarding their ability to provide medically necessary care, yeah, that could be a major problem," said Bill Clark, acting general counsel and director of government relations for the Medical Assn. of Georgia. Cuts like a knifeHartford, Conn.-based Aetna will not pull out of any cities or product lines with this round of job cuts, which represent 16% of its current base of 37,000. Previous cuts included a pullback from the Medicare HMO business. Instead, 2,700 customer-service representatives will be chopped, as well as more than 1,100 workers in regional operations such as sales, marketing, patient management and network underwriting, said Aetna spokesman Fred Laberge. Another 580 employees are going from administrative services. Aetna also counts 1,600 positions that won't be filled when employees leave voluntarily, he said.
Aetna lost 800,000 commercial HMO members in 2001.
Laberge said many positions won't be necessary because of declines in Aetna's membership. As of Sept. 30, 2001, the company counted 8.3 million commercial HMO members, down from 9.1 million a year earlier. Much of that loss came from the sale of Aetna's international business; further membership erosion is expected as Aetna hikes premium prices. "Our bias is on profit rather than growth," said Laberge, whose company grew dominant through past acquisitions of firms such as U.S. Healthcare and Prudential's health care business. "We're certainly over with the types of acquisitions we've made in the past." One number Aetna is trying to reduce is its medical expense ratio -- premium collections divided by medical expenses, which at 90.5% is one of the highest in managed care. By comparison, UnitedHealth Group, the second-largest HMO in terms of revenue, has a medical expense ratio of 85.4%. Aetna is using premium hikes to improve its ratio, Laberge said. Through the first three quarters of 2001, Aetna's HMO commercial premium collections increased $213 million, or 1.3%, but its medical costs jumped $670 million, or 7.3%, said the company's SEC filing. Among other things, the company blamed the increase on increased physician reimbursement and pharmaceutical costs. Wall Street certainly will be happy if Aetna can at least start making money again.
Aetna's 90.5% medical expense ratio is one of the highest in managed care.
"Right now, they've got to show they can be profitable," said Todd Richter, an analyst at Banc of America Securities. "[2002] is not a year of growth." In terms of cutbacks, Richter said, Aetna is behind other large managed-care companies, which made similar cuts a few years ago. Tim Norbeck, executive director of the Connecticut State Medical Society, finds the cutbacks at Aetna troubling, not only because of sympathy for anyone losing a job, but also because the cuts may exacerbate a problem that is a basis for a lawsuit his organization filed last year against Aetna and five other plans. One allegation in the pending unfair business practices lawsuit is that Aetna and other plans "intentionally and systematically see there aren't enough people to handle" doctors' calls, causing long hold times, Norbeck said. Cutting customer services and other administrators probably won't help Aetna handle calls any better, he said. The Medical Society of the State of New York filed a similar suit last year. Both cases are pending. "An already difficult situation has been made that much more difficult," Norbeck said. Meanwhile, doctors say they are still fighting old bugaboos such as the all-products clause, which Aetna last year said it would no longer force on physicians. Despite the claim that physicians can sign up for individual Aetna plans rather than commit to every one of them, the North Carolina Medical Society is alleging that the company is not living up to that claim in contracts currently being sent to doctors. Aetna has written to the society to disagree. And in Georgia, the Medical Assn. of Georgia's Clark said Aetna isn't requiring an all-products clause, but it has structured payment in a way that the financial incentives are better for doctors if they agree to such a deal. ADDITIONAL INFORMATION:Recipe for lossesAmong major, publicly traded health plans, Aetna Inc.'s medical cost ratio is high... Aetna Inc.: 90.5%
...as are administrative costs... Anthem: 18.8%
...which spells trouble for the company's earnings (through Sept. 2001): WellPoint : $4.64 per share
Sources: Company third-quarter 2001 reports; InterStudy Publications' 2001 "National HMO Financial Database." Copyright 2002 American Medical Association. All rights reserved.
|
Featured stories     
« Prev
1
2
3
4
5
6
Next »
Current topicsMost-viewed
This weekUnspent war funds eyed to avoid years of Medicare doctor pay cuts Rite Aid clinics place new twist on "doc-in-a-box" Get our email alertsUse our one-step registration. Learn more Your information will not be shared. Privacy policyColumns and series
From the vaultQuotable"Our goal really is to provide the right care for patients at the right time. Not too much and not too little." Steven Weinberger, MD, co-author of a list developed by the American College of Physicians of 37 clinical situations in which screenings and medical tests provide little or no benefit |
|||||||||
SHARE
