News in brief - April 25, 2005

AOL founder establishes health plan - Magellan launches obesity program - HCA puts hospitals up for sale - Study: Hospital ads play on emotions - Group resolves FTC allegations - HealthSouth, former auditor sue each other

AOL founder establishes health plan

The founder of America Online says he's put up $500 million of his personal wealth to establish a new company called Revolution that will market consumer-directed health plans and promote wellness programs.

Steve Case said April 4 that the new powerhouse would bankroll ventures in the health care field and in the vacation resort industry. Although Case gave few specifics, the Revolution Web site said that the company has been working for a year to create "the first comprehensive, consumer-driven health care company, designed totally around meeting the needs of consumers and giving them more choice," and would be ready to unveil it in May.

Revolution is based in Washington, D.C., and Case is its president.

Case told The Washington Post that he had become aware of the deficiencies in the present health care system in his role as a patient and a parent, and in conversations with Senate Majority Leader Bill Frist, MD (R, Tenn.).

"It is the largest industry in the country, and almost everyone is unhappy with it," Case told the Post. The new company "is a significant commitment and will be my principal focus," he said.

Case also announced he was buying the assets of West Virginia-based Wisdom Media Group, a developer of health-related programming for cable and satellite TV networks.

Case built AOL into an Internet powerhouse, and then, at the top of the tech-stock bubble, led AOL's acquisition of Time Warner. Case quit as chair of AOL Time Warner in 2003 as investors criticized the company for heavy financial losses and a falling stock price.

Magellan launches obesity program

Magellan Health Services has introduced a disease management program intended to give obese patients information over the Internet on dieting, nutrition and exercise, provide them with one-on-one telephone guidance, and help them understand the potential risks and benefits of bariatric surgery in cooperation with their physician.

The Farmington, Conn.-based company, which administers behavioral health carve-out programs and psychiatric disease management programs for plan sponsors, said in April that it would market the product, named "Condition Care Management: Obesity," to health plans, employers and other buyers of medical care.

The program incorporates online "animated coaches" that tell patients about weight loss and aid them in using screening tests; telephone coaches who provide one-on-one education and community referrals; and, if necessary, a specialty network of psychiatrists, psychologists and social workers who can discuss behavior modification, tailored exercise and nutrition counseling, the company said.

If patients meet the clinical thresholds to qualify for bariatric surgery, another phase of the program provides emotional counseling before, during and after the surgical period using telephone coaching and individual and group therapy.

HCA puts hospitals up for sale

HCA Inc., has announced plans to shed 10 acute care hospitals, becoming the latest hospital chain to take steps to slim down.

The targeted hospitals are in six states, primarily in rural and small urban markets, HCA said in its March 28 announcement. HCA did not say how many hospitals it would own after it completes the sales, though its portfolio currently includes about 190 hospitals.

Study: Hospital ads play on emotions

Advertising by some of the nation's top academic medical centers frequently targeted patients by playing on their emotions and promoting unproven or cosmetic procedures, a study concluded.

The report, which appeared in the Archives of Internal Medicine on March 28, examined advertisements at the 17 academic medical centers that were named to the U.S. News & World Report 2002 honor roll of the nation's best hospitals.

It looked at 127 nonresearch-related print ads and found that 122 of the ads were aimed at attracting patients. Of those, nearly 62% used emotional appeal as a strategy to attract patients.

The study also found that 21 of the ads touted single interventions, with 38.1% promoting unproven procedures and 28.6% for cosmetic procedures. More than half of these ads presented benefits, but only one outlined potential harms. An example cited in the study featured the image of a middle-aged woman with words exclaiming, "We do botox!"

Robin Larson, MD, MPH, lead author of the study, said she wasn't surprised to find that academic medical centers were engaging in advertising, but she was shocked by what types of advertisements were being used. Dr. Larson is a clinician researcher at the Veterans Affairs Medical Center in White River Junction, Vt., and an instructor of medicine at Dartmouth Medical School.

Rick Wade, spokesman for the American Hospital Assn., said that all advertising evokes some sort of emotional reaction. But hospitals should be particularly careful with how they advertise because of "the special place they hold in the community."

He added that hospital advertising can be an important resource for the public when it is used for health promotion and illness prevention.

Group resolves FTC allegations

A group of Chicago-area physicians has reached an agreement with the Federal Trade Commission to resolve price-fixing allegations raised in a broader complaint about a hospital merger.

Evanston Northwestern Healthcare Corp. said it voluntarily signed a consent order, without admitting any wrongdoing, which calls for its ENH Medical Group to cease negotiating fee-for-service contracts on behalf of independent physicians.

The FTC had alleged that price-fixing occurred when Evanston Northwestern took over Highland Park Hospital and folded an independent physician association into the larger ENH Medical Group, which then allegedly negotiated with payers for uniform prices on behalf of nearly 1,000 salaried and independent physicians.

The FTC said the order, announced April 5, settles one part of its complaint against Evanston Northwestern over its 2000 acquisition of Highland Park. Counts alleging that the merger was illegal and anticompetitive are pending before an administrative law judge.

HealthSouth, former auditor sue each other

HealthSouth is suing its former auditor, Ernst & Young, accusing the firm of breaching its contract by failing to detect massive accounting fraud at the outpatient services giant.

The lawsuit, filed April 1 in circuit court in Jefferson County, Ala., was a response to an earlier lawsuit filed by Ernst & Young. According to published reports, that suit claimed HealthSouth hid the fraud, damaging the accounting firm's reputation and exposing it to lawsuits.

In HealthSouth's complaint, the company said Ernst & Young auditors either intentionally ignored the fraud or were negligent in failing to detect it. The complaint seeks compensatory and punitive damages.

An Ernst & Young spokesman did not return messages seeking comment.

The complaint also included statements that appear to mark the first time that the company has publicly accused its ousted founder, Richard M. Scrushy, of directing the $2.6 billion accounting fraud that was made public after the FBI raided the company in March 2003.

Federal prosecutors have alleged that Scrushy and others conspired to inflate earnings in a scheme to meet Wall Street expectations. At least 18 former executives have faced criminal charges in the case. Scrushy's trial in federal court began on Jan. 5.