Aug. 13--When Health America of Pennsylvania enlisted Pyramid Health, one of the region's large hospital networks and Allegheny General Hospital's parent company, to authorize treatment decisions instead of authorizing them itself, it looked very much like the company was backing away from the business of managed care and becoming a plain vanilla insurer.
Whatever the appearance, the reality is otherwise, the company's new chief executive and outside analysts say.
Robert Mayer, president and CEO, views the move merely as the latest evolutionary phase in managed care -- one that will make physicians and medical institutions responsible for day-to-day treatment decisions while managed care companies provide guidance to improve standards of practice and look out for the big picture.
Under traditional indemnity plans, the health care was 'episodic.' Physicians treated patients when they got sick and insurers paid the bills.
'Then we evolved into HMOs, trying to force doctors to do things a different way' emphasizing preventive care, among other things, Mayer said. 'Now we're at the third level. ... We guide, we direct, we work with, we partner,' to ensure high-quality care and cost efficiency.
In that regard, Health America is in step with some of the more progressive trends in managed care nationally.
But it's also in the midst of an evolution of its own.
Last year, the health plan's parent company, Nashville-based Coventry Corp., alarmed Wall Street and its health plan customers with an annual loss of $61.3 million, despite a 24 percent increase in revenues. The company violated its borrowing agreements and its stock plunged.
Health America had also seen layoffs and operations and service had suffered.
Both Coventry and Health America underwent management shake-ups, with the parent appointing a new CEO, Allen Wise, in September as losses mounted. Wise recruited Mayer as senior vice president of Coventry in January and appointed him CEO of Health America of Pennsylvania, the company's largest health plan, in June.
Coventry's decision to begin selling off the group physician practices it owned -- including Penn Group Health, which Allegheny General's parent acquired earlier this year -- added to the appearance of instability.
But the practice sales -- and the decision to give certain medical providers such as Pyramid a share of premiums, rather than fee-for-service payments, to both deliver care and approve day-to-day treatment decisions -- have helped the company's financial picture.
Coventry posted a modest operating profit for the quarter ended in June. Mayer said both it and Health America are expected to end the year in the black.
'Financially, clearly the balance sheet has been stabilized and things are improving,' said George Shipp, an analyst who follows Coventry for Scott & Stringfellow, a Norfolk, Va. investment firm.
Among the problems that led to the losses was a fierce battle for new members that led to an all-out price war among insurers such as Health America and Highmark Blue Cross and Blue Shield. (Highmark took its lumps too, racking up huge losses last year.)
Mayer vows he won't fight for members at the expense of profits. Premium prices for some customers could go up as a result and the health plan may lose some employer groups before it begins building enrollment again, he said.
'This company made some poor decisions. ... We have some (employer) groups where the cash flow is just inappropriate.'
But the new CEO, who is credited with three HMO turnarounds earlier in his career, said he believes the membership game will ultimately go to those managed care plans that ensure quality and service.
With that in mind, he said, he is shoring up Health America's customer service staff and is thinking of adding to its network of providers somewhat. Mayer said he's cut claims processing backlogs from one month to a week.
The health plan has also invested $14 million this year in technology to improve service and is rolling out new disease management programs that help members with chronic illnesses avoid hospitalizations by managing their conditions better on a daily basis.
Mayer said he believes enrollment gains will follow and that the company can get back to double-digit gains again.
Company: Health America of Pennsylvania
Business: Managed health care insurer
Employees: 1,100
Headquarters: Harrisburg
History: Formed in 1969 as Community Health Association of Western Pennylvania by a group of Pittsburgh business and labor leaders trying to stimulate competition for Blue Cross. Evolved into Penn Group Health plan in 1974, which became one of the first health maintenance organizations in the country. In 1981, Health Plans of Nashville took over management of the HMO and later renamed it Health America. Coventry Corp., based in Nashville, acquired Health America in 1988.
(c) 1997, Pittsburgh Post-Gazette. Distributed by Knight-Ridder/Tribune Business News.
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