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Florida Small Business



May 26, 2018

Health Services

Deborah Borfitz | 1/1/1996
Employers' quest for lower premiums, and growing acceptance of managed care as the vehicle for achieving it, will be the major shaper of business conditions for Florida's health-services industry in 1996 and beyond.

"The health-care delivery system, which has been exempt from the natural forces of economic competition, will now be brought into the fold," says Donald White, spokesman for the Group Health Association of America, a Washington trade group.

In 1994, the Florida Hospital Association says the state trailed only New York and California in enrollment in health maintenance organizations (HMOs), the traditional model of managed health care that offers a benefits package for a fixed monthly fee.

About one-quarter of Florida's 1.6 million Medicaid-eligible population are now enrolled in HMOs, says Chuck Corley, health program analyst with the Agency for Health Care Administration (AHCA). Last year, Medicaid HMOs were put on an enrollment freeze when a number of plans came under fire for poor quality care; after the complaints were cleared up, the freeze was lifted for most plans.

But a number of others factors could restrict a plan's ability to sign up new members, he adds, including a state requirement that an HMO which includes Medicaid patients must have at least 25% of its enrollment made up of non-government clients. Medicaid enrollees who are unhappy with HMOs, perhaps because they're not allowed access to the specialist of their choice, have the option of enrolling in MediPass. It's a state-administered program that gives primary care physicians control over a scope of services enrolled individuals receive.

Medicare HMOs
About 18% of the state's 2.6 million Medicare beneficiaries were enrolled in HMOs at the end of October. Membership is bound to soar in 1996, predicts Cynthia Sucher, executive director of marketing and public affairs for the Central Florida Division of Columbia/HCA Healthcare Corp., as more insurers introduce plans with better coverage and lower out-of-pocket costs.

Despite annual growth of better than 20% during the past three years, the number of state-licensed HMOs has remained relatively unchanged (at about 32). In part, this reflects the consolidation in the health-insurance market, as companies that failed to meet the state standard for solvency have been bought out by other HMOs. According to White of the Group Health Association of America, this leaves Florida with "fewer, stronger HMOs."

Big, out-of-state HMOs will continue to enter the Florida market primarily by buying smaller or financially troubled HMOs, says Melissa Gannon, insurance research manager for Weiss Ratings, Inc., Palm Beach Gardens.

These big HMOs are from competitive managed-care markets, and they are looking at Florida because its hospital usage rates are higher than they see in their markets. Many figure they can implement their policies in Florida, drive down utilization and make money, reports the Florida Hospital Association (FHA).

Increased competition will force down premiums, which have been flattening since the state's 1993 creation of Community Health Purchasing Alliances (CHPAs).

HMOs will be held more accountable by corporate purchasers, says White. "Increasingly, employers are not contracting with health plans unless they can demonstrate they provide quality care." But for now, costs remain the deciding factor because the various plans still are not differentiated on the basis of the quality of service, according to Bob Sabo, director of Ernst & Young's managed care practice for Florida based in Miami.

Hospitals and physicians alike are feeling the squeeze from managed-care plans. The plans are in strong negotiating positions on matters of price, due largely to the oversupply of providers and beds, says Richard Rubinson, MD, president of the Dade County Medical Association. "It's a buyer's market, so there's a lot of bottom-feeders in the medical marketplace."

As a result, physicians' gross income has plummeted by about 30% over the last five years, and by 40% or more among some specialists in South Florida. Primary care physicians have fared somewhat better, largely because of their role as "gatekeepers" of care for enrolled individuals. "The perception is that physicians are a bunch of fat cats with big cars and big houses, but there is some real pain out there," Rubinson says.

One remedy for a doctor is to sell his or her practice to a physician service management company and become its employee, he adds. South Florida's physician glut has made it a fertile ground for such companies, whose aim is to make physician practices more efficient, and thus more appealing to managed-care organizations.

And increasingly, what managed-care payers want is "capitation" -- the practice of paying providers a set monthly fee per patient rather than per health-care service. But some see this as a way for doctors to collect more money for less work. "It's unethical and borders on the immoral," charges Rubinson. "The less physicians do for patients, the more money winds up in their pockets."

Regardless of payment arrangement, Rubinson adds, physicians will have to "make do with less. Fee-for-service medicine will be a relic. If physicians try to maintain the status quo, and not manage change, they'll be left to hang out and dry."

Still, while a significant number of doctors are on the track toward consolidation, Steven Baratta, CEO of Associated Primary Care, Tampa, says the "vast majority are still in solo practice."

Community hospitals are collecting less from HMOs and PPOs than they collect from traditional indemnity insurance plans. "Hospitals have learned to manage in this environment in terms of their costs, working with physicians to make sure what is done is appropriate but not excessive," says Ernst & Young's Sabo. They also are making increasing use of outpatient care.

Between 1990 and 1994, the median total profit margin among Florida acute-care hospitals rose from 2.89% to 6.52%, according to HCIA Inc., a Baltimore, Md.-based health-care information company. But cuts in Medicaid and Medicare could "significantly change" hospitals' financial outlook, says Kim Streit, the FHA's vice president/information services.

Multi-hospital systems own 78% of hospital beds in Florida. Many of the state's remaining 44 independents, largely overlooked by employers and insurance companies when they put together managed care contracts, are now actively seeking merger partners or developing alliances with other hospitals, says Streit.

Technological advances are allowing many procedures to be performed safely without a hospital stay. "Even if admissions increase," as would be expected among Florida's growing and aging population, "patient census will still decrease," says Columbia/HCA's Sucher. The demand for inpatient services will diminish further as hospitals assume more of the cost risk of care by accepting flat-fee payments from HMOs.

Hospitals still have work to do. While patient days in hospitals fell an estimated 5% over the past five years, the loss of licensed beds fell by a mere 1%, according to the FHA.

Hospitals are expressing interest in forming their own HMO, under the auspices of a physician-hospital organization (PHO), "so they can run the show," says Glen Lewis, financial analyst and HMO coordinator for the state's Department of Insurance. But it's unlikely to happen in the near term. Few hospital systems will risk antagonizing insurance companies by developing their own plan, predicts Sucher, "unless they can jump in with a huge number of members."

Currently, the only state-licensed PHO/HMO is Neighborhood Health Partnership, a joint venture between Dimensions, a five-hospital system in Miami, and John Alden Insurance. But "everyone wants to get on the bandwagon," says FHA's Streit, including physicians. The Florida Medical Association and Florida Osteopathic Medical Association, for instance, have teamed up to form a physician-run HMO. Part of its appeal, says Rubinson, is that profits will go back into the system, not to stockholders or executives. The problem with existing HMOs, he adds, is that only about 70 cents of every revenue dollar goes into patient care in some instances.

Dental HMOs
Among dental HMOs, which are years behind their counterparts in medicine, one of the most formidable barriers to expansion is dentists themselves. Statewide enrollment in dental HMOs reached 1.8 million at year-end 1994, up nearly 18% from a year earlier, while net profits zoomed 36%, according to the State Department of Insurance. But many dentists continue to grumble that such plans, by restricting freedom of choice and paying dentists what amounts to a monthly retainer fee, are bad for patients -- not to mention the dentists' own livelihoods.

"I can't possibly see patients on a volume basis and produce the kind of quality dentistry I like to produce," grouses Tampa dentist Frank Giunta, a managed-care holdout. Prepaid plans usually will discount fees 30% to 50% off standard charges, and dentists simply don't have that much to play with, he says. "There's 70% overhead in dentistry -- twice that of medicine." And enrollees in such plans often have to wait several weeks to get an appointment with contracted dentists, who are reluctant to empty their calendar of private pay patients.

But soon, many dentists may have to give up the fight. More employers are migrating to managed dental-care plans, whose premiums are typically 25% to 45% lower than fee-for-service plans. On a statewide annual basis, premiums for a typical prepaid dental plan average $155 for individuals and $364 for families, compared to $276 and $635 for traditional indemnity dental plans, says Gail Garcia, vice president and secretary at Plantation-based CIGNA Dental Health.

Moreover, employees like them. Unlike traditional indemnity plans, dental HMOs generally offer preventive checkups at no charge, no cap on annual benefits and no deductibles.

Tags: Florida Small Business, Politics & Law, Business Florida

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