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Capital Gains

Six years ago, Nancy Van Vessem, chief medical director for Capital Health Plan in Tallahassee, was sifting through federal data on back and neck surgeries and noticed that the HMO was paying for more surgeries than other providers. “We were at the 90th percentile nationally for back surgeries here locally,” Van Vessem says.

Physicians in Tallahassee typically recommended costly MRIs for back pain, then prescribed surgery — despite evidence that most people get better without operations, she says.

To curb the reliance on surgery, Capital Health launched an aggressive effort to educate doctors and patients about back pain and the benefits of physical therapy. In face-to-face meetings and newsletters, the firm encouraged physicians to delay ordering costly MRIs and send patients to six weeks of physical therapy unless there was a red flag. “It gave primary care doctors the ‘easy’ button,” Van Vessem says.

Capital Health Plan’s Customers

2012 enrollees 125,000

2012 Medicare enrollees 13,054

Biggest customer State of Florida

Counties Calhoun, Franklin, Gadsden, Jefferson, Leon, Liberty, Wakulla

Accolades Rated best HMO in the nation and third-best private health insurance plan in the nation by National Committee for Quality Assurance

Source: Office of Insurance Regulation, Department of Management Services, National Committee for Quality Assurance

It worked. Most patients’ pain lessened after physical therapy, and back surgeries decreased 24%. Now, Capital Health Plan says the incidence of back surgery among its customers is in the 90th percentile nationally only among 45- to 64-year-old males. The goal is to get that group to the national average.

Intensive use of data and technology to track everything from knee surgeries to colon screenings is one of the hallmarks of Capital Health’s operations. Founded in 1982, the firm is part insurer, part provider. It employs 37 doctors and has a total network of 560 doctors and specialists who accept reimbursement from Capital Health. For customers who need help outside Capital Health’s service area, the company has an agreement with the National Blue Cross Blue Shield Association.

This year, Capital Health’s average premiums stayed flat, compared to the national average of a 7% increase. Members of one plan, for instance, pay an average $271 in monthly premiums for family coverage, and individuals pay $102, both below the national average of $426 for the same plan, according to the Milliman Medical Index.

Capital Health covers on average 90% of health benefits, says Capital Health Plan President and CEO John Hogan.

Notably, the company has implemented electronic records even as most doctors and HMOs elsewhere struggle with the new technology. Patients and their physicians — both staff and affiliated — can see claims, laboratory results and pharmacy history online.

The National Committee for Quality Assurance rates Capital Health’s insurance plan as the third-best in the nation, using data from claims, prescriptions and prevention measures. Capital Health — executives prefer to call it a “delivery system” rather than “insurer” or HMO — is the only Florida-based health insurer to make the list.

The right ingredients

To be sure, Capital Health has several factors working in its favor, including demography. Leon County and Tallahassee tend to be younger and healthier compared to statewide averages. (Capital Health sells Medicare plans.) State workers make up 45% of its enrollment, providing a stable base.

The insurer’s relatively small size makes communicating with members and physicians easier. The medical staff is able to talk directly to Capital Health administrators about health care decisions, Hogan says. Administrators can’t “hide behind a 1-800 number. You’re part of this town. It’s a small town, and you want to be good because they are your neighbors,” Hogan says.

Capital Health has had the same CEO since its inception 30 years ago, a rarity for any company. And as a non-profit, it isn’t beholden to shareholders.

Capital Health also doesn’t face much competition. Coventry Health Plan and United Healthcare enrolled 22,500 Big Bend residents last year, but both companies were dealt a blow when the state shifted to a one-HMO-per-county rule last year. Capital Health was awarded a $20 million-a-month contract for 2012 to be the sole HMO for state policyholders in the Tallahassee area.

Florida Blue is considered a significant competitor because its preferred provider plan enrolls thousands of state and private industry workers. But Capital Health dominates the market. More than half of Tallahassee residents with health insurance choose Capital Health for health care, and 98% of HMO members in the area chose the company, according to Health Leaders-InterStudy.

Capital Health’s Market Base — Tallahassee

82% — Percentage of Tallahassee residents with health insurance, 304,847 out of a population of 369,758

64% — Of the 196,417 people enrolled in commercial health insurance that don’t self-insure, Capital Health plan has 125,000 enrollees, or 64% market penetration.

98% — Of the 120,828 people enrolled in commercial HMOs, Capital Health Plan has 98% market penetration.

Source: Health Leaders-InterStudy

Insured Floridians

75% — Percentage of Floridians with commercial health insurance plans

49% — Percentage of Floridians with commercial plans enrolled in PPOs

29% — Percentage enrolled in POS (point-of-service, a type of managed care that combines elements of PPOs and HMOs)

19% — Percentage enrolled in HMOs

The secret sauce

When Hogan started at Capital Health, consultants told him it wouldn’t work, he says. The enrollment pool was too small and it would take two to three years to become profitable, they said. Hogan, who previously worked as an associate director of two health system agencies in Georgia, felt he knew the community well enough to make Capital Health succeed. It was profitable within five months and had 8,000 new members in its first year.

Last year, Capital Health had $640 million in total revenue, making it the eighth-largest managed care organization in the state. That same year, the plan earned $52.6 million in net income, $30 million higher than the state average for managed care groups, which includes HMOs and PPOs. Capital Health has posted a net income for 23 of its 30 years in operation.

To control costs, Hogan and Van Vessem say Capital Health aggressively uses its primary care physicians as gatekeepers to try to keep its customers out of the hospital and avoid the unnecessary tests and expensive treatments that drive up costs. “When you’re in an emergency room as a patient, you are typically going to see someone that does not know you, may not have access to your record and is in a pressure environment,” Hogan says.

Van Vessem says the company’s physicians regularly test cholesterol of at-risk patients such as diabetics, for example, so that physicians can guard against potential strokes and heart attacks — common killers of diabetics. Capital Health can even set up its electronic records to remind physicians about specific tests or questions to ask certain patients. “We try to detect and fix problems before they become a real emergency,” Van Vessem says.

In addition to holding down costs, the focus on preventive care has translated to high levels of customer satisfaction and few complaints. According to data from the state’s Department of Financial Services, which regulates insurers, Capital Health has had 24 customer complaints since 2009, far below the average of 143 complaints for managed care companies with similar enrollment size.

Mary Pankowski, 71, first became a Capital Health member when she worked for Florida State University in the 1980s. Pankowski, now an assistant state attorney, praises the plan’s customer service and affordability. When her husband last year had a quintuple bypass, neck and foot surgery, Pankowski says, “not for one moment did I worry that the best care wouldn’t be provided.” The cost was “a relatively small amount given the value we get,” she says.

Insurer 2006 2011
Aetna Health $61.6 $91.3
United Healthcare of Florida $59.4 $73.8
Capital Health Plan $31.2 $52.6
WellCare of Florida $12.1 $37.0
Universal Health Care -$13.8 $9.0
Coventry Health Care of Florida NA $8.9
Cigna Healthcare of Florida -$2.5 $0.5
Avg. for Florida HMOs $16.7 $21.9
Source: State of Florida Office of Insurance Regulation

Medicare explosion

Capital Health isn’t immune to the same challenges other insurers face in holding down costs as it complies with the new health care law. Some provisions won’t impact the company, such as eliminating lifetime limits on coverage. “We’ve never had lifetime limits or annual limits,” Hogan says.

Still, the law changes how much Capital Health can charge employers based on the age and gender of patients.

A major challenge for Capital Health is the growth in the number of its Medicare enrollees as the area’s population ages. In just six years, its number of Medicare enrollees has swelled from 5,000 to 13,300, and the company expects to see that number grow further. “The explosion of Medicare is really going to be very significant,” Hogan says. Tallahassee will need more internists — different from family physicians — who understand better how to treat an elderly clientele, he says.

Demand for Medicare is also fueled by Capital Health’s high rankings last year as a Medicare provider. “We’re pretty gratified, but not satisfied,” Hogan says of the growth and praise. “Any time you get satisfied, you can start slipping in terms of attention you need to pay. It’s still a small town, and it’s still a word-of-mouth town. You’re only as good as your last game.”