|San Diego Education Report
|News, information and ideas about our
education system, courts and health care
by Maura Larkins
Kaiser Permanente Is Shutting Down Its H.M.O. in the
By MILT FREUDENHEIM
New York Times
June 19, 1999
Kaiser Permanente, one of the nation's largest health maintenance organizations,
said yesterday that it was closing its money-losing Northeast division, at the end of
the year. The move affects 575,000 members in four states, including 29,500 in
the New York suburbs of Westchester County and Fairfield County in Connecticut.
The H.M.O. said it lost almost $90 million on nearly $1 billion in revenue in the
Northeast last year. Dr. David Lawrence, the chief executive of Kaiser Foundation
Health Plans and Hospitals, said the company had decided against investing more
money into the region.
This is the fourth regional pullback by Kaiser, a nonprofit company that has been
losing money for two years. Kaiser sold its Texas H.M.O., with 130,000 members
in the Dallas-Fort Worth area, last year. It also plans to close health plans with
107,000 members in Charlotte and in Raleigh-Durham in North Carolina this year.
The latest shutdown includes 28,000 Medicare members in upstate New York,
adding to a nationwide pullback by other managed care companies, which has
forced hundreds of thousands of elderly Americans to switch health plans.
Kaiser was unable to attract enough customers in the Northeast unit -- New York,
Connecticut, Vermont and Massachusetts -- to support its West Coast style of
managed care, which mostly uses large groups of 60 or more specialized
physicians, a Kaiser spokeswoman said.
Similar problems have plagued H.I.P., a New York-based health plan. Its New
Jersey unit was forced to file for bankruptcy protection last year, and the
company's growth has been relatively slow in New York at a time when other
managed care companies have expanded rapidly.
Patients in the Northeast have favored more loosely organized types of managed
care, including networks of doctors operating from small, separate offices.
''Kaiser has been successful in California, but this area of the country is not ready
for that model,'' said Jane Laffner, a senior consultant in Stamford, Conn., with the
Watson Wyatt consulting firm. ''The Northeast is still a few years behind California,
and this is a Darwinian market.''
In a region with big metropolitan areas like New York and Boston, Kaiser's
enrollment was spread thinly across smaller cities and rural areas, including
97,000 in western Massachusetts. ''We do best in urban, densely populated
areas,'' said Beverly Hayon, the Kaiser spokeswoman.
Kaiser said the 600 doctors and other professionals in the unit were trying to
move to other health plans in the hope that their patients could easily transfer with
them rather than switch to new physicians.
''There are a number of other plans quite eager to get this enrollment,'' said Dave
Rahill, a principal in New York at the William M. Mercer benefits consulting firm.
''They include Aetna, Empire Blue Cross, Cigna and Physicians Health Plan in
Consultants and employers are already planning to advise Kaiser customers of
their choices when they decide on next year's health plan, typically in October.
Jeff Simek, a spokesman for the Xerox Corporation, said, ''Most of our employees
will have a choice of half a dozen alternative plans, from H.M.O.'s to traditional
fee-for-service coverage.'' He said perhaps 200 Xerox employees in the Northeast
were enrolled in Kaiser.
Kaiser had total operating losses of $881 million for 1997 and 1998. It reported a
profit of $56 million from operations on revenue of $4.2 billion in the first three
months of 1999, its first quarterly profit since Sept. 30, 1997.
Subtracting the Northeastern members, Kaiser will have about 8 million members,
of which 5.8 million are in California. It also has H.M.O.'s in Washington, Atlanta,
Baltimore, the Kansas City area, Cleveland and Akron, Ohio, and in Washington
State, Oregon and Hawaii.
Aetna U.S. Healthcare is larger, with about 11.3 million H.M.O. members. Cigna
and United Healthcare Group each have 6.9 million, according to estimates by
Bernstein Research, a Wall Street firm.
To stop its losses, Kaiser raised monthly premium charges ''9 to 10 percent
across the country in 1999,'' Ms. Hayon, the spokeswoman, said. She said there
were wide variations in the increases, up to an 11.7 percent rise at the California
state employees pension system.
Kaiser leaves Connecticut
My friend in Connecticut tells me that the CT attorney general noticed that Kaiser
was not following the state's rules about referrals. Rather than comply, Kaiser left
the state. She thinks Kaiser wanted to protect its profits.
After it left the state, Kaiser sent patients' medical records to Iron Mountain.
Connecticare, Kaiser Sign Deal
Hmo Transaction Must Be Approved By State
July 23, 1999|
By MATTHEW KAUFFMAN;
Courant Staff Writer
Kaiser Permanente, the giant HMO that announced it was pulling out of the state
at year's end, will transfer most of its Connecticut business to Farmington-based
ConnectiCare Inc., the companies announced Thursday.
The deal, which was expected, will affect about 43,000 of Kaiser's 60,000
members in the state. It does not cover Kaiser members who are on Medicare or
Medicaid and those who contract for insurance directly with the company rather
than through their employers. A spokesman for Kaiser said the insurer is working
with state regulators and the Health Reinsurance Association to come up with
options for those members.
Under the deal, most Kaiser members will be able to keep their doctors if their
employers sign up with ConnectiCare, said the spokesman, David Rooney.
ConnectiCare recently signed a deal to work with Kaiser's staff physicians, who
are taking over Kaiser's five medical centers in the state, where more than 60
percent of Kaiser members get care.
ConnectiCare also has 5,500 network doctors, including most of Kaiser's network
doctors, Rooney said.
The financial terms of the deal were not disclosed. The transaction is expected to
be completed by the end of the year, subject to the approval of regulatory
That approval will not be automatic. ``We're scrutinizing the deal closely,'' said
Connecticut Attorney General Richard Blumenthal. ``We met with both Kaiser and
ConnectiCare, as well as potential competitors, and we're reviewing all the details
of the agreement.''
Blumenthal said the state would examine antitrust questions and thorny
charitable-trust issues that are raised when a for-profit HMO joins forces with a
nonprofit HMO such as Kaiser.
``And obviously one of our main concerns, and perhaps our predominant
concern, is making sure there is adequate insurance coverage for consumers who
are affected,'' Blumenthal said. ``I hope that we'll reach a conclusion sometime
within the next month or so.''
Kaiser said it will contact customers later this summer with details and a schedule
of the transition to ConnectiCare.
Kaiser, which lost $90 million in the Northeast last year, including $14.6 million in
Connecticut, announced in June that it was abandoning the Northeast to
concentrate on more profitable areas. But officials at ConnectiCare, which already
has 220,000 members, said the addition of Kaiser members will boost their
company, particularly in the Hartford area.
``In Kaiser Permanente, we found a unique opportunity to acquire a stable plan
with a rich history in the market,'' said Marcel L. ``Gus'' Gamache, chief executive
officer of ConnectiCare.
LIST OF WEB SITES THAT
SPECIFICALLY STUDY KAISER
PERMANENTE AND PROVIDE
ADVOCACY AND OFFER
SUGGESTIONS FOR THE
Conahan v. Sebelius and Kaiser
Foundation Health Plan, Inc.
Cases and news
Doctors who cause death
Doctors who go along
with Kaiser tactics
Doctors in charge of