DAILY MAIL HEALTH REPORTER
The leader of the state's largest health maintenance organizationstepped down today as regulators announced an investigation intoCarelink's severe financial problems.
Al Mytty, chief executive officer of Carelink Health Plans,resigned today after four years at the helm. Carelink insures morethan 60,000 West Virginians, more than any other HMO.
'We have notified Carelink we will be sending a team of examinersand a team of actuaries into the plan to give us a clear picture ofwhere Carelink is and where it's going in the future,' said HanleyClark, the state insurance commissioner.
Clark was to meet today with Phil Goodwin, president and CEO ofCamcare Inc., Carelink's owner.
Charleston Area Medical Center also is a subsidiary of Camcare.Hospital officials announced this week that profits are down andaction will be taken to scale back expenses.
'The financial status they find themselves in is not unusual,'Clark said of Carelink. 'It takes time for an HMO to understand themedical and financial circumstances of their clientele. This is notsomething for the public to be concerned with.'
Camcare has infused about $24 million into the ailing HMO sinceits inception in August 1994. To maintain a license in the state,the commission requires HMOs to keep a $2 million capital surplus.
Carelink, which was licensed in 32 counties as of December 1997,has lost about $22 million in four years.
Goodwin said Camcare is not actively searching for a buyer butcontinues to evaluate options.
Camcare also will continue to support the HMO financially.
'If we can't make it a viable alternative, we will have to look atother strategies,' Goodwin said. 'If we make the decision not to ownit, we sure as heck are not going to close the doors. It would be aresponsible and orderly transitional process.'
Clark said it is not uncommon for the state to step in when aninsurer is experiencing financial difficulties. The commission onceworked with PrimeOne after it lost $2.6 million in one month.
'Our role is to stay on top and work with HMOs,' Clark said. 'Thepublic should watch the financial status of HMOs, but they have noreason to feel any of ours would become insolvent.'
Goodwin said Carelink lost another $2.5 million in the firstquarter of 1998 and is expected to lose as much as $8 million by theend of the year.
Still, Goodwin said Carelink's goal is to break even after fiveyears of operation, or in 1999.
'That's our target,' Goodwin said. 'We have a whole series ofstrategies to get there. We can't tell you now. Premium increasesare an option. If you look around the country, premium increases arecoming from all segments.'
However, Mytty earlier predicted the for-profit company would bemaking money by 1997. To do that, premiums charged by Carelinkmembers would have to cover operating costs of the company.
In 1996, Carelink lost $41.22 per member per month. By 1997, thathad dropped to a deficit of $9.39 per member per month, according torecords at the Insurance Commission.
Clark said his examiners will look closely at the premiumsCarelink charges to Public Employees Insurance Agency enrollees andits commercial business.
'In our initial review, it appears that large losses tend to bewith PEIA subscribers rather than Medicaid or commercial,' Clarksaid.
Compared to other HMOs in the state with a few years ofexperience, Carelink spends a relatively large percentage of itsrevenue on administration. As an HMO is organizing, administrativeexpenses are expected to be large.
In 1997, about 14 percent of total revenue went to administrativeexpenses, compared to 7 percent for Optimum Choice; 7.7 percent forthe Health Plan of the Upper Ohio Valley; and 9.3 percent for QualMedPlans for Health of Ohio and West Virginia.
Mytty, who introduced the concept of wellness and prevention inthe Charleston market, earned $242,683 last year, down from $266,626the year before, according to the Insurance Commis-sion.
Other salaries in 1997 were $185,029 for the vice president ofmarketing and sales, Greg Lueck; $142,450 for the medical director,Glenn Crotty Jr.; $113,655 for the chief financial officer, DaveStacy and $104,123 for the provider network vice president, JohnMarks.
Clark, however, said Carelink's management team was not top-heavy.
'Look at the large number of subscribers,' Clark said. 'They havea great deal of responsibility. Their administrative costs arecoming down.'
Mytty is leaving to pursue other opportunities in health care,Goodwin said. He could not be reached for comment.
Until a successor is named, Robert Deitz will coordinate day-to-day operations and help implement Carelink's revised business plan.
'Mytty has done a wonderful job in an environment in which therewere no managed care plans in existence when we started,' Goodwinsaid.
Therese S. Cox can be reached at 348-4874.
