Byline: Cheryl Powell
Jun. 18--Hospitals nationwide are pulling the plug on their hospital-owned health insurance plans. But a handful -- including at least two in Northeast Ohio -- are sticking it out and helping maintain competition within the communities they serve. Leaders from Summa Health System's SummaCare in Akron and Aultman Health Foundation's AultCare in Canton say they're committed to remaining a locally owned option for the thousands of area businesses and consumers. SummaCare is a vital part of Summa Health System, said Thomas J. Strauss, Summa's president and chief executive. About 15 percent of Summa's hospital revenues come from SummaCare, making the health plan the system's largest payer aside from Medicare and Medicaid, he said. 'If you're just a hospital, you only get paid when patients are sick,' he said. 'There's no incentive for you to keep that patient well and out of the hospital. If you're an integrated system, you can actually work on true wellness and generate benefit financially to keep patients out of the hospital. 'I'm absolutely convinced this is part of the future.' Likewise, Aultman Health Foundation views AultCare as a vehicle to pass on lower charges at Aultman Hospital to the community, said Joe Novak, AultCare's vice president for provider services. The hospital only contracts with AultCare, Novak said. 'The goal was to not have a profit and keep the money in town,' he said. Both local insurers operate with razor-thin margins. SummaCare has an operating margin of 2 percent to 3 percent each year, while AultCare's averages less than 1 percent. In comparison, the health insurance industry posts an average operating margin of 6 percent, with some publicly traded companies approaching double-digit margins, said Rick Byrne, Ohio market analyst for HealthLeaders InterStudy, an industry research firm in Nashville. Unlike their larger competitors, hospital-owned insurers aren't looking to make big bucks, said Cathy Eddy, president of the Health Plan Alliance, a group based in Texas that represents 37 provider-owned health plans. 'The plan helps support the overall objectives of the system,' she said. During the 1980s and into the mid-1990s, many hospitals were looking to diversify and develop strategies to get more patients, Eddy said. AultCare started in 1985, and SummaCare started five years later. Many hospitals also got into the insurance business because of potential changes in the way hospitals were paid, said Alan Bleyer, Akron General Health System's president and chief executive. Akron General acquired HomeTown Health Network in 1999 when it purchased Massillon Community Hospital. Back then, he said, it appeared the industry was moving toward paying hospitals capitated rates. Under that scenario, insurers pay contracted hospitals a set amount of money per enrollee per month regardless of the amount of care provided. Evolving strategy
'The payment model seemed to be going in the direction where you'd have to assume full risk for everything -- from inpatient to outpatient to pharmacy,' Bleyer said. 'That was one of the critical reasons why many hospitals decided to enter the managed-care business, because that seemed to be the focus on managing the care of patients across the continuum.' That form of payment, however, didn't catch on.
'That's part of the reason we decided to divest ourselves of HomeTown,' Bleyer said. Akron General sold HomeTown three years ago to The Health Plan of the Upper Ohio Valley, a nonprofit insurer in southern Ohio. Many smaller, regional players struggled to attract enough customers to compete with national health plans that offer consumers access to more hospitals and doctors, said Byrne, the market analyst.
'A suitor may come along who has a broader customer base to draw the funds from,' he said. 'That's why you see there's about a half a dozen plans -- big, for-profit nationals -- that are starting to snatch up these smaller plans.' Consequently, far fewer provider-owned health plans exist than a decade ago. About 100 hospitals and doctor groups nationwide operate an insurance company, compared with about twice that number 10 years ago, said Eddy of the Health Plan Alliance.
QualChoice deal in works That trend is continuing to play out in Northeast Ohio, where University Hospitals of Cleveland is shutting down its insurance company, QualChoice, and selling portions to WellPoint Inc., one of the nation's largest insurers. Officials with QualChoice declined to comment until the deal is approved by the Ohio Department of Insurance. To ensure a strong future, SummaCare recently completed a strategic plan and reorganized to focus on and grow four key product lines: individual insurance, commercial (or employer-sponsored) plans, Medicare managed-care plans and services for self-insured companies, SummaCare President Marty Hauser said. As a result of the reorganization, 47 of SummaCare's 292 workers lost their jobs. SummaCare's enrollment has dropped within the past year because of a decision to sell its Medicaid managed-care line and loss of a contract to pay claims for the Cleveland Clinic Foundation's employers. SummaCare now has about 133,000 enrollees, down from almost 200,000 several years ago. But SummaCare is financially strong -- it posted revenues of $218 million last year -- and is poised for growth, Hauser said. 'One of the things that came out of our strategic plan is a recommitment to grow SummaCare,' he said. In fact, he said, SummaCare is in the process of investing more than $5 million on a new information technology system to meet future needs and enhance customer service. Struggles at AultCare AultCare also has faced some struggles, including lawsuits from rival companies accusing the insurer of using nonprofit money from its parent Aultman Health Foundation to give secret payments to select brokers who persuaded customers to switch to AultCare. One of those suits was dismissed last year after AultCare bought the rival company; another, filed this month by HomeTown, is working its way through Stark County Common Pleas Court. AultCare officials have defended the payments as legitimate compensation to help brokers with costs associated with transferring clients. Despite the obstacles, provider-owned plans can succeed if they emphasize the 'customer touch' and offer more hands-on customer services to clients in the community, Byrne said. That's exactly the approach SummaCare and AultCare take, said Clark D. Swisher, senior vice president for Leonard Insurance, a broker representing more than 500 area companies. 'They're very good to work with,' he said. 'Because they're involved in the community, they know the dynamics of the companies that they're dealing with. We can really get things done much more quickly with the regional carriers than we can with the national carrier.' AultCare's Novak agreed.
'We want them to know who to call,' he said of AultCare's customers. 'It's not going to be someone in Indiana or Nashville or India.'
Cheryl Powell can be reached at 330-996-3902 or chpowell@thebeaconjournal.com
Copyright (c) 2006, The Akron Beacon Journal, Ohio
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