PacifiCare Keeps OC Seniors; Cardiac Science Marketing Key Product
Two top officials of St. Joseph Health System, Orange, are calling for a re-evaluation of the industry’s fixed-payment system for healthcare in the wake of the hospital company’s decision to stop accepting new patients from health maintenance organizations.
St. Joseph said it made the decision to cut off new HMO patients because it was losing $45 million on its local contracts and had worries about losing even more money if it had to assume a larger patient load in light of troubles with other large medical groups in Orange County.
“There is a problem with the capitation model,” said Joe Randolph, St. Joseph’s chief financial officer. “It’s not just Orange County, it’s a problem throughout the state.” Capitation is the practice where healthcare providers such as St. Joseph are paid a fixed amount per patient each month, regardless of the treatment involved.
Randolph said his system gets the same amount of money for a healthy 24-year-old woman as it does for a 50-year-old “in dire straits,” regardless of how much care is provided.
“The premiums are not nearly what they need to be,” he said.
Randolph said he would like to see California’s new state Department of Managed Care take a different approach to such issues, noting that the Department of Corporations, which formerly oversaw HMOs, only got involved if an organization was threatened or in bankruptcy.
St. Joseph is also concerned about the assumption of risk, said Bob Fraschetti, chief executive of St. Joseph Heritage Health, the medical practice foundation that manages all of the system’s affiliated medical groups in Orange County.
Fraschetti said providers don’t get enough reimbursement to deal with changes in the system, including technical advances in pharmaceuticals, among other things. He warned that if the assumption of risk continues by providers, the healthiest ones would not be that way for long.
Besides not accepting new patients, St. Joseph indicated that it would consider ending relationships with HMOs it currently contracts with. But, for the time being, more than 400,000 Orange County St. Joseph patients who already belong to HMOs will receive care from the system.
OC Untouched by Medicare HMO Withdrawals
Come January, more than 700,000 Americans 65 years or older who belong to so-called Medicare-risk health maintenance organizations won’t get their healthcare from such groups. Many seniors in Orange County, however, appear to be untouched by the curtailing of coverage so far.
PacifiCare Health Systems Inc., Santa Ana, won’t drop its Secure Horizons Medicare HMO in Orange County or any other part of the state. PacifiCare, however, is going to leave 15 counties in five states, potentially affecting more than 26,600 people.
PacifiCare’s pending withdrawal will affect 7,200 members in Arizona; 6,630 members in Colorado; 6,300 in Ohio; 5,000 in Texas and 1,480 in Washington state.
PacifiCare and other Medicare HMO operators faced a July 3 deadline to tell the U.S. Health Care Financing Administration whether they were going to stay in the Medicare Plus Choice program.
Medicare-risk HMO operators and the American Association of Health Plans, an industry trade group, frequently complain about what they consider a lack of adequate reimbursement from the federal government to care for their patients because seniors are heavier consumers of healthcare services than the general population.
Even though HMOs have been among the most attacked forms of managed healthcare, Medicare-risk plans are popular with seniors because they offer some degree of prescription drug coverage,a benefit that is absent from traditional fee-for-service Medicare. Congress and the Clinton administration, striving for the senior vote, have rushed to get competing Medicare drug benefits into play.
Other big players, such as Aetna, United Healthcare, Humana and Foundation Health Systems, already made plans to withdraw from certain Medicare markets.
Swiss Infuse Device Maker With Cash
Cardiac Science Inc., Irvine, said it raised $9.7 million through a private placement of its common stock to investors from Switzerland. Cardiac Science, a maker of heart defibrillators, sold 2.1 million shares of its common stock at a price of $4.50 a share. Proceeds from the offering will be used to fund global marketing of Powerheart, the company’s initial commercial product. Cardiac Science also plans to develop additional products and use some of the cash raised for working capital.
Separately, Cardiac Science signed an agreement to license its tachyarrythmia detection software to Medtronic Physio-Control, a maker of external heart defibrillation machines that’s part of Medtronic Inc. The software will be integrated into Medtronic Physio-Control’s Lifepak products for the hospital market.
Bits and Pieces:
Kaire Holdings Inc. of Los Angeles relocated its EZ-Trac laboratory division to the Irvine facility of Stason Pharmaceuticals Co., the U.S. arm of Taiwan-based Standard Chemical and Pharmaceutical Co., as part of a strategic agreement between the two companies MedicineNet.com, Irvine, and IDG Books Worldwide collaborated to publish Webster’s New World Medical Dictionary. The dictionary, which MedicineNet.com said was written by its doctors and experts, comes packaged with a compact disc containing a fully searchable electronic version Burton Willis, a pediatrician who practices with Edinger Medical Group, Huntington Beach and Fountain Valley, was elected chairperson of the American Academy of Pediatrics’ California district.
