"Managed Care Update"

Insurers Dropping Medicare HMO Programs in Various Regions

Meanwhile, Pacificare teams up with Compaq to buy e-commerce company targeting seniors

Several of the nation’s largest health insurance companies will cease offering Medicare HMOs in certain regions of the United States.

Almost 800,000 of the nature’s seniors will be dropped from Medicare +Choice plans as Aetna/US Healthcare, Foundation Health Systems, Oxford Health Systems, Cigna, and Pacificare withdraw their Medicare HMO programs in specific regions around the nation.

Major Changes

Aetna and Cigna are making major changes. Aetna will withdraw from 11 states, including New York and Northern California. Its actions affect 355,000 seniors. Cigna will withdraw from 13 cities and states, including Atlanta, Los Angeles, and Delaware. At least 104,000 seniors will be dropped from Cigna’s Medicare HMOs.

All the companies say under-reimbursement and over-regulation are the reasons behind their decisions. They hope their actions encourage Congress to increase funding for the Medicare+Choice health program.

These changes by private insurers have potential revenue impact upon clinical laboratories and anatomic pathology groups. Medicare HMOs pay labs and pathologists much less money for services. In recent years, the growth of enrollment in Medicare HMOs has shifted patients away from Medicare fee-for-service reimbursement. Instead, the HMOs enrolling these patients generally offer capitated or highly-discounted contracts to clinical labs and pathology group practices.

Thus, anything that encourages sizable enrollment increases in Medicare+Choice plans tends to reduce revenues to clinical labs and pathology groups which had served those patients under fee-for-service reimbursement arrangements. The question is whether Congress will increase funding for the Medicare+Choice program so as to encourage greater numbers of seniors to enroll in such health plans.

Ongoing Integration

Meanwhile, Pacificare has teamed with Compaq Computer Corp. to acquire the Senior.com website. The two companies are investing $19 million to develop a business unit, to be called SeniorCo, that will offer “a broad array of products and services to senior citizens.”

Pacificare wants to leverage its “incredible knowledge base of how seniors act and what their preferences are,” according to Pacificare CEO Alan Hoops. Compaq wants to sell seniors its computers and related services.

This new venture demonstrates how healthcare companies want to leverage existing customer relationships to sell additional products and services. Labs have a similar opportunity.

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