CHICAGO: Univ. Hospitals Drop Out Of Medicaid HMO Program

      The University of Chicago Hospitals has sold its Medicaid managed care plan, Family First, to Harmony Health Plan of Chicago -- joining "a list of HMOs and prepaid health plans that have gotten out of the Medicaid business in the last year," the Chicago Tribune reports. Avis LaVelle, University of Chicago Hospitals' vice president of government affairs, said, "For us, the Medicaid managed care business didn't turn out to be what we thought it would be, so we are narrowing our perspective to be providers." When Gov. Jim Edgar (R) introduced Medicaid managed care to the state five years ago, it was widely expected that the model would become mandatory. However, that didn't happen and Edgar has now deferred that decision to the next administration. The Tribune reports that under voluntary Medicaid managed care, "plans haven't been getting enough customers to be profitable." In addition, the state's program has one of the lowest reimbursement levels in the country. LaVelle also cited as other reasons for the withdrawal the capital required to "compete in the increasingly volatile health insurance industry" and the slim overhead reimbursement for his group as it struggled to begin the Medicaid operation.

In Harmony
      Todd Swim, a benefits consultant with William M. Mercer and Associates said, "The reimbursement has become so thin that a lot of people are backing away, saying 'we can't do this.'" In fact, a number of HMOs have left Medicaid in recent months -- Unity HMO of Chicago, Compass HMO, OneCare and Children's Memorial Hospital -- leaving the door open for Harmony to become "the fastest-growing Medicaid HMO in Illinois." Following the sale, Harmony will cover more than 30,000 individuals, second only in Illinois to United HealthCare, with 70,000 customers. Ancelmo Lopes, president and CEO of Harmony, said, "We think that with the appropriate mass, and good operations, Medicaid can still be a good arena to participate in" (Jaspen, 8/18).