Department of Managed Health Care Approves CalPERS Plan To Drop 24 Hospitals From HMO Network

Officials for the Department of Managed Health Care on Friday approved a plan by CalPERS to drop HMO coverage at 24 hospitals, the "final step needed for the 1.2 million-member pension fund to proceed with its controversial plan to cut health care costs," the Sacramento Bee reports (Rapaport, Sacramento Bee, 8/7). CalPERS in May voted to drop 38 of the most expensive hospitals from the Blue Shield of California HMO network in 2005. CalPERS said that an analysis by Blue Shield reimbursement rates proposed by some of those hospitals for 2005 exceeded the statewide average by as much as 80%. The move to drop HMO coverage at the hospitals will save CalPERS an estimated $36 million in 2005 and $50 million annually in subsequent years (California Healthline, 7/19). Since May, CalPERS has announced that 10 of 38 hospitals would remain in the network after they negotiated lower reimbursement rates or improved their quality. In the decision on Friday, DMHC said that four additional hospitals would remain in the network (Sacramento Bee, 8/7). DMHC made the decision without a public hearing, despite a request for a hearing last month from Sen. Deborah Ortiz (D-Sacramento).

CalPERS members whose providers are dropped from the HMO network can enroll in one of two preferred provider plans offered by the pension fund to retain their physicians or hospitals (California Healthline, 7/19). Members will make their decisions in October in an open enrollment period, and changes will take effect on Jan. 1, 2005. Members with chronic illnesses and women who are pregnant can retain their providers for 12 additional months. The move to drop HMO coverage at the hospitals will affect 55,400 CalPERS members in 15 counties statewide (Vesely, Oakland Tribune, 8/7).

DMHC approved the "most contentious portion" of the CalPERS plan, "dropping coverage at 13 hospitals owned by Sutter Health," the Bee reports. DMHC officials said that members would continue to have adequate access to care after CalPERS dropped the Sutter hospitals from the HMO network (Sacramento Bee, 8/7). According to the Tribune, DHMC officials reviewed more than 320 pieces of correspondence submitted during the public comment period and conducted an analysis of available physicians and hospitals in each affected area before they made their decision on the CalPERS plan (Oakland Tribune, 8/7).

The CalPERS plan "is revolutionary to some," although the "idea of limiting hospital choices in this way has been around for along time," the Bee reports. In the past, however, employers have raised concerns about health coverage that "dramatically restricts patients' access to hospitals," according to the Bee. DMHC Chief Deputy Director G. Lewis Chartrand said, "This was a very difficult decision for us. We know it will have a lot of impact for patients locally, and it was not taken lightly" (Sacramento Bee, 8/7). He added, "Our role has been to determine that access to health care will continue to be available to enrollees affected."

Sutter Health spokesperson Bill Gleeson said, "We remain convinced that the network will be overloaded and overwhelmed (with hospital cuts)" (Oakland Tribune, 8/7). CalPERS spokesperson Pat Macht said that the pension fund might return more hospitals to the network in the future. He said, "It's my understanding we are still open to anybody who wants to come in to talk and who meets our standards for cost and quality" (Sacramento Bee, 8/7).