HEALTH CARE BUSINESS: HOSPITALS, HMOS AND ALL THE REST
In the long run, 1997 will likely be remembered as the yearThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
when the breaks were slammed on the for-profit health care train.
From the spectacular crash of Columbia/HCA Healthcare Corp. to
the continued problems of managed care golden-child Oxford Health
Plans, the mantra that for-profit health care will show the way
has been severely tested. The big question now is "what's next?"
What began in March with the investigation of one Columbia
facility in El Paso, TX, quickly mushroomed into the largest
federal Medicare fraud investigation ever. The casualties
included Columbia's hard-charging chair and CEO Rick Scott, the
affection of Wall Street, the company's name and national
branding campaign, its Pac-man-like hospital acquisition
practices and, eventually, its home care and Value Health units
and up to one-third of its hospitals.
Despite Columbia's sudden loss of interest in buying up
community hospitals, the pace of hospital acquisitions and
mergers did not slow noticeably in 1997. Among those tying the
knot, Dallas' Harris Methodist Health System and Presbyterian
Healthcare System, King of Prussia, PA-based Universal Health,
which signed up Washington, DC's George Washington University
Hospital, the widely watched merger between New York's Long
Island Jewish Medical Center and North Shore Health System, which
got the go-ahead despite anti-trust concerns and the University
of California-San Francisco and Stanford University both gave the
final go-ahead to their hospitals' controversial merger.
However, New York City Mayor Rudy Giuliani's (R) plan to turn the
city's public hospitals over to private operators fell apart when
the state Supreme Court ruled that he didn't have the power to
make the transfer, and the Vatican flexed its muscle in deals
involving Catholic health care institutions, first nixing a deal
between St. Peter's Medical Center and the Robert Wood Johnson
University Hospital, and then threatening to derail a deal
between Tenet Healthcare Corp. and St. Louis University Hospital.
Managed care also took it on the chin in 1997. Oxford
Health Plans suffered major losses on Wall Street after news that
problems with its computer system had prevented it from getting
an accurate picture of just how much in claims it was liable for.
Problems at Oxford -- which had been the darling of the managed
care industry for its claims that it could offer quality and
choice while still controlling costs -- reverberated across the
industry, as other major players such as Aetna saw their shares
tumble. As health care costs and prescription drug usage
continue to rise, managed care companies will face an
increasingly difficult time turning a profit while holding the
line on costs. Many analysts predicted costs will rise the
coming year, despite the best efforts of managed care. One
analyst summed it up by saying, "The feeling I've got is the
bloom is off the rose on the HMO business."
BLUES FOR THE BLUES
The nation's Blue Cross plans continued to struggle to make
themselves more competitive. The fireworks flew over Blue Cross
& Blue Shield of Ohio's plans to sell itself to Columbia, and
even though the deal was officially rejected by Ohio regulators
in March, the fallout continued throughout the year as the former
Ohio Blue was stripped of its Blue Cross membership. Blue Cross
and Blue Shield of Massachusetts saw a bruising year that
included the continued hemorrhaging of its Medex Medigap plan,
several lost contracts and a battle with the state's hospitals
over reimbursement rates. While the merger of the Maryland and
Washington, DC, Blues continues on schedule, the deals between
Blue Cross and Blue Shield of New Jersey and Blue Cross Blue
Shield of Delaware and between the New Jersey Blues and Anthem
Inc. were called off because of regulatory opposition.
A YEAR TO FORGET
1997 also wasn't such a great year for the American Medical
Association, which became embroiled in a scandal over a failed
endorsement deal with the Sunbeam Corp. While AMA Executive Vice
President Dr. John Seward said, "The AMA apologizes for creating
a public doubt about our motives. ... We take full responsibility
for actions on our part that may have eroded our credibility,"
the apology was apparently too little, too late, and by the AMA's
December meeting Seward was out of a job. With the battle over
managed care regulation heating up, the Health Insurance
Association of America also saw a shake-up as it was announced
that longtime congressional health committee aide Charles
("Chip") Kahn III has been named chief operating officer and
eventual replacement for HIAA President Bill Gradison. The
rapidly growing home care industry came under fire as a series of
reports and audits found widespread fraud and waste within the
Medicare home health system, prompting calls for reform in 1998.
From reforming home care to rethinking the supremacy of for-
profits -- while satisfying consumers and keeping costs down --
it's clear that policymakers and the industry will have a busy
year in 1998 (Miller, American Health Line, 12/23).