KAISER-GROUP HEALTH: Scale Back Integration Plans
The financial losses plaguing the health care industry have claimed yet another victim -- the affiliation agreement between Group Health Cooperative and Kaiser Permanente in the Seattle area. The two managed care companies "have scaled back their plans for integration" and "are disbanding parts of the joint administrative organization they created last year." The decision to pull back from the deal comes in the wake of recent reports that Kaiser's financial losses could reach $500 million, as well as Group Health's estimates that it will have $10 million in losses by the end of the year. Group Health President Cheryl Scott asserted that the changes are aimed at "cost-cutting and refocusing, not unwinding the partnership." The Puget Sound Business Journal reports that the reorganization will return "the finance, human resources and community relations functions to each HMO's local operations." Scott noted that the two partners continue to jointly focus on insurance, public policy, marketing and sales.
This year marks the fourth in a row that Group Health will post a loss, following $10.4 million in net losses for 1997, $7.2 million in 1996 and $11.5 million in 1995. Scott said the company's revenue will offset a portion of the losses. But she conceded that her company "cannot go on sustaining losses" and that the health plan is expected to raise rates next year by 10%. Furthermore, Group Health administrators "are carving $4.3 million in expenses from next year's budget," shedding some services for Medicaid recipients and low-income families, and dropping coverage for state employees in Clallam County, WA (Neurath, 10/26).