OMNI HEALTHCARE: HMO Closing Shop After Tough 1998

      Beset by $2 million losses in 1998, Omni Healthcare announced yesterday that it will go out of business "no later than Dec. 31" of this year. Co-owners Sutter Health and St. Joseph's Regional Health System blamed the HMO's ill fortune on its relatively small size compared with its competitors. Omni CEO Robert Fahlman said, "For a small, regional player, it's more complicated and more difficult to compete." Sutter spokesperson Bill Gleeson noted that "Omni's dilemma" stems from the fact that 20 regional HMOs have consolidated into six major companies in recent years. He added that the end of Omni was a "unanimous decision" between Sutter and St. Joseph's. Dale Waters of Benefit Insurance Services in Sacramento said the company also struggled because "enrollees in the Sacramento area could only use Sutter hospitals and doctors." Finally, Omni entered into a rate war with Foundation Health Systems that left it "with a slew of 'bad business' -- that is, employers with a lot of sick employees." When it raised its rates, employers fled to other plans.

How About the Little Guy?
      The Sacramento Bee reports that Omni covers about 124,000 Northern Californians, half of whom are Medi-Cal patients. Blue Cross of California has paid Omni an undisclosed sum for the right to take over its accounts, although employers have 180 days to choose another plan if they wish. Medi-Cal patients will be transferred to Blue Cross pending approval by the state Department of Health Services. Blue Cross spokesperson Rhonda Seaton said, "We're going to do whatever we can to facilitate a smooth transition" (Kasler, 5/19).