PacifiCare to ‘Radically’ Change Business Model

With PacifiCare Health Systems' profits down and the insurer -- with a large Medicare membership -- "heavily dependent" on reimbursements set by lawmakers and regulators, the Los Angeles Times reports that the company has been "forced" to "radically" change its business model. PacifiCare has undertaken a two-year plan to "speed up" its claims handling system and to "diversify" its product line. PacifiCare President and Chief Executive Howard Phanstiel said, "Today, we're principally a Medicare HMO. And we want to evolve from an HMO model to a full-service health insurance company." The Times reports that such a "shift" will increase the emphasis on PacifiCare's preferred provider organization, which has 45,000 members, rather than its 3.7 million member HMO. The Times reports that analysts have expressed "concern" about the insurer's Medicare+Choice product, called Secure Horizons, because the federal government has "slowed the rate" of reimbursement increases for participating plans. "Unfortunately for PacifiCare ... a lot of their ability to implement changes is really out of their control," Todd Richter, managing director of Banc of America Securities, said (Ornstein, Los Angeles Times, 9/9).