RURAL PLANS: SD Networks Ready to Launch Medicare HMOs
Two hospital networks in South Dakota are gearing up to offer the state's first Medicare HMO products, even as other plans in the area warn that prohibitively low reimbursement rates and a dispersed population will likely thwart their efforts. Modern Healthcare reports that Sioux Valley Hospitals and Health System aims to break into the Medicare HMO business this summer. The network launched its HMO, the Sioux Valley Health Plan, just last January and already has 10,000 members. The second network, Avera Health, expects to secure state approval to kick off a commercial HMO this April, and "hopes by the end of the year to gain the 5,000 commercial enrollees required to win approval for a Medicare product." Both systems intend to expand their Medicare HMOs in northwestern Iowa, southwestern Minnesota, western Nebraska, and eastern South Dakota -- areas already peppered with their hospitals, clinics and nursing homes.
Modern Healthcare reports that other HMOs "operating in South Dakota don't share the Sioux Falls systems' enthusiasm for Medicare risk." DakotaCare, the state's largest HMO with 25,000 members, will steer clear of the Medicare market. Kirk Zimmer, senior vice president of DakotaCare, contends that "[r]eimbursement levels are too low and the Medicare population too small and dispersed" to risk such a venture. Noting that Congress might "eventually" boost rates to rural areas, Sioux Valley president and CEO Kelby Krabbenhof said he can stomach the $380 per enrolle per month HCFA payment. But he "said he holds out hope for a rate increase in future years" (Jaklevic, 1/25 issue).