SHMOs: SCAN HEALTH PLAN SEEKS FOR-PROFIT CONVERSION
SCAN Health Plan, one of the few social health maintenanceThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
organizations (SHMO) approved by Congress to offer expanded
benefits to Medicare recipients, is preparing to convert to for-
profit status. MODERN HEALTHCARE reports that the Long-Beach,
CA-based SHMO is the first plan to file for conversion under a
new California state law "that spells out procedures" for HMOs
attempting to become for-profit companies. "SCAN is also the
first SHMO to convert to for-profit status," MODERN HEALTHCARE
reports. Two of the six SHMOs approved by HCFA last year are
already for-profits.
SHMO WHAT?: SHMOs pool "funds from Medicare, Medicaid and
member premiums to provide more than 50,000 seniors with
community-based long term care on top of regular health care
benefits," MODERN HEALTHCARE reports. SHMO programs, which are
"designed to keep the elderly living at home and out of
institutions" include homemaker services, transportation to
medical appointments and meals on wheels. Some SHMOs also
provide "limited nursing home care." Congress authorized four
SHMOs in 1982; there are currently nine operating in the U.S.
HOW SCAN CAN: While other SHMOs charge Medicare
beneficiaries a premium "depending on their markets," SCAN offers
expanded Medicare benefits at no additional cost to recipients,
MODERN HEALTHCARE reports. HCFA pays SHMOs 100% of Medicare
costs per enrollee by county. Walter Leutz, project director for
SHMOs at the Heller Graduate School at Brandeis University, said
that "[p]er-enrollee payments by county vary by several hundred
dollars, a problem the government hasn't figured out how to fix."
Leutz said, "The idea of a health plan offering a richer package
of benefits, with members paying a higher premium in certain
markets in return for protection against a broader range of
risks, is a good policy." He added, however, that "probably no
one knows whether SHMOs are budget neutral or if they save money
for the Medicare system."
A SCAN AMONG GIANTS: Sam Ervin, SCAN president and CEO,
said the conversion to for-profit status will "generate capital
needed to market [the plan's] unique product and to expand ... a
'very tiny company among giants'" in California's competitive
health care market. Leutz said the despite SCAN's unique
product, "it's hard to get people's attention these days in the
health care market ... a small HMO has an awful hard time getting
its message across." SCAN currently provides medical and dental
coverage to about 12,000 seniors in Southern California, and
enrollment has grown at a rate of 25% over the past several
years. The company made "$1.4 million on revenues of $67 million
in its fiscal year ended June 30" (Kertesz, 12/9 issue).