Western Health Looks to Benefit From CalPERS’ Contract
A new multi-year contract with CalPERS has Sacramento-based Western Health Advantage hoping for a 15% increase in enrollment and sends "the powerful message" that the hospital-owned HMO "has staying power," the Sacramento Bee reports. With Western Health's contract with CalPERS set to begin Jan. 1, the company is looking to enroll up to 7,500 current members of Aetna, Cigna and Lifeguard, the three health plans that were dropped by CalPERS during negotiations this year. Jointly owned by UC Davis Health System, Mercy Hospitals and Northbay Healthcare System in Fairfield, the 51,000-member Western Health is in its fourth year of operations and has yet to "end a year in the black." However, the Bee reports that the CalPERS contract "comes at a pivotal moment for Western Health," as it reported a net income of $27 million for the three quarters ending March 31, a "scant" yet "remarkable profit for a small hospital-owned HMO." Such HMOs have found it "impossible to compete with the lower rates and broader provider networks offered by larger for-profit health plans." However, CalPERS spokesperson Pat Macht said that Western Health's "low rates and recent profits" made it an "attractive option" for the pension fund. Although Western Health will offer the lowest rates in many counties, how much it benefits from the CalPERS contract depends on how much of the premiums state employers choose to pay, Macht said. "If the state picks up a good share of the increased premiums in 2002, then it's possible that Western Health won't look that different from other plans, and it won't gain as many enrollees as it anticipated," Macht said (Rapaport, Sacramento Bee, 5/1).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.