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more competition among plans

Area health care system to face
more competition among plans

(Elizabeth Mullin is president and CEO of St. Ann’s of Greater Rochester Inc. She came to Rochester this year from Puget Sound, Wash., where she was director of Group Health Cooperative’s Office of Chronic and Long Term Care Planning. This is an edited version of her views on the Rochester system.)
One year: Emerging health-insurance products developed by two local health systems are faced with increasing competition. Competitive sources come from not only the traditional local insurance/HMO providers, but also new physician group plans and national HMOs exploring Rochester once again.
Physician group insurance products, as well as the health systems, continue to pour money into infrastructure, marketing and advertising. Additional capitalization is required in order to support these early efforts. The hybrid health-plan products developed with existing health systems continue to fail to meet original growth projections.
The new introduction of physician health plan products has resulted in a confused health care consumer community–torn between the variety of options. There is further fragmentation of marketing efforts by local health systems with the anticipated launching of their new Chronic Care Network (CCN) products, over a half- dozen years in development. The launch date of this Medicare and Medicaid hybrid demonstration product has finally been publicly announced: January 1999.
Despite a major new marketing and advertising campaign, Rochester’s largest HMO is experiencing losses in market share. In addition, this HMO also is facing true losses in enrollment. (It) has decided to submit an application to the Health Care Financing Administration to become a Medicare risk contractor. Anticipated approval and roll out of the new product also is January 1999.
In addition, there is potentially a new Medicare risk HMO health plan that has filed an application and is considering entering Rochester in ’99.
Meanwhile, Rochester’s smaller health plan puts forth a solid performance by gaining market share, especially with its Eastman Kodak Co. and Medicare products.
Hospital occupancy continues to decline, slowly but steadily. Community-based certified home-health agencies also see a decline in Medicare visit volumes.
Overall, there are more home- health admissions, but Medicare efforts to control home-health utilization is beginning to have an impact on all agencies in the area of visits per case. Physicians are beginning to have a newfound interest in home health and its impact on cost and utilization.
Skilled-nursing facilities (SNFs) are seeing a substantial growth in their Medicare admissions and days. Hospital-affiliated SNFs continue to increase their market share in Medicare admissions at a disproportionate rate. Like with home- health relationships, there is substantial opportunity to influence referral decisions in the direction of hospital-owned or -operated entities. To maintain some level of control or leverage, long-term-care providers have formed one or more coalitions.
Meanwhile, overall census and occupancy rates in SNFs begin to demonstrate a declining trend, particularly in the private-pay segment. Aggressive efforts to use home health and assisted- living alternatives are having a clear impact.
Five years: The health care environment has changed substantially. The changes have been much more rapid than local providers had expected. There are now four active health-plan organizations in the Greater Rochester area, plus several large employers besides Kodak have proceeded with self-insuring strategies. Two well- known national HMOs have arrived in the community, with huge marketing and advertising campaigns. One entered the market in 1999, the second in 2000, and both are Medicare and Medicaid risk contractors.
An increase in the Rochester-area rates paid by the HCFA to Medicare risk contractors has fueled and supported substantial growth in this market segment. A third national HMO is predicted to enter the market in the beginning of next year.
The national HMO organizations have had an impact on the market share of Rochester’s current largest HMO; despite the introduction of new and innovative products, it continues to lose market share. This largest of Rochester’s HMOs has decided in the past several years to focus on its core competency–insurance and HMO products–and therefore has divested itself of health care providers, which were previously part of its operations.
The products developed in conjunction with two local health systems in 1996 continue, but with marginal performance.
Information systems have begun to fall into place and provide the data health care entities need for care and cost management. The length of time to put such systems into place has been much greater than anticipated, and the resulting costs exceeding original projections. Lack of adequate information systems contributed to the failure of the plans developed by the health systems and physicians groups.
Two Rochester hospitals have essentially closed, one focusing primarily on outpatient surgery and other ambulatory-care services, and the second on rehab and skilled-nursing-facility care.
Overall home-health service volumes continue to decline. Medicare prospective-pay systems have had a profound impact on day-to-day operations. Medicare lengths of stay in SNFs and visits per case for home health have dropped by well over 30 percent, both by the actions of the federal government and Medicare-risk HMOs. There is a new stronger and closer bond between home- health agencies and skilled-nursing facilities focused on care-management strategies.
At the same time, however, they are taking on increasing numbers of more complex and “acute-like” patients. SNF subacute care has a well-defined and clear presence in Rochester.
The main skilled-nursing-facility providers are having difficulty. A couple SNF facilities are even considering closure, or at least conversion to assisted-living.
The state has provided an inflation adjustment to the Medicaid SNF rates in two of the last five years, not enough to keep up with the cost pressures most facilities are facing. Medicaid occupancy continues to rise, as private-pay census continues to decline, with the competition introduced with assisted-living facilities.
Meanwhile, Medicare-aged adults are somewhat confused with all the marketing and advertising in the community but pleased with their options.
The Chronic Care Network products did not meet their anticipated rollout date. Growth has been steady, but disappointing. One network has been more successful, due to its careful planning efforts and willingness to fund care- management services.
New York State has implemented mandatory Medicaid managed-care enrollment for all Aid to Families with Dependent Children beneficiaries three years ago. Implementation of this program was very stressful to the primary- care physicians. Contracting health systems and HMOs are struggling with utilization issues with this capitated group.
In 2002, Rochester looks more like the national health care market did in the year 1999. Rochester still has its unique flavor in how it operationalizes the health care environment, but its model has adapted to the national trends to a much greater extent than most Rochesterians thought would happen in 1997.

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