HMOs MAKING GAINS IN MD. Growth outstrips level nationwide

May 28, 1993|By Patricia Meisol | Patricia Meisol,Staff Writer

The size of U.S. Healthcare Inc. was incorrectly characterized in yesterday's Business section. The company ranked as the nation's fourth-largest health maintenance organization in 1992, according to the Group Health Association of America. The Kaiser Foundation Health Plan is the nation's largest HMO.

The Sun regrets the errors.

U.S. Healthcare Inc., the country's largest health maintenance organization, is picking up customers in Maryland almost as fast as it can build a network of doctors to treat them.

In the past three months, the Philadelphia-based company signed up 3,000 Marylanders, more than half the level it hoped for during the entire year.


U.S. Healthcare's gains are occurring as the industry grows at a rapid clip in Maryland and other big players lose share, according to industry figures filed in recent days with state regulators.

Overall, the reports show that the HMO industry in Maryland is growing at a faster rate than the level expected nationwide. Based on first-quarter figures, the industry's revenue here would grow more than 7 percent for the year, compared with analyst predictions of between 4 percent and 6 percent growth nationwide.

"While [the membership increase] is tiny by any comparison, it is the most successful four-to-six months of start-up we've ever had in any area we expanded," said Arthur Liebowitz, U.S. Healthcare's corporate medical director, who has been recruiting doctors in Maryland in recent months.

He attributed it to good timing, name recognition and increased interest by employers and employees in alternatives to existing managed care programs in Maryland.

But the company also is "picking up business from people now interested in HMOs as an option" for the first time, he said. "So it's not all cannibalizing other businesses, but really picking up // new business. That makes it more exciting."

U.S. Healthcare has 1.6 million members nationwide. Thanks to its growth in Maryland, its total enrollment here and in Delaware, where it has operated for seven years, grew 18 percent for the three months that ended March 31, according to a quarterly financial report filed with the Maryland Insurance Division. The gain was second only to Aetna Health Plan, whose business is mostly in Virginia and Washington.

By contrast, the company with the largest share of HMO business in the state, Mid Atlantic Medical Services Inc., saw a 12 percent drop in enrollment in the tri-state area. Premiums collected in Maryland are available from regulatory filings, but specific enrollment figures are not.

Rockville-based Mid Atlantic continued to maintain its share of dollars spent on HMOs in Maryland. Also, enrollment in all the company's managed care products is up by 42,000 members.

Michael Savage, head of investor relations, said enrollment in the company's HMO dropped because Mid Atlantic was trimming marginal business.

"We're not contracting with groups that are low-margin businesses or businesses in which we're losing money," Mr. Savage said. Some of the smaller groups, he said, have moved into Optimum Choice, a preferred provider organization run by the company. Optimum Choice provides insurance that is experience rated, or priced according to the medical use of the group.

Another set of big players, the four HMOs owned by Blue Cross and Blue Shield of Maryland, lost market share as well as members. Together, they control 30 percent of the market.

Increasing membership from small and medium-sized companies has fueled much of the growth in Maryland, according to officials at several HMOs.

"That's no coincidence because that is the market that needs health care the most," said Stewart Lavelle, senior vice president of U.S. Healthcare who oversees the Maryland operation.

"I think we're a good cost effective and quality alternative. I think employers are smart enough not to just buy price," he said. "Also, we offer financial stability, and this is a big concern for providers in Maryland."

Another company benefiting from more small businesses is Prudential Health Care Plan Inc., better known as PruCare. Its HMO enrolled 8,000 people during the first quarter, a gain of 7.3 percent in Maryland enrollment, the company said. PruCare now has 131,000 members in Maryland, out of 994,000 in the region.

One reason for the growth is that HMOs are increasingly being accepted as a cost-effective option for employers, said Greg Conderacci, vice president of marketing for Prudential's mid-Atlantic region, which includes Maryland.

"Employers who were more apt to go with traditional plans now are at least offering the HMO to their employees," he said.

Employees, in turn, especially younger ones who don't have long-standing relationships with doctors, find it increasingly attractive because they don't have to fill out claims forms and they pay only $5 when they visit a doctor, he said.

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