Full range of HMO care to be provided by hospital

March 15, 1994|By Patricia Meisol | Patricia Meisol,Sun Staff Writer

In the first arrangement of its kind allowed in Maryland, a new company owned by North Arundel Hospital has reached agreements with four health maintenance organizations to provide health care for their members.

The program calls for the HMOs to pay the company a lump sum monthly to care for a group of members. Care would be provided exclusively through the Glen Burnie hospital, its doctors and its subsidiaries, which provide a range of health care options from medical supplies to home health assistance.

The new company, New American Health Inc., is betting it can attract tens of thousands of HMO members and lower its costs at the same time, partly by directing people away from the hospital.

It is the first time a Maryland hospital has been allowed this kind of arrangement in a managed-care network, and signals a major change in the way health care may be delivered in the state.

Around the country such arrangements are common. Columbia/HCA Healthcare Corp., for example, has set up networks of hospitals and other providers in Southern cities, including Atlanta and Richmond, Va., that are winning contracts to provide health services to workers at some of the cities' biggest companies for a preset fee.

But they have not existed in Maryland because hospitals are tightly regulated and barred from discounting their rates, which is usually required when offering a packaged price.

Now, as care moves away from the hospital setting, state regulators are beginning to consider experiments such as the one proposed by North Arundel.

The agreement, signed Friday, is unique for managed care in that the hospital will be paid at its usual rates. The rest of the money will be divided among doctors and services provided. If the lump sum is not sufficient to pay the hospital's usual rates, the new company will get additional money by reducing the doctors' fees. If this money still isn't enough, the hospital would end up in the red.

New American Health, a wholly owned hospital subsidiary, said it has agreements with three HMOs owned by Blue Cross and Blue Shield of Maryland -- the CareFirst, Freestate, and Potomac health plans -- as well as the separate Chesapeake Health Plan Inc.

For the HMOs, it means a better price for medical services and a chance to expand.

Debbie Holloway, vice president of professional services for CFS Health Group Inc., the holding company for the three Blue Cross HMOs, said the contract gives its members a greater choice of providers and gives the HMOs a like-minded partner in managing costs. The Blues' 27,000 HMO members in Glen Burnie now use Mercy Medical Center.

The HMOs will market the option to employers. Members who choose North American doctors will be treated in the North Arundel Hospital network of health care services, except for specialized treatments such as neonatology, severe burn treatment, cardiac surgery and transplants.

The hospital becomes an entity to be avoided, in favor of outpatient care when possible. Under the agreement, the HMOs will pay $33 a month to a hospital fund for each patient it sends to the network and $33 a month to the physician for each patient. Any additional expenses for the hospital would come from the doctors' pool, reducing fees by up to $7 per patient per month.

Michael Steinberg, a Baltimore consultant who advised North Arundel, said primary care physicians should earn more money. But specialists will experience a "great loss of income," he said.

Whether the hospital will lose money on the deal "is the $64,000 question," said Robert Murray, acting director of the Maryland Health Services Cost Review Commission, which approved the managed-care plan. However, he and others predicted the risk would be minimal.

James R. Walker, North Arundel president and CEO, said he expects "some bumps in the road" in the first two years. "But the bottom line is, our financial position will be stronger in the long run as a result of this."

New American hopes to attract 25,000 patients into its network within three years, and eventually expand to 100,000.

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