Health care alliances worry regulators


June 14, 1994|By Patricia Meisol | Patricia Meisol,Sun Staff Writer

Insurance regulators worried aloud in Baltimore yesterday over whether and how they should oversee the alliances and networks being set up by doctors and hospitals.

For the most part, the new health care alliances are outside their purview. Yet they are taking the kind of risk once reserved for insurance companies -- and with little or no experience at covering large groups of people for a monthly fee.

"To get at market share, they are simply willing to take any risk, and you can't touch them," Barry S. Scheur, president of the Scheur Management Group Inc., of Newton, Mass., told a packed seminar of the National Association of Insurance Commissioners yesterday.

Many state insurance commissioners are ill-equipped to deal with the consolidation of the health care market, said Mr. Scheur, who has served as independent caretaker of insolvent managed-care plans in a number of states.

"You are out of step, heading toward a precipice, and most of you are without a bungee cord," he said.

He estimates there are 2,000 physician-hospital organizations, or PHOs, across the country, and an untold number of OWAs -- or "Other Weird Arrangements." In one case he noted, an Ohio PHO agreed to provide care for 50,000 people, even though it had only $100,000 in capital. "Does this scare you? It should," he said.

"We need to devise a regulatory system that includes PHOs," Mr. Scheur said.

An estimated 20 percent of all managed-care companies went bankrupt in the 1980s. In addition to lax solvency standards in many states, there aren't any uniform care standards in the managed-care industry. That means companies can lower their prices on the same package of benefits to win market share, and the consumer has no way to judge the quality of that care before they are treated.

A big topic among the 3,000 participants at the NAIC's semiannual meeting -- at the Stouffer and Hyatt hotels through tomorrow -- is whether state insurance commissioners should expand their oversight beyond rate filings and solvency to the quality of health care.

Pennsylvania has already moved in that direction. In that state, a PHO that takes risk will now be licensed as a preferred-provider network, a type of managed-care insurance plan. This is to ensure that savings are passed on to the consumer -- as would happen with a traditional insurance company, health maintenance organization, or other managed-care company regulated by the state.

"What really bothers me about these PHOs is that, in my experience, most community hospitals don't have the [accounting] systems in place to develop a responsible price," said Cynthia M. Maleski, the Pennsylvania insurance commissioner and moderator of yesterday's seminar. "The question is, 'Who should have this system?' "

"People assume we are protecting them," she said. "We need to continue to be vigilant."

(In Maryland, where a number of physician practices went belly-up in the 1980s, leaving unpaid bills, HMOs now are required to be sure that any group they hire, such as a PHO, is properly capitalized. But Mr. Scheur says it's too easy for the PHO to shift debt to other entities. "I don't think the Maryland approach works," he said.)

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