IHS gains fixed-fee contract with Nevada HMO Maryland firm to provide post-hospitalization care

January 04, 1996|By M. William Salganik | M. William Salganik,SUN STAFF

Integrated Health Services Inc., based in Owings Mills, yesterday announced its first-ever exclusive capitation contract with a health maintenance organization.

Under a five-year contract with Health Plan of Nevada, a subsidiary of Sierra Health Services, Integrated will receive a monthly fee and promises to provide all subacute care, long-term care and outpatient rehabilitation services for the plan's 136,000 members.

"This is the future of health care," said Marc B. Levin, senior vice president of Integrated. "This is what the payers want -- pairing up with companies that can share the risk and assure quality care."

Capitation is one of the hottest trends in health care finance. It means the insurer pays the provider a fixed per-capita fee rather than reimburse the provider for specific services.

In this case, the HMO knows in advance how much it will be paying Integrated for long-term care -- regardless of how many patients use it or how long they stay in an Integrated facility. Integrated is assuming some risk, but if it can get patients well quickly, it profits.

Integrated officials said they were not aware of any similar capitation contracts in the country between an HMO and a provider of services after hospitalization.

"Everybody -- government, private, HMOs -- is looking for a way to control [health] costs," said Kurt Funderburg, an analyst at Ferris, Baker Watts Inc. who follows Integrated. "Capitation seems the best way to do that."

Noting that Integrated stock had tumbled in the last quarter of 1995 as Congress moved to rein in Medicare and Medicaid costs -- programs that pay for many of Integrated's patients -- Mr. Funderburg said, "This is the way they're going to replace that with more private business.

"Also, as more Medicare and Medicaid patients move into managed care, this is a way to get them back in the door" for Integrated, he said. The Nevada HMO includes 24,000 Medicare enrollees among its members.

Critics have complained that capitation creates incentives for shoddy care, but Mr. Levin said the opposite is true. "Managed-care payers such as Sierra have to satisfy their enrollees with the quality of the care, or they will lose business," he said.

Integrated is a leading provider of subacute care -- more intensive care than patients would get in nursing homes but less than they would get in hospitals. It operates 223 facilities in 30 states, with more than 28,000 beds.

Integrated has two facilities in Nevada to serve patients. As part of the deal, Sierra, the HMO's parent firm, acquired a 25 percent interest in IHS of Silvercrest, Integrated's subacute and long-term care facility in Las Vegas.

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