Sierra hits the beach tomorrow Military getting a new provider of health care

Stakes high for Baltimore

City guaranteed lease in Candler Building, is gaining 300 jobs

Health care

May 31, 1998|By M. William Salganik | M. William Salganik,SUN STAFF Staff writer Greg Schneider contributed to this article.

Sierra Military Health Services Inc. tomorrow begins providing health care to as many as 600,000 military dependents and retirees in a 13-state region, capping an eight-month race to get ready for its official start of business.

Just last September, when it won the five-year, $1.2 billion military contract, Sierra Military was a fledgling operation with only seven employees. It quickly selected Baltimore as its headquarters, and began moving through a vast list of tasks spelled out in voluminous contracts and regulations.

For Sierra Health Services Inc., a managed care company that is Sierra Military's parent, the stakes are high. It has spent, according to filings with the Securities and Exchange Commission, more than $18 million on its bid and start-up expenses. The military contract boosted Sierra Health's subscribers by about one-third virtually overnight, and the Las Vegas-based company hopes to use its new East Coast beachhead to gain national visibility.

Serving a region that includes the Pentagon and "134 congressional districts," said David R. Nelson, president of Sierra Military, "we have to get it right the first time."

The stakes are also high for Baltimore, which kicked in a half-million-dollar package of loans, grants and job training to lure Sierra Military and its 300 headquarters jobs. As part of the deal, the city guaranteed a 10-year lease for Sierra's 83,000 square feet in the Candler Building on Market Place. If Sierra doesn't win a contract renewal, the city is on the hook for the remaining five years of the $12.5 million lease.

While stressing his confidence that Sierra can handle the job, Dr. Carl Akins, director of contracting for the Pentagon agency that awarded and monitors the contract, said, "The proof will come Day 1, when we flip the switch."

Whenever a new contractor goes live, he said, "We always cross our fingers -- and our arms and our legs and everything else."

Gearing up to go live has been an enormous undertaking.

Sierra hired and trained (as of May 22) 262 employees to staff its headquarters and 181 more for 32 service centers in a region that stretches from Virginia to Maine. Of those hired, about 100 came from a Baltimore jobs-training program.

Even before it begins offering care, it has been fielding thousands of questions a day about enrollment and other details of how the new program, called Tricare, will function. It's had to sift through the terms of a contract so detailed that it is nearly 4 inches thick. (Example: "The telephone blockage rate at each TricareService Center shall not exceed five percent (5%) and beneficiaries telephoning the Tricare Service Center shall never be placed on hold for more than five (5) minutes.") Not to mention the terms of various Pentagon guidelines and regulations, and the terms of its bid, which filled 38 volumes.

It's had to contract with some 23,000 civilian physicians, hospitals, pharmacies and laboratories. It's had to develop a working relationship with the military hospitals that will be providing the bulk of the care.

It's had to write new software and prepare for connections to military computers, creating a system capable of booking appointments with the civilian doctors and hospitals and at 79 military hospitals and clinics. It's also had to defend itself against a still-unresolved challenge to its contract from the losing bidder.

And, since October, Sierra Military has replaced its president and four key vice presidents. Two new vice presidents, one for government affairs and one for medical affairs, were named as recently as late April.

Nelson, who worked on the Sierra bid as a consultant and was named president of Sierra Military in November, said the turnover is a natural result of shifting from the bid process to health operations. That means, he said, different types of managers. "The skill sets are not necessarily the same," he said.

The previous president, Joseph Lamarca, had been appointed by Dr. Anthony Marlon, the founder and chief executive of Sierra Health, to oversee the bid process, Nelson said.

"Joe was a businessman in Nevada and a trusted confidante of Dr. Marlon," Nelson said. "He was needed as an interim president. He's a very inspirational leader, the kind required during the procurement process." Lamarca, who remains on Sierra Military's board, has returned to Nevada, where he operates a chain of beauty shops and day spas.

Similarly, Nelson continued, several vice presidents found that they were better suited to preparing a bid than to running a health system.

Don Thompson, head of managed care contracts for the military's Tricare agency, said that while some turnover is normal when a plan moves from bidding to execution, Sierra has had more of it than usual.

The Tricare office, which is in Aurora, Colo., has to approve the hiring of key executives.

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