Unhealthy Competition? Fined In Other States, Giant Hmo Launches Ad Blitz Here
Anyone who watches TV knows the commercials: Likable people filmed in black-and-white talking candidly about their off-the-wall health woes.
Who wouldn’t be charmed by the tale of the kid who shoved a raisin up his nose?
But besides making people chuckle, those ads may mark the start of a highly competitive era in health insurance in Eastern Washington.
The fast-growing company behind the commercials, PacifiCare, vows to become one of the area’s top players - a for-profit, managed-care company in an arena dominated by not-for-profit insurers.
Some liken it to “the big bad wolf” barging in and threatening to eat up its competitors.
“It’s a big, out-of-state, for-profit, well-capitalized, aggressive player. And here they are and what’s going to happen?” said Miriam Marcus-Smith, a project manager researching HMOs, or health maintenance organizations, at the University of Washington in Seattle.
The California-based insurer has made giant strides, not just in Washington, but in five other states, too. It doesn’t operate in North Idaho.
Starting as a non-profit company in Cypress, Calif., two decades ago, the insurer is moving from one state to another, buying smaller or struggling companies along the way. Now PacifiCare boasts more than 1.7 million members and nearly 5,000 employees.
The insurer leaped into the lucrative Medicare market, enrolling more patients in its plan than anyone else in the nation.
Its operating revenue has climbed from $1.2 billion in 1991 to $3.7 billion in 1995.
A north Spokane doctor’s network says PacifiCare is soaring past one local competitor when it comes to popularity with patients, lured by lower premiums.
“They came in the lowest,” said Nancy McMurray, program administrator at the Northside Physician Hospital Network.
“They’re very competitive and they are taking some of the business away.”
But not everyone thinks as highly of the company as the television mom whose kid shoved a raisin up his nose. Health regulators in Florida and Oregon have levied big fines against PacifiCare. The state of California is suing.
And Oklahoma competitors are attacking PacifiCare’s subsidiary there because it failed a national accreditation review.
Peter Lee, attorney for the Center for Health Care Rights, a Los Angeles consumer advocacy group, gives this assessment: “We certainly have had complaints against PacifiCare, but it’s not the bottom of the barrel when it comes to HMOs.”
No one is sure what PacifiCare’s presence in Spokane will mean for people in the long run. If nothing else, it’s another choice in health insurance.
PacifiCare contracts with doctors - mostly organized networks and clinics - and runs like an HMO. Doctors are paid a set monthly amount for patients, and they decide how much is spent on patient care.
Four Spokane hospitals and more than 300 doctors have contracted with PacifiCare since the company began actively recruiting here a year ago.
“The dust has barely settled, but it was pretty amazing really,” said Mary McWilliams, PacifiCare of Washington’s chief executive officer.
The company’s “bread and butter” will eventually come from insuring groups of employees, McWilliams, of Seattle, said during a visit to the company’s office in downtown Spokane. So far, 57 groups have signed on.
Some industry watchers predict the cost-conscious company will spur positive competition.
“Competitors will choose to squeeze out excess cost without compromising quality,” said Dr. Douglas Conrad, a University of Washington professor specializing in health services.
For-profit insurers often have another advantage. “Capital to pour into marketing,” said Carol Molinari, a professor in the health administration program at Washington State University. “You’re getting money from a broad national base. These are the real threats to existing local companies.”
Competitors are whispering concerns and fears as PacifiCare’s profile in Spokane grows.
Some predict the company will raise premiums once it recruits lots of customers. Others worry PacifiCare will send patients out of town for lower prices on procedures and surgeries.
McWilliams says it isn’t so.
In California, where PacifiCare grew up, the company’s biggest run-in is perhaps with state officials.
After patients filed more than 11,000 complaints against PacifiCare in 1994 and 1995, the Department of Corporations ordered PacifiCare to turn over medical records. Company officials refused, citing confidentiality and the high cost of providing the records.
“PacifiCare was slamming the door in their face,” said Lee, whose consumer agency sided with the state.
Eventually, some of the complaints were made public in court documents.
In one, a San Diego woman said her daughter was denied surgery to correct a red birthmark that disfigured her face. After she complained to the state, PacifiCare approved the surgery as a “goodwill” gesture.
In another complaint, a 73-year-old woman said her clinic isn’t always staffed by a doctor. She said she got blood pressure medication - but no instructions on how to take it - from a physician assistant and landed in an emergency room after a bad reaction.
Health officials in Oregon fined PacifiCare $20,000 in January after saying it too readily denied nearly 5,000 emergency room claims.
Paramedics rushed one man to the hospital when he collapsed in a restaurant after breaking out in welts. PacifiCare denied the claim. “A reasonable person would find that these facts qualify this claim for emergency coverage,” stated the Oregon Department of Consumers and Business Services.
In Oklahoma, however, health officials are standing up for PacifiCare as competitors publicly bash the company for failing an accreditation survey with the National Committee for Quality Assurance.
“It’s our understanding that the grounds they didn’t get the accreditation on is what Oklahoma customers like,” said Nora House, a consultant with the Oklahoma State Department of Health.
For instance, PacifiCare gives doctors a bigger role in health care decisions, House said. NCQA accreditation is voluntary and not needed for licensing.
PacifiCare gets mixed reviews in Florida.
In late 1993, the company bought a struggling Florida insurer under threat of liquidation by state health officials. Afterward, complaints dropped dramatically, said Robert Aronoff, spokesman for the state insurance commissioner.
“They provided it with a solidity that was missing,” he said.
But PacifiCare was fined $60,000 in 1995 after its Medicaid plan met only 75 percent of Florida state quality standards, according to a report by the state Agency for Health Care Administration.
PacifiCare has a reputation for buying or contracting with existing health networks.
It took the latter approach in Spokane County. In 1994, a year before PacifiCare opened an office here, the company contracted with Rockwood Clinic, Spokane’s largest multi-specialty medical clinic.
Ironically, Rockwood dumped PacifiCare shortly before the company began its aggressive advertising campaign.
“They didn’t do any marketing here and were pretty focused on the west side of the state,” said Bill Poppy, Rockwood’s administrator and chief executive officer.
Poppy said Rockwood also feels loyalty to local insurers and their plans, such as the Medicare plan offered by the owners of Sacred Heart Medical Center.
“The hospital’s been here for many, many years and made a contribution to the community,” Poppy said.
PacifiCare hasn’t had time to rack up that kind of loyalty. But it’s contributing to community causes, including Hoopfest, said Marge Rusch, the company’s Spokane branch manager.
Some doctors suspect PacifiCare will find loyalty among younger physicians who aren’t as entrenched in the existing health plans.
Dr. Duncan Lahtinen, at The Doctor’s Clinic in north Spokane, may be one of those physicians.
“PacifiCare has allowed us as physicians to do a lot of own our quality management,” said Lahtinen, whose clinic is led largely by young doctors.
Once or twice a month, Lahtinen and his colleagues review each other’s cases and discuss whether more efficient care could be given, Lahtinen said.
“It means I have a little more say in how the care is administered.”
In a world where doctors feel less in control all the time, that can mean a lot.
, DataTimes