With home health agencies struggling along and some HMOs in trouble, Mississippi health care may need a checkup.
Several HMOs are experiencing growing pains and there are no guarantees in the business, said Mark Haire, special assistant attorney general.
On July 16, the Mississippi Insurance Department shut the doors on AmeriCan, the state`s fifth largest HMO, for failure to maintain minimum net worth requirements. Even though AmeriCan showed $4.8 million in premium volume in 1997, financial troubles brewed in 1998.
AmeriCan, with about 6,500 participants, nearly half of whom are Medicaid recipients, was placed under a consent order for voluntary rehabilitation and 11 employees lost their jobs. Last month, Georgia also took rehabilitative action against AmeriCan.
In April, complaints of long delays in claim payments began streaming into Dale`s office, including one from the Home Builders Association of Jackson, one of AmeriCan`s largest subscribers. Legal and financial staff members were dispatched to examine books at the parent company in Atlanta where Mississippi records are kept before Insurance Commissioner George Dale made his ruling. A management team will run AmeriCan until it becomes solvent or it is determined the company should be liquidated.
Is the AmeriCan situation an isolated incident or part of a larger trend with solvency problems with HMOs?
“You have to see how mature the market is,” said Haire. “We have several HMOs licensed in Mississippi that are start-up corporations and they will all experience growing pains. It generally takes a company a while to be established before it starts making money, but that probably holds true in a lot of ventures, not just in the health care industry and HMO business.”
The national trend toward HMOs is similar to the banking industry, Haire said.
“A lot of the larger HMOs are going to be left standing after all of the health care wars are over and sorted out,” Haire said. “Some of the smaller HMOs around the country will be gobbled up through acquisitions and mergers, and unfortunately, some will not make it. That`s not to say some of the new organizations will not take hold and do well. I think time will ultimately tell.”
Further problems in HMOs are not anticipated, Haire said. “Since the new HMO law was passed in 1995, this is the only HMO we`ve had to place in rehabilitation through the courthouse.”
The HMO law gave regulatory authority to two state agencies – the Mississippi Insurance Department and state Department of Health – to govern the licensure, financial solvency and overall operation requirements for HMOs.
“Our financial examination division spots issues of concern in financial statements all the time with HMOs and insurance companies,” Haire said. “Those issues are taken up with the carriers and worked through. If they can`t be worked out, more stringent action is taken. To date, no other HMOs have required the level of commissioner supervision as AmeriCan has.”
While HMOs are struggling along, the home health industry is in turmoil, said Jean McCarty, executive director of the Mississippi Association of Home Care.
“Home health agencies are basically trying to survive cost-cutting measures from the Balanced Budget Act,” McCarty said. “About 800 agencies nationwide have closed their doors because they cannot get under cost limits.”
The Balanced Budget Act of 1997 changed the way provider-based health care costs were reimbursed, and capped expenses that were unlimited.
The Health Care Financing Administration (HCFA), the federal agency that manages Medicare, is charged with administering the BBA to regulate the Medicare program. HCFA devised an interim payment system (IPS) for home health agencies based on a complex set of formulas – but at 1993 costs, McCarty said.
“The way the IPS has been devised is terribly unfair,” McCarty said. “It gives each agency a different reimbursement amount per beneficiary limit based on 1993 costs. Since 1993, medical costs have escalated tremendously. One small example of inflation is the minimum wage increase to $5.15 per hour. That was not adjusted. A freeze has been placed on the market basket index for two years. Unfortunately, it`s the home health agencies that operated economically in 1993 that have been penalized.”
A moratorium on new home health agencies has been imposed since 1983. Currently, there are 55 home health agencies in the state through the MAHC. Thirty are hospital-based; 25 are freestanding. The Mississippi State Department of Health has about 19 active home health agencies throughout the state, McCarty said.
“I`m not sure if all of the home health agencies are going to survive IPS,” she said. “For instance, IPS is retroactive. Even though these rate limits came in effect last October, some of the home health agencies were not given their rates until April. Some of them had to operate six months before they knew even what their rates were going to be and were very surprised at their cost limits. Can you imagine contracting with the government to perform a service without knowing how much they`re going to pay you? It`s very difficult.”
Home health agencies have lobbied for a prospective payment system, which could be in place by next October. Under the PPS, costs are reimbursed at a reasonable rate for reasonable service, much like hospitals are reimbursed, McCarty said.
“Mississippi is rated as one of the states with the sickest and poorest health in the nation,” McCarty said. “IPS does not allow for patients with multiple medical conditions or long-term care. There`s no fair rationale to that reimbursement method.”
In the interim, the IPS reimburses home health agencies the lesser of three separate formulas – actual cost, cost per visit, or per beneficiary limit, which is a certain number of dollars per patient, she said.
“Home health is one of the most tremendous services to the aging public one can find,” McCarty said. “If your parents live several hundred miles away from you, it`s a comfort to know that you`ve got someone going in once a week looking after them.”
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