Medicare HMO strains to survive

By Phil Galewitz



Palm Beach Post Staff Writer



Sunday, October 16, 2005



America's Health Choice was a lifesaver to thousands of senior citizens on the Treasure Coast.



From 2000 through this spring it was the only Medicare HMO in Martin, St. Lucie and Indian River counties. The main allure of the health insurance plan was that it gave seniors prescription drug coverage not available in traditional Medicare.



After quick success in the Treasure Coast, the Vero Beach-based company expanded to Palm Beach County in 2001 and gained a small following as it competed against HMO giants such as Humana and Health Options. Earlier this year, the firm looked to move into Miami, Tampa and Orlando.



But America's Health Choice has had to shelve those expansion plans to fight for its own survival after state and federal government health regulators this summer found the company failed to comply with numerous quality-of-care and patient-access rules. As a result, the federal government threatened to terminate the firm's Medicare contract, a move that would effectively shut down the company.



Among the most serious allegations spelled out in state and federal inspection reports obtained by The Palm Beach Post: The Medicare HMO plan lacks enough doctors and hospitals; it fails to pay doctors and hospitals on time; and it fails to evaluate the quality of care that its members receive.



The Centers for Medicare and Medicaid Services said it would end the HMO's Medicare contract effective Oct. 1, but has held off on that punitive action while the company appeals the allegations. Meanwhile, the firm's Medicare HMO plan, which has 16,000 members, has been prohibited since July from marketing or signing up new customers.



Federal health officials refuse to say what specifically triggered the Medicare termination notice, though inspection reports indicate that America's Health Choice had repeatedly been warned to fix many of the same problems. The government very rarely sends such termination notices to Medicare HMOs.



The company has fallen short in addressing the issues raised by federal officials.



"The company's responses have not mollified our concerns," the Medicare agency wrote in a July letter to America's Health Choice.



If it is shut down, seniors covered by the firm's health plan would have to return to traditional Medicare or choose one of two new Medicare HMOs that have started operating on the Treasure Coast this year. Those plans are operated by Hollywood-based Vista Health Plan and West Palm Beach-based AdvantageCare.



State and federal health regulators refuse to say when or if they will lift the sanctions on America's Health Choice, which was founded five years ago by former Fort Lauderdale heart surgeon Walter Janke and his wife, Lalita.



"We are reviewing their plans and determining if they have corrected the deficiencies," said Christine Perenich, a health insurance specialist for the Centers for Medicare and Medicaid Services Atlanta regional office.



It's unclear when the federal government will make its next move with America's Health Choice. The company expects to file its latest corrective action plan with Medicare officials in the next few days.



The timing of the company's problems couldn't have been worse. While its Medicare HMO plan is barred from marketing or signing up new customers, two other health plans are making a big push into the Treasure Coast and more than a dozen companies statewide have begun selling the new Medicare prescription drug coverage. America's Health Choice is selling a stand-alone Medicare drug benefit, though its HMO customers would get even better coverage in the HMO.



"The timing is frustrating and upsetting," said Richard Tuten, a health-care attorney who in July was hired as the firm's chief operating officer. He arrived just before the government sanctions came down.



COO says firm gives to community



One thing America's Health Choice has done right since its inception was make money. It's been profitable since its first year, something unusual for a start-up health plan, particularly in Florida.



In 2004, the company made a $9.9 million profit on $128.9 million in revenue. While larger health plans make more money, the company makes more profit than any HMO on a per-member basis in the state, state records show. The plan made about $600 per member last year, compared with $400 for industry leader Humana.



That's left some to wonder if the company has gotten rich at its members' expense.



It's a charge America's Health Choice strongly denies.



"We give plenty back to the community," Tuten said.



In an interview last week, Tuten said the company has fixed most of the problems identified by the regulators such as streamlining its payment system to doctors and hospitals and better documenting its quality improvement programs. But the health plan is still trying to make its case to the federal government that it has enough medical providers — doctors and hospitals — in its Medicare HMO plan network.



Unlike most HMOs, the family doctors who oversee care to America's Health Choice members are salaried physicians who only work for the one plan. As a result, the doctors have more time to see members because they don't have to take time to see patients from other insurers, Tuten said. The plan has about 55 doctors who work at 34 different offices in the region. Tuten said the company contracts with another 550 specialists.



"We have plenty of doctors," Tuten said.



Lack of enough medical specialists is one reason why the two St. Lucie County hospitals — Lawnwood Regional Medical Center & Heart Institute in Fort Pierce and St. Lucie Medical Center in Port St. Lucie — haven't agreed to a contract with America's Health Choice, said Beth Williams, a spokeswoman for HCA Inc., the owner of both hospitals. The shortage of specialists also was cited by Martin Memorial Medical Center in Stuart as a factor behind its decision not to contract with the company from 2003 until last month.



Tuten said the Medicare HMO plan doesn't need a hospital in every county it operates in because Florida rules only require health plans to have hospitals within a 30-minute drive of its customers living in urban areas.



Even though the company didn't have contracts with the HCA hospitals, it still often authorized its doctors to send patients to the St. Lucie County hospitals, Tuten said. The firm is still trying to secure a managed care contract with HCA to obtain better rates on hospital care for its Medicare HMO members, Tuten said.



In letters sent to Medicare officials, Walter Janke, CEO of America's Health Choice, said getting contracts with Treasure Coast hospitals has been difficult because those hospitals have a vested interest in maintaining the traditional Medicare fee-for-service system that pays them the highest rates.



Sanctions have drained morale



Tuten acknowledges the health plan had sent letters to customers denying medical claims without telling them about their rights to appeal. But he said that no longer occurs. Similarly, he admitted the firm's Medicare HMO plan lagged in paying doctors and hospitals in a timely fashion, but he said the reason was due to technological glitches and staffing issues rather than a deliberate attempt to hold back payments. A new electronic payment system will further rectify the issue, he said.



On the issue of quality improvement, Tuten said the HMO plan always has had various efforts to check the care given to seniors but the plan did a poor job at documenting it. He said the company has resolved that issue, too.



If the sanctions are lifted against the company, its health plan already has been approved as a Medicare HMO for 2006, he said.



The uncertainty surrounding the plan's future has shaken the company's 550-person staff. "It's been a real morale buster," Tuten said.



But the health plan is buoyed by the loyalty its customers have shown so far. The company has lost less than 300 members since the problems first came to light in July.



"Our members don't see quality-of-care issues, they see quality of care," Tuten said.