FHP Assures Membership That It’s in Good Health

FHS. FHP. HMO.

FHS is Family Health Services, known in some areas as Gen Med. FHP is FHP International, formerly called Family Health Program. Both are health maintenance organizations, otherwise known as HMOs.

Small wonder the public sometimes has difficulty telling one from another, FHP Chairman Robert Gumbiner said Tuesday.

Last week, FHP’s Fountain Valley offices were inundated with calls from worried members after Maxicare Health Plans announced that it was shutting down its Family Health Services unit. The callers wanted to know if FHP was closing down.

Gumbiner said FHP reassured its members that they belonged to a profitable institution that was not affiliated with Family Health Services. The company even issued a news release stressing that there was no relationship.

But consumer confusion doesn’t stop with the name. Gumbiner said the public tends to lump HMOs together, when in fact their services, rates, and financial stability vary tremendously.

“Many consumers don’t understand the differences among HMOs. And they don’t know that many HMOs are doing well and have been doing well for years,” Gumbiner said Wednesday after a speech to the Orange County Society of Investment Managers.

And because consumers don’t differentiate between the services provided by different HMOs, they don’t make informed choices in selecting their health care plans, he said.

Some HMOs have their own staff doctors and run their own facilities, for example. Others contract services with independent physicians. Some provide medical and dental care, and some provide one or the other.

Some, like FHP, are increasing their services and membership.

Others like Los Angeles-based Maxicare are consolidating their operations in the face of staggering losses. In shutting down FHS, Maxicare said the unit was not profitable and that a buyer could not be found.

FHS is an HMO with its own staff and facility. In most cases, Maxicare does not provide medical care directly but contracts with independent health care providers for services.

FHP earns most of its revenues from facilities owned by the company and staffed by company employees. The company, which earned $18 million during the 12-month period ended Sept. 30, has 430,000 members, including about 110,000 in Orange County.

“They didn’t manage their doctors, and they contracted with the wrong doctors and the wrong hospitals,” Gumbiner said. “When your doctors are independent you have joint ventures with doctors who don’t want to be in a joint venture with you.”

“The companies that are doing well, like Kaiser Permanente and ourselves, are the ones started many years ago for the purpose of providing better health care and better health care management,” he added.

Gumbiner predicted that some HMOs will continue to lose money, particularly those that seek to expand rapidly through acquisitions.

He noted that some troubled HMOs have been purchased by insurance companies, which don’t have experience operating the health plans. “Health insurance companies are used to being financial institutions. Our business is providing health care.”

Instead of buying other health maintenance organizations, Gumbiner said FHP plans to grow by offering an increased number of health care services, including ambulance service, optometric boutiques and skilled nursing facilities.

Although publicly held Maxicare has turned some financial analysts interests away from HMOs, FHP is a darling on Wall Street. FHP stock has advanced from less than $10 per share in August, 1987, to as high as $24 this year. The stock closed Wednesday at $21.88, up 75 cents per share.