FHP Will Help Manage HMOs Serving Xerox : Health: FHP is working to build a network of management affiliations throughout the West that it can market nationwide.


FHP Inc. said Monday that it is one of six health maintenance organizations selected by Xerox Corp. to coordinate claims and provide quality assurance for the scores of HMOs that serve Xerox employees nationwide.

FHP and the other firms--U.S. Healthcare, Kaiser Permanente, the HMO Group, Prudential Insurance Co. of America and Benefits Enrollment Services--will manage the 126 HMOs that currently serve Xerox and will recruit new health care providers where necessary.

FHP said it has not been determined how much it will be paid for its management services.

However, the contract will add about 2,000 Xerox employees to FHP's membership roster by 1991, resulting in a $2-million boost in annual revenue, said James Smith, associate vice president of national accounts for FHP. The gain is expected because Xerox will begin to offer FHP's medical plan to employees in New Mexico and Arizona. FHP already serves 1,000 Xerox employees in Southern California, Utah and Guam.

Development of a management team gives Xerox a mechanism to better police the quality and cost-efficiency of its HMO providers, said Sharon Diehl, manager of benefits of Xerox, which is based in Connecticut. It also provides a more centralized billing system because all paper work will be funneled through the six managers.

For FHP, Smith said, the management contract offers an opportunity to develop an extensive system of HMO affiliations throughout the West that it can then market to other national corporations.

Smith said his company feels that management affiliations with other HMOs is a better method for attracting national accounts than the alternative of developing its own national medical delivery system. Expansion through acquisition, he said, helped to drive Los Angeles-based Maxicare into bankruptcy earlier this year.

FHP provides medical services only in Southern California, New Mexico, Arizona, Utah and Guam.

"FHP's intention is to continue to operate as a regional HMO. But in order for us to appeal to large national companies like Xerox, we will need to have affiliations with other HMOs in other parts of the country," Smith said.

Xerox's Diehl said many of its HMOs already are affiliated with the six companies that Xerox has selected. It will be the responsibility of the managing companies, she said, to screen all new HMOs gaining entry to the system and to act as watchdogs to assure that medical services will not be over- or under-utilized.

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