UCI Cuts Some Ties to HMOs

Seeking an improved bottom line, the physician group run by UCI Medical Center has begun dropping HMO contracts and is planning to woo patients by becoming a center for medical referrals in Orange County.

The initial round of cancellations, which began in late August and continued Wednesday, will affect about 2,500 people and take effect late this year.

In coming months more of the 15,000 patients whose HMOs let them enroll directly with the UCI Medical Group could be forced to sign up with outside physicians and get referrals to see UCI doctors.

The actions are part of a restructuring of the medical center’s HMO business that will mean fewer patients will be able to sign up directly with UCI Medical Group as their primary care provider.

Rather, many patients seeking the expertise of UCI’s 350 faculty and clinical staff physicians will have to be referred by their own physicians’ medical groups, pay for the care out of their own pockets or get their insurance plans to pay on a direct fee basis.

While the future of its commercial HMO business is not determined, by next summer the medical group will be out of the Medicare HMO business, which is the primary care provider for about 700 patients, said Susan Rayburn, a vice president at UCI.

The medical center physicians’ group is reviewing all its HMO contracts in an effort to cut losses, Rayburn said.

UCI was losing $800,000 a year on the Medicare HMO program alone, she said, and an additional $3.2 million on its commercial HMO business, which has 14,342 enrollees.

“We would be fiscally irresponsible . . . if we continued to incur that kind of loss,” she said. “We would be out of business.”

The new strategy, which evolved over the past year, became evident as UCI dropped four of its Medicare HMO contracts and announced Wednesday it intends to drop the single remaining one next spring when it comes up for renewal. About 700 seniors are signed up with the medical group through Medicare HMOs.

In a more sweeping change, UCI Medical Group announced Wednesday that it will end its commercial HMO contract with Health Net for all non-UCI employees. That means that after December, about 2,000 of these Health Net members, who are signed up with the UCI Medical Group, will have to find new primary care providers.

The changes at UCI are part of a tug of war in the health care business, with some physician groups nationwide flexing their muscles to see if they can win higher rates from medical plans, experts said.

UCI officials emphasized that the health center is eager to remain prominent in the Medicare market--albeit on a referral basis--and to continue serving all types of patients, but cannot afford to do so under the existing system.

Officials would not say UCI Medical Group is going out of the HMO business. It still is committed to serving about 20,000 other patients through CalOPTIMA, the county’s HMO for the poor.

Some medical groups and hospitals have dropped out of the HMO Medicare market nationwide as costs have not kept up with reimbursements from insurers, experts said. In addition, many of the same medical providers are reevaluating how to do business in commercial HMO markets.

Others are actively courting the business. At UCLA, for instance, the medical center “quite aggressively pursued primary care and HMO business for many years,” said spokesman David Langness. “It is unusual among academic medical centers, but we have really made a commitment.”

It can be particularly difficult for academic medical centers to turn a profit on such patients because these centers tend to attract enrollees who are willing to travel farther because they need specialized care.

The challenge to profitability stems largely from how the HMO system works. Medical groups, such as UCI’s, are paid a monthly per-patient fee by medical insurance plans under a system called capitation. In exchange, they are expected to provide all patient care regardless of cost for everyone who signs up with their medical group.

Physician groups and hospitals rushed into the programs and accepted the risk out of fear that they would otherwise lose patient business. That is especially true in Southern California, where the majority of privately insured patients are in HMOs.

UCI, however, found it was attracting the sickest patients to its medical group, officials said. In some cases, cancer patients who were referred to UCI for treatment by their medical group from elsewhere in the county, were switching to UCI at the next enrollment opportunity, Rayburn said.

The result was that UCI was being paid a capitation fee instead of the heftier referral fee by the patient’s medical group.

So far, UCI has told four Medicare providers that their contracts would end late this year. The plans are Aetna, Blue Shield, Health Net and United Healthcare, covering 366 people. Blue Shield’s contract ends Nov. 30, the others Dec. 31.

Secure Horizons’ contract ends June 30, Rayburn said.

UCI said enrollees with questions about changes in their coverage should call (714) 456-7004.