St. Joseph to Scrap HMOs, Cites Losses

The county’s largest medical provider will jettison 12 patient health plans over the coming months, claiming that the low-paying HMOs have cost the network of hospitals and physician groups $45 million in annual losses.

In a move that could force as many as 150,000 patients to either switch doctors or change health plans, officials at St. Joseph Health System in Orange said Saturday that the medical provider was renewing contracts with only four of its current health maintenance organizations. Contracts with 12 other HMOs would be allowed to expire gradually over the next year and a half, said Joe Randolph, chief financial officer.

The announcement follows four months of intense negotiations between St. Joseph and its HMOs, negotiations that centered on the cost of medical care for St. Joseph’s 420,000 patients.

The group runs hospitals across California including St. Joseph Hospital in Orange and St. Jude Medical Center in Fullerton.

St. Joseph officials said the HMOs are paying them too little for medical care--about $80 to $87 per patient per month in this case--and that the cost of catastrophic care, new technology and medicine is pushing medical providers into the red.

As a result of these negotiations, four HMOs agreed to take responsibility for these items. The reduced number of health plans would also lower administrative costs for the hospital, Randolph said.

Medical industry experts said the announcement was part of an ongoing struggle between medical providers and HMOs.

“This is not unprecedented, but we do applaud it,” said James Lott, executive vice president of the Health Care Assn. of California, a trade organization of hospitals. “Health facilities are finally telling the HMOs, ‘You need us more than we need you.’ ”

Other California medical providers that have jettisoned low-paying HMOs include Sutter Health, Catholic Health Care West and Tenet Health Care Corp., according to Lott.

At the California Medical Assn., spokesman Peter Warren offered a similar response. “It’s another example of health plans playing hardball with their rates and dislocating patients from their doctors,” Warren said.

The health plans that St. Joseph has decided to maintain are Aetna USHealthcare, Blue Shield of California, Blue Cross of California and Cigna Healthcare of California. Patients with these health plans should not experience a change in their medical service, officials said. St. Joseph is also continuing to negotiate with a fifth plan, Health Net, which may join the group.

Patients who belong to the medical provider’s other 12 HMOs will likely face changes in their health care. Most prominent among this group is PacifiCare of California, the county’s largest HMO and the insurer of 114,000 St. Joseph patients.

A PacifiCare representative could not be reached Saturday.

In an effort to make the transition as smooth as possible, Randolph said St. Joseph would begin an information “blitz” to tell patients about the changes and encourage their employers to offer coverage through the four favored health plans.

Randolph said that of the 150,000 affected, 25,000 are employees of St. Joseph and would all but certainly be cared for by St. Joseph, but under a different HMO.

“To some, it sounds like we’re just leaving our patients without anywhere to go,” Randolph said. “That’s not the case. We’re going to do everything we can to maintain our relationship with them.”