MEDAMERICA HEALTHNET TO SHUT DOWN

A number of area employers are looking over their health insurance options after an announcement Monday that MedAmerica HealthNet Inc. is dissolving.

The network of some 250 physicians and six hospitals in Southeast Missouri and Southern Illinois no longer will exist come March 1. It will continue to offer services until then.

The physician hospital organization became partners with Alliance Blue Cross Blue Shield to offer HealthNet Blue to about 15,000 policyholders in the region.

When the network was formed in 1994, organizers trumpeted it as a move to permit the cost savings of traditional managed-care products while allowing local control and choice of health-care providers.

Wade Adams, executive director of MedAmerica HealthNet, said Alliance Blue Cross Blue Shield's financial woes forced the PHO out of business. The network filed Dec. 31 for Chapter 11 bankruptcy in federal court, he said.

Adams said the decision to dissolve the network was prompted by "irreparable problems" in the network's agreement with Alliance Blue Cross Blue Shield.

The network was informed by Alliance Blue Cross Blue Shield in March that HealthNet Blue had incurred $1.6 million in losses through the HealthNet Blue joint venture and that losses were projected to reach $16 million through 1998.

"We've been told that the losses were the result of the ABCBS's contract with Missouri Consolidated Health Care Plan," Adams said.

Missouri Consolidated contracts to provide health insurance for state employees and employees of public entities such as municipal governments, school districts, levee districts, fire districts and county governments.

Dr. Richard Martin, a Cape Girardeau ear, nose and throat specialist and president of the Cape Girardeau County Area Medical Society, was critical of the lack of communication with network members.

"They have withheld vital information from us for a year and a half about what it was costing us and costing them for medical coverage," Martin said.

Martin said he was voicing his personal opinion, not those of the area medical society's.

When the Missouri Consolidated losses became apparent, he said, physicians were asked to take a 20 percent cut in their fees.

Said Martin: "I've personally taken a 30 percent cut in my salary, so to speak, with the HealthNet Blue corporation. Now they're asking us to take another 20 percent. I don't know how many businesses in town can afford to take a 50 percent cut. I certainly can't."

The Missouri Consolidated contract was a poor decision, he said. "This small percentage of folks has threatened the whole program, and I think the Blues are going to have to deal with that. They're asking us to pay for something we had no say in and no understanding of in the first place. We were kind of the silent partner, and we were not only silent, we were blind."

The Cape Girardeau public school system contracted with HealthNet Blue through Missouri Consolidated Health Care Plan. District officials are waiting to find out what MedAmerica's decision will mean for its employees.

"They're all having a dialogue, and they're supposed to get back to us and find out how and what that means for us," said school superintendent Dan Tallent.

Tallent said district employees will be informed of the development once more details are available.

"I don't want to alarm anybody until I actually get the facts," he said. "Hopefully in the next few days they will have sorted out what is occurring and can give us some better information on exactly how it's going to affect us in the long term and what we need to do in the long term."

The school district could seek bids for health insurance on its own, he said, but being enrolled in a large group -- Missouri Consolidated has 30,000 people in Southeast Missouri alone -- gives the district more favorable rates.

In November, Alliance Blue Cross Blue Shield announced it had posted a third-quarter loss reserve of $29.5 million and a $3.5 million net loss through RightChoice Managed Care Inc. on the Missouri Consolidated contract.

Adams said Alliance Blue Cross Blue Shield officials informed the network that it was liable for half of the losses and demanded the joint venture be restructured by Jan. 1.

About 7,000 of the 15,000 HealthNet Blue policyholders were insured through Missouri Consolidated, Adams said.

"We asked them for financial information and utilization information to back their claims up. They still have not provided it," Adams said.

He said MedAmerica HealthNet hired an auditing firm to trace the losses, but the firm could not get enough information from Alliance Blue Cross Blue Shield to reach a conclusion.

Alliance Blue Cross Blue Shield is arguing that the Missouri Consolidated program was opened up to too many high-risk patients and that it should be allowed out of the contract. Missouri Consolidated is suing to require Alliance Blue Cross Blue Shield to hold to its agreement.

In a written statement Monday, Alliance Blue Cross Blue Shield officials said, "We are both surprised and disappointed in MedAmeria's decision to file for bankruptcy and to dissolve."

Officials said in the statement they are studying MedAmerica's decision, "but our most important objective is to ensure continuity of health-care coverage for our HealthNet Blue members in the Cape Girardeau area."

Alliance Blue Cross Blue Shield officials said in the statement that "MedAmerica has shared in the benefits of the contract, and they also shared in the risk."

The partnership between MedAmerica HealthNet and Alliance Blue Cross Blue Shield was "a good marriage in the beginning," Adams said, with MedAmerica HealthNet running the provider network and Alliance Blue Cross Blue Shield handling the marketing and billing of the insurance component.

But the relationship soured when Alliance Blue Cross Blue Shield stopped providing financial statements and other information to MedAmerica HealthNet, he said.

"It's basically that issue that forced the board to make this decision, if you can imagine trying to run a business with no accounting statements, particularly when you're talking a budget in the millions of dollars," Adams said. "That's what the board faced."

He said the network's board of directors didn't know until last March that the Missouri Consolidated contract carried a five-year commitment. He said the board was under the impression that the contract would last a year, with an option to renew on a yearly basis.

Alliance Blue Cross Blue Shield could not be reached to comment on Adams' allegations.

"This has been an escalating problem that we've been trying to resolve for more than eight months," Adams said. "We had hoped that with the change in administration at ABCBS that there would be more and better cooperation, but this did not happen. We believe that ABCBS negotiated a bad contract with Missouri Consolidated without our consenting to the terms, that they have not taken advantage of opportunities to resolve some of the problems with this contract, that they have not kept us informed or provided us with critical information, and now expect us to share the liability and responsibility. Every aspect of this is unjust."

"There's going to be a lot going on in the next 60 days," said John Mehner, executive director of the Cape Girardeau Chamber of Commerce.

The announcement comes as a surprise to many, but Mehner said it is important to remember there are other managed-care options available.

"I think what we have lost sight of is that there are other networks now that were not in existence," he said. "It's going to be incumbent on everybody to evaluate those networks and make a decision. And Blue Cross has other products, too."

Jim Wente, administrator of Southeast Missouri Hospital, referred all comments on the decision to Adams, as did officials at St. Francis Medical Center. The SEMO Business Group on Health had no comment, indicating they were awaiting further information.

The network was formed in June 1994. Medamerica HealthNet and Alliance Blue Cross Blue Shield teamed up to offer HealthNet Blue in December 1994.

Major providers involved with MedAmerica are Dexter Memorial Hospital, Missouri Delta Medical Center, Perry County Memorial Hospital, St. Francis Medical Center, Southeast Missouri Hospital, Union County Hospital District in Anna, Ill., and Doctors' Park Surgery.