TY - JOUR
T1 - NorthMed HMO
AU - Christianson, J.
AU - Krein, S.
N1 - Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 1998
Y1 - 1998
N2 - NorthMed HMO is viewed by its owners as an important vehicle for integrating rural providers in northern Michigan. Through the HMO, rural providers hope to be able to contract with government programs, while retaining private-sector patients through employer contracts. For most rural providers, NorthMed HMO does not yet represent a major source of revenues. However, the HMO is about to embark on an expansion that, if successful, will increase its importance to providers and its visibility within the service area. This planned expansion is likely to place severe demands on the financial and managerial resources of the organization. Physicians. NorthMed HMO offers a model of a rural-based HMO in which physicians play a dominant role. Rural physicians in northern Michigan own Northern Physician Organization, a physician organization which, in turn, is the major stockholder in NorthMed HMO. The geographic expansion of the HMO is tied, in large part, to the geographic expansion of the membership of Northern Physician Organization. NorthMed HMO enters new communities when a significant number of physicians in those communities joins Northern Physician Organization. When physicians purchase ownership shares in the physician organization, they indirectly become part owners of the HMO. Participation in NorthMed HMO's network has offered limited benefits to rural physicians at a minimal cost. By being a participating provider in NorthMed HMO, physicians can remain available to their patients who choose the HMO as a health insurance option. NorthMed HMO has not been aggressive in attempts to influence physician practices, and physicians bear no financial risk as a result of their participation. Participating physicians are paid under a fee- for-service arrangement with no risk sharing related to hospital use. Indirectly, through Northern Physician Organization's ownership role in the HMO, physicians have the potential to gain financially from NorthMed HMO's growth if the HMO were to be sold, but this diffuse incentive is unlikely to have an impact on physicians' day-to-day behavior. The relationship between NorthMed HMO and its physicians is likely to change soon. The number of HMO patients seen by physicians will increase if the HMO succeeds in securing Medicare and Medicaid contracts, and if its new point-of-service option attracts additional private-sector enrollees. NorthMed HMO plans to contract with Northern Physician Organization on a capitated basis to serve the HMO's enrollees, an arrangement that would place financial responsibility for managing care delivery more directly on participating physicians. This is likely to result in more aggressive utilization review and quality assurance measures. In effect, rural physicians will be faced with a difficult trade- off that they have, to this point, largely avoided: They will be asked to accept financial risk and oversight of their practices in return for the assurance that their HMO can successfully compete for local patients (and their insurance dollars) against health plans that are owned and managed by entities located outside of their rural area. Hospitals. The dominant provider of inpatient care in NorthMed HMO's service area is a part owner of the HMO and has been a major source of capital for its development. At this stage in the HMO's development, Munson Medical Center has enjoyed little return on its capital investment. The number of NorthMed HMO patients has been small, and a significant proportion of the HMO's total enrollment still consists of employees of the hospital and its parent organization. Again, the planned expansion of the HMO, if successful, is likely to underscore the difficult issues that arise with respect to rural hospital ownership of an HMO. On one hand, if the HMO grows through Medicare, Medicaid, and new private sector contracts, it will be able to influence the medical care decisions of more area residents. This has the potential to increase the dollars flowing to local hospitals. On the other hand, if NorthMed HMO faces significant competition for these contracts, the HMO will need to exercise tighter controls over hospital use on the part of its members. This could reduce the share, if not the actual amount, of local health premium dollars received by rural hospitals. At the time of this study, the major hospital system in northern Michigan supports NorthMed HMO's expansion. The hospital system provides a diverse array of health services and is likely to capture a substantial portion of the HMO's hospital expenditures that are shifted to an outpatient, or less intensive inpatient, setting. The hospital system's administrators also see the potential value of creating a contracting organization that can result in greater local control over how community health care dollars are spent. Employers. No coherent, consistent picture of employers' objectives in purchasing health insurance for their employees, or of the HMO's strategy in attempting to meet those objectives, emerged from employer interviews. Some rural employers primarily emphasize price in their decision making, while others appeared to be more concerned with offering choices (of health plans or of physicians) to their employees. Some rural employers, particularly in the public sector, use a formal, structured process to review and select health insurance options. This process typically is influenced by limitations imposed by contracts with employee unions. For other employers, however, the process is surprisingly informal. The rural employers who were interviewed as part of this case study consistently express support for NorthMed HMO because of its local ownership. NorthMed HMO emphasizes local ownership and control in its marketing to employers and apparently this message is well received. At a less abstract level, the advantage of local control, as manifested in responsiveness to employer and employee questions and concerns, was noted by several employers. Clearly, the locally owned and managed HMO was perceived as user friendly by employers. An important issue for the HMO will be how to maintain this favorable perception as the HMO grows in enrollment and expands its service area. Employees. Employees enrolled in NorthMed HMO are generally satisfied with their experiences. This is to be expected because the HMO has an extensive local provider network, few restraints on accessing services, and generally competitive premium levels. Somewhat unexpected, however, was the consumers' reaction to their satisfaction: They were pleasantly surprised by their experiences as NorthMed HMO enrollees. They noted that their own experiences did not seem to be consistent with the poor image of HMOs portrayed in the national media. This suggests that an emerging issue for HMOs expanding their markets in rural areas will be the need to counter negative perceptions of HMOs held by rural consumers who have little actual experience with managed care.
AB - NorthMed HMO is viewed by its owners as an important vehicle for integrating rural providers in northern Michigan. Through the HMO, rural providers hope to be able to contract with government programs, while retaining private-sector patients through employer contracts. For most rural providers, NorthMed HMO does not yet represent a major source of revenues. However, the HMO is about to embark on an expansion that, if successful, will increase its importance to providers and its visibility within the service area. This planned expansion is likely to place severe demands on the financial and managerial resources of the organization. Physicians. NorthMed HMO offers a model of a rural-based HMO in which physicians play a dominant role. Rural physicians in northern Michigan own Northern Physician Organization, a physician organization which, in turn, is the major stockholder in NorthMed HMO. The geographic expansion of the HMO is tied, in large part, to the geographic expansion of the membership of Northern Physician Organization. NorthMed HMO enters new communities when a significant number of physicians in those communities joins Northern Physician Organization. When physicians purchase ownership shares in the physician organization, they indirectly become part owners of the HMO. Participation in NorthMed HMO's network has offered limited benefits to rural physicians at a minimal cost. By being a participating provider in NorthMed HMO, physicians can remain available to their patients who choose the HMO as a health insurance option. NorthMed HMO has not been aggressive in attempts to influence physician practices, and physicians bear no financial risk as a result of their participation. Participating physicians are paid under a fee- for-service arrangement with no risk sharing related to hospital use. Indirectly, through Northern Physician Organization's ownership role in the HMO, physicians have the potential to gain financially from NorthMed HMO's growth if the HMO were to be sold, but this diffuse incentive is unlikely to have an impact on physicians' day-to-day behavior. The relationship between NorthMed HMO and its physicians is likely to change soon. The number of HMO patients seen by physicians will increase if the HMO succeeds in securing Medicare and Medicaid contracts, and if its new point-of-service option attracts additional private-sector enrollees. NorthMed HMO plans to contract with Northern Physician Organization on a capitated basis to serve the HMO's enrollees, an arrangement that would place financial responsibility for managing care delivery more directly on participating physicians. This is likely to result in more aggressive utilization review and quality assurance measures. In effect, rural physicians will be faced with a difficult trade- off that they have, to this point, largely avoided: They will be asked to accept financial risk and oversight of their practices in return for the assurance that their HMO can successfully compete for local patients (and their insurance dollars) against health plans that are owned and managed by entities located outside of their rural area. Hospitals. The dominant provider of inpatient care in NorthMed HMO's service area is a part owner of the HMO and has been a major source of capital for its development. At this stage in the HMO's development, Munson Medical Center has enjoyed little return on its capital investment. The number of NorthMed HMO patients has been small, and a significant proportion of the HMO's total enrollment still consists of employees of the hospital and its parent organization. Again, the planned expansion of the HMO, if successful, is likely to underscore the difficult issues that arise with respect to rural hospital ownership of an HMO. On one hand, if the HMO grows through Medicare, Medicaid, and new private sector contracts, it will be able to influence the medical care decisions of more area residents. This has the potential to increase the dollars flowing to local hospitals. On the other hand, if NorthMed HMO faces significant competition for these contracts, the HMO will need to exercise tighter controls over hospital use on the part of its members. This could reduce the share, if not the actual amount, of local health premium dollars received by rural hospitals. At the time of this study, the major hospital system in northern Michigan supports NorthMed HMO's expansion. The hospital system provides a diverse array of health services and is likely to capture a substantial portion of the HMO's hospital expenditures that are shifted to an outpatient, or less intensive inpatient, setting. The hospital system's administrators also see the potential value of creating a contracting organization that can result in greater local control over how community health care dollars are spent. Employers. No coherent, consistent picture of employers' objectives in purchasing health insurance for their employees, or of the HMO's strategy in attempting to meet those objectives, emerged from employer interviews. Some rural employers primarily emphasize price in their decision making, while others appeared to be more concerned with offering choices (of health plans or of physicians) to their employees. Some rural employers, particularly in the public sector, use a formal, structured process to review and select health insurance options. This process typically is influenced by limitations imposed by contracts with employee unions. For other employers, however, the process is surprisingly informal. The rural employers who were interviewed as part of this case study consistently express support for NorthMed HMO because of its local ownership. NorthMed HMO emphasizes local ownership and control in its marketing to employers and apparently this message is well received. At a less abstract level, the advantage of local control, as manifested in responsiveness to employer and employee questions and concerns, was noted by several employers. Clearly, the locally owned and managed HMO was perceived as user friendly by employers. An important issue for the HMO will be how to maintain this favorable perception as the HMO grows in enrollment and expands its service area. Employees. Employees enrolled in NorthMed HMO are generally satisfied with their experiences. This is to be expected because the HMO has an extensive local provider network, few restraints on accessing services, and generally competitive premium levels. Somewhat unexpected, however, was the consumers' reaction to their satisfaction: They were pleasantly surprised by their experiences as NorthMed HMO enrollees. They noted that their own experiences did not seem to be consistent with the poor image of HMOs portrayed in the national media. This suggests that an emerging issue for HMOs expanding their markets in rural areas will be the need to counter negative perceptions of HMOs held by rural consumers who have little actual experience with managed care.
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U2 - 10.1111/j.1748-0361.1998.tb00625.x
DO - 10.1111/j.1748-0361.1998.tb00625.x
M3 - Article
C2 - 9825614
AN - SCOPUS:0031763646
SN - 0890-765X
VL - 14
SP - 233
EP - 243
JO - Journal of Rural Health
JF - Journal of Rural Health
IS - 3
ER -