Rocky mountain HMO

A. Wellever, I. Moscovice

Research output: Contribution to journalArticle

Abstract

Rocky Mountain HMO's two-decade history of success on the western slope of Colorado is due not only to the conscious decisions of its managers but also to the geography and demography of its primary market area. The managers of Rocky Mountain HMO sought to build a managed care plan that was physician friendly and that had a local face, explicitly recognizing that their success hinged on the ability to satisfy the needs of both providers and purchasers. Isolated by the Rocky Mountains from major population centers of the state and located beyond the pull of the Salt Lake City, Utah, market to the west, Rocky Mountain HMO had no real managed care competitors on the western slope during its formative years. This lack of competition, combined with the ability to defuse physician resistance to managed care and to provide a satisfactory array of benefits at a reasonably low price, gave Rocky Mountain HMO an impressive share of the western slope health insurance market. Rocky Mountain HMO's expansion plans, in part, are a reaction to real and anticipated increases in managed care competition along the western slope. To maintain competitive premium rates, Rocky Mountain HMO executives perceive the needs to spread the fixed costs of its infrastructure by increasing enrollment. As Rocky Mountain HMO expands its market to include all areas of the state, three issues relative to rural areas emerge. First, will Rocky Mountain HMO be able to import its successful rural HMO development strategies to other rural areas of the state at the same time it attempts to develop urban markets, or will rural expansion areas be treated in the same manner as urban expansion areas? Second, what are the consequences of the HMO's change in strategic focus for Rocky Mountain HMO providers and consumers on the western slope? Third, how will increased competition on the western slope affect Rocky Mountain HMO's relationship with its providers and consumers? Implications for Rural Providers, Employees, and Enrollees. Physicians. Physicians generally characterize Rocky Mountain HMO as physician-friendly. The HMO increased the payments that participating physicians receive from Medicaid, and reduced the paperwork required of physicians' offices. Moreover, Rocky Mountain HMO's utilization management and quality improvement programs have not affected the autonomy of practicing physicians. The establishment of independent IPAs and PHOs in most of the western slope counties has increased the bargaining power of physicians in negotiations with the HMO and also has increased the perception among local physicians that they have greater control over health services decisions than many of their colleagues in other rural communities. If competition and expansion cause the HMO to alter its programs and policies to lower its costs, Rocky Mountain HMO may seem less friendly in the future to participating physicians. Rocky Mountain HMO is beginning to compete with itself on the western slope by offering both Rocky Mountain HMO products and Rocky Mountain Physicians Choice products. Selling both products potentially increases the market share of Rocky Mountain HMO and offers employers a wider variety of products, but it also raises an issue for local physicians. Currently, western slope physicians participate in the Rocky Mountain HMO provider network through their local IPA or PHO; they participate in the Rocky Mountain Physicians Choice through the statewide network. The statewide network is now recruiting individual physicians. Eventually the Physicians' Choice products will have statewide name recognition, will be more portable, and will feature a broader provider panel than Rocky Mountain HMO. Consequently, the Physicians' Choice products may end up commanding a larger share of the western slope market than Rocky Mountain HMO products. Should this occur, the perception of local control currently enjoyed by physicians through their participation in local, autonomous IPAs and PHOs might diminish. Hospitals. Hospitals, too, have had generally good relations with Rocky Mountain HMO in the past. As with physicians, these relationships may be tested as competition intensifies on the western slope and as the HMO implements its expansion plans. In an effort to reduce costs, the HMO may tighten its utilization management program so that hospitals see a reduction in the number of admissions and patient days. This reduction in use by HMO patients will reduce the revenue of the hospitals. Hospital revenue also may be affected by the form and the amount of payments from the HMO, both of which may be subject to change. Because hospitals participate in PHOs, they also may feel a loss of local control if Physicians' Choice products should come to dominate the managed care market. Employers. In the past, employers have purchased Rocky Mountain HMO products because they considered them to be good products sold at good prices. Local ownership of the HMO and the availability of member support locally also played a part in selecting Rocky Mountain HMO products over other health insurance options. Greater competition on the western slope from other managed care firms, however, will test the product loyalty local employers have had for Rocky Mountain HMO. In the short run, larger managed care firms will likely to be able to charge less for their products that Rocky Mountain HMO. The value that employers place on the local nature of Rocky Mountain HMO will be a key to the HMO's success in an increasingly competitive environment. The IPAs and PHOs with which Rocky Mountain HMO contracts can be quite restrictive; for example, physicians of one IPA refuse to refer Rocky Mountain HMO patients to physicians in another IPA, even though both IPAs are in the provider network. Such barriers may not exist in Rocky Mountain Physicians Choice products because the provider panel is a statewide network. Not only are the artificial barriers on referrals removed by selecting Physicians' Choice over Rocky Mountain HMO, but the provide panel is greatly enlarged. These two changes may combine to make Physicians' Choice the preferred product in the future. Enrollees. The enrollees are generally satisfied with the coverage they receive from Rocky Mountain HMO. Greater managed care competition on the western slope may benefit enrollees in the short term if the cost of benefits declines, or if the cost of benefits remains the same but the patient's out- of-pocket obligation decline. Should employers switch from Rocky Mountain HMO to Rocky Mountain Physicians Choice, enrollees would gain access to a broader, less restrictive provide network.

Original languageEnglish (US)
Pages (from-to)211-223
Number of pages13
JournalJournal of Rural Health
Volume14
Issue number3
DOIs
StatePublished - Jan 1 1998

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