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PacifiCare Forming Its Own Preferred-Provider Unit to Cut Costs

March 16, 1994|JAMES S. GRANELLI | TIMES STAFF WRITER

CYPRESS — PacifiCare Health Systems Inc., one of the state's largest health maintenance organizations, is wading into the insurance pool by forming its own network of independent physicians for its California members.

Through its PacifiCare of California subsidiary, the Cypress company said Tuesday that it is forming a preferred-provider organization to replace a costly PPO plan it has been leasing from another company.

The average cost to employers will drop by 15%, while the number of physicians available to members will grow to 25,000, a 32% increase over the number in the current plan. The new plan also expects to sign up 250 hospitals statewide.

More importantly, the new plan marks the company's effort to broaden its HMO image and position itself as a managed-care company, which it thinks it will need to do to remain competitive with other major health-care providers.

A PPO plan offers members a group of private physicians and hospitals from which to choose when seeking medical care. The physicians and hospitals agree to abide by fees established by the health-care provider.

PacifiCare's switch to a wholly owned and managed PPO is a "direct response to customer demands for flexibility and freedom of choice in health care," said Jeff Folik, PacifiCare of California's president.

"The new PPO product, when combined with our list of PacifiCare products, provides brokers and employers with one-stop shopping for all their employee-benefit needs," he said.

Initially, the plan will be available only to about 10,000 PacifiCare members in California. But 600,000 members eventually could join the plan if their employers pick up that option at their contract renewal dates with PacifiCare, spokesman Ben Singer said. The plan will not be available to 250,000 seniors already benefiting from Secure Horizons, PacifiCare's Medicare HMO.

"Frankly, the current leased network just hasn't been competitive. It is not priced well," Singer said. "It only has 700 members."

The savings under the new PPO will make it competitively priced, he said.

While the new plan is aimed only for PacifiCare's California members, Singer said, it may eventually be expanded to the company's customers in Florida, Oklahoma, Oregon, Texas and Washington.

PacifiCare, which has 1.1 million members in six states, is the state's third-largest and the nation's eighth-largest HMO. It also offers other managed-care programs, including a dental and a vision plan.

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