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Foundation Exits More Medicare Markets

Health care: Managed-care provider says reimbursement isn't enough to cover costs in those areas.

October 06, 1998| From Bloomberg News

Foundation Health Systems Inc. said Monday that it is withdrawing from the Medicare health maintenance organization business in 18 more counties in the West because reimbursement rates do not cover its costs in those locations.

The provider of managed-care plans covering more than 6 million people said it will drop Medicare customers in eight counties in Northern and Central California, Colorado, New Mexico and Washington. Medicare is the government health program for the elderly.

Foundation already had announced plans to exit 10 rural Northern California counties and several counties in New Jersey and Connecticut. The latest withdrawal brings the number of Medicare customers affected by Foundation's pullbacks to 22,700, or about 7% of its total Medicare customers.

The company, based in Woodland Hills, is one of several large managed-care organizations reducing Medicare coverage as the federal government restricts payment growth in the program.

"We cannot continue to operate in areas where reimbursement rates don't reflect trends in actual medical costs," Jay Gellert, Foundation president and chief executive, said in a statement. He said Foundation "will remain in areas where we can adequately provide beneficiaries with quality health-care services and where the economics are sound."

The company also said it has rescinded its decision to leave Windham County, Conn. It still plans to leave New London County in that state and three counties in New Jersey.

Shares of Foundation fell 38 cents to close at $8.94 on the New York Stock Exchange.

By the beginning of next year, Foundation will be a Medicare HMO provider in 96 counties, serving about 292,000 customers in Arizona, California, Colorado, Connecticut, Florida, New Jersey, New Mexico, New York, Washington and West Virginia.

The 1997 balanced-budget law cut the growth of Medicare payments to HMOs by $20 billion over five years while creating new conditions for HMOs to participate in Medicare.

Managed-care companies say the new regulations are costly and that rate increases are not keeping pace with rising medical costs.

Aetna Inc., the biggest U.S. health insurer, and United HealthCare Corp., the second-biggest, also have pulled Medicare HMOs out of some markets.

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