PacifiCare's New HMO to Limit Choice
In a major shift in health-care benefits likely to be followed by others, PacifiCare Health Systems Inc. today will unveil an HMO that will limit members' choices to a relatively small network of doctors and hospitals.
The approach marks a radical change from past years when, at the behest of employers and consumers, health maintenance organizations offered ever broader networks of medical groups and hospitals. The thinking was the bigger the network, the better the HMO.
But now, with health premiums rising unchecked, employers and managed-care companies are moving, albeit gingerly, in the other direction. Many employers, led by those in California, already are offering their employees HMOs and other health plans that charge members higher co-payments for using more expensive hospitals.
PacifiCare's new HMO goes much further. Starting next year, members who enroll in the plan, called Value Network, will have available to them about one-third of the hospitals and one-half of the doctors of a standard HMO. Altogether, there are 300 hospitals and 250 medical groups in California. Value Network members who use providers outside the slimmed-down network generally will have to foot the bills.
Cypress-based PacifiCare, one of California's largest HMO companies, with 2.3 million members, said the narrow network would include those providers that have met PacifiCare's cost threshold and scored high on several quality measures. The new HMO will be offered only in California.
Some hospitals and doctors have sharply criticized the health insurance industry's increasing efforts to rate providers on cost and quality, saying it is an attempt by the HMO companies to gain leverage in negotiating rates.
Excluded from PacifiCare's new HMO are a number of well-regarded institutions such as Cedars-Sinai Medical Center, UCLA Medical Center and Childrens Hospital of Los Angeles.
Even so, some of California's largest employers, including Wells Fargo Bank and Lockheed Martin, have signed up for PacifiCare's new HMO, although employees at those firms won't learn specifics of the change until they receive their open-enrollment forms in the next few weeks.
Analysts said this type of HMO, which will be offered to tens of thousands of Californians in open enrollment this fall, could spread widely because it is seen as one of the few options to hold down health costs for employers and consumers.
