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HIP Health Plans drops hospitals from HMO plan

Published Sep. 28, 2005

The arrival of the new year brings with it little cheer for the 3,250 Pasco County residents who are members of HIP Health Plans of Florida.

On Thursday, the financially struggling health maintenance organization officially terminated its contracts with Columbia HCA/Healthcare Corp.'s hospitals in west Pasco and Hernando. HIP, based in Hollywood, Fla., said the hospitals' reimbursement rates were too high.

The contract termination angered Pasco customers, many of whom complained that HIP had not contacted them about the cancellation, which severely limits their health care options. HIP says it still hopes to reach a deal with Columbia in the coming weeks.

The dispute also marked the third time this year that Columbia has tangled with an insurer over rates. United Healthcare of Florida Inc., the largest managed care company in the state, recently ended an eight-month contract dispute with Columbia that prevented its members from using five Tampa Bay area hospitals.

And early last month, Columbia said it was in a contract dispute with Humana and that it may let that agreement expire at the end of March. Without an agreement, Humana patients won't have access to any Columbia hospitals in the state.

Such contract disputes aren't confined to the Tampa Bay area. Similar disagreements have surfaced in Orlando, as well as Texas and California. And they will likely become more prevalent as managed care comes under increasing strain, analysts say.

Many Florida HMOs, which are losing money or barely turning a profit, are under intense pressure to reduce what they pay to hospitals and physicians in order to cover their costs. At the same time, hospitals face shrinking revenues thanks in part to Medicare spending reductions adopted in 1997 that cut reimbursements to hospitals for treating Medicare patients.

"The margin is so much thinner now, you can't avoid having these kinds of contract disputes," said Peter Young, a Fort Myers based health care consultant and analyst. "It almost leads to inevitable conflict."

Eager to capture market share, many HMOs signed contracts with hospitals that didn't reflect their true costs. "Now what's happening is that people are moving toward the true cost of doing business, versus gaining market share," Young said.

Columbia hospitals in particular are feeling the squeeze because the parent company can no longer shift costs to its home health care business, Young said. The company sold its home health care business after Columbia's Medicare billing practices became the focus of a federal investigation. Costs related to the investigation also have taken a toll on Columbia's bottom line.

All of which spells bad news for hundreds of Pasco teachers, business owners and retirees, who find their health care options severely curtailed.

HIP Health Plans of Florida in November informed school district officials that Community Hospital of New Port Richey, Regional Medical Center Bayonet Point and Oak Hill Hospital in Spring Hill no longer would remain in the company's health maintenance organization.

School district officials were exasperated by the news because many of their employees had switched from United to HIP only to find themselves in the same predicament.

But others affected by the cancellation, such as retirees enrolled in HIP's Medicare HMO plan and small business owners with group plans, say they were not notified by HIP.

"I'm a businessman here and we switched to HIP because we thought it might be a good plan, and without any notice all this happens," said Billy Quinn, 60, co-owner of Tri-City Glass and Mirror in Port Richey. "We're paying up to $900 a month for our employees and we didn't hear anything about it until it came out in the paper. That's not right."

Some have forwarded their complaints to state Rep. Mike Fasano (R-New Port Richey), who said he will take up the matter with state regulators.

State law requires HMOs to give subscribers up-to-date provider lists. However, it doesn't specify when that notification has to be given, said Dan McLaughlin, spokesman for the Florida Department of Insurance.

It may be time to change the law, he said.

"Until now, there hasn't been a significant problem in the managed industry with a loss of a chain of hospitals," McLaughlin said. "One of the things we will look into in the coming (legislative) session is further clarification of the statute regarding notification. Our position would be that we should require HMOs to notify subscribers of major changes, such as loss of hospitals."

The department, which helped to settle Columbia's disagreement with United, will work to do the same with HIP, McLaughlin said.

Last month, an HIP spokesman told the Times that all Pasco customers would be notified of a pending contract cancellation if the two sides couldn't reach agreement by mid-December.

As of Thursday _ the day the contract expires _ no such notice had been given.

Pamela Adams, senior vice president for corporate development for HIP Health Plans of Florida, said that's because "we had hoped to be able to come to terms by then." Customers likely were to be notified on Thursday, Adams said.

However, she said, both companies still were negotiating and that "we do expect to come to terms with them."

Regional Medical Center Bayonet Point spokesman Chris Hyers declined comment.

_ Staff writer Richard Verrier covers business in Pasco County. He can be reached in west Pasco at 869-6245 or (800) 333-7505, ext. 6245. His e-mail address is