BEN SULLIVAN Staff Reporter
Los Angeles HMOs spend among the most and least in the state on medical care, according to the California Medical Association’s annual survey of the industry.
The study looks at how much of every premium dollar an HMO actually spends on medical care. Data comes from reports filed by the health plans with the state Department of Corporations, which regulates the HMO industry, and from filings with the U.S. Securities and Exchange Commission.
Pasadena’s Kaiser Foundation Health Plan, which operates throughout the state and is the largest HMO in L.A. County, came out on top, with 96.6 percent of its premium revenue going to medical costs. That figure is far above the expenditures of nearly every other HMO in the state.
The nearest runner-up locally is Prudential HealthCare of Woodland Hills, which spent just under 89 cents of every premium dollar on health care. InterValley Health Plan in Pomona turned in an 87.9 percent expenditure on medical costs.
By contrast, CaliforniaCare Health Plans in Woodland Hills, run by WellPoint Health Networks Inc., spent just 76.3 percent of its premium revenue on health care, making it the next-to-lowest-spending HMO in the state, after tiny Chinese Community Health Plan based in San Francisco.
Scan Health Plan of Los Angeles and Molina Medical Centers had relatively low expenditures as well, with 77.8 and 79.7 percent respectively.
Twice as many HMOs in the state have increased their percentage spent on care as have decreased their percentage since the California Medical Association began keeping tabs in 1992.
An exception in L.A. is Health Net, operated by Woodland Hills’ Health Systems International, which spent 80.8 percent of premium revenue on medical costs in 1992, and just 80.1 percent in 1995. During the same period, however, its profit margin rose from 4.4 percent to 8.3 percent of revenue.
L.A. HMOs were also well-represented among top executive compensation packages in 1995, which was the year scrutinized by the study. HSI President Malik Hasan was paid $1.9 million in salary, bonuses and retirement contributions in 1995, Maxicare Health Plans President Peter Ratican got $1.85 million, and former WellPoint CEO Leonard Schaeffer, who has since stepped down, garnered $1.1 million.
Costs vs. expenses
A study out of the Sherman Oaks office of The Wyatt Company, a human resources consultancy, says that although medical inflation is slowing in the United States, overall health care costs continue to skyrocket.
In 1996, the medical portion of the consumer price index rose 3 percent a bit less than the overall CPI increase of 3.3 percent, the study found.
Total national health care expenditures should have risen at a slightly higher rate, due to a growing and aging population. But expenditures are actually growing much faster.
That’s because, faced with price caps, health care providers are performing more procedures to generate more income.
That increase in procedures and corresponding increase in expenditures is being passed along by insurers to consumers.
For example, the American Association of Retired Persons, the largest supplier of Medicare supplemental insurance in the country, is raising its monthly premiums 13 percent in 1997, after having raised it 22 percent in 1996.
According to the report, real health care costs in the U.S. will more than double over the next 30 years if they keep growing at the same rate as in the first half of the 1990s.
“By focusing on the price of health care, we’ve taken our eye off the ball,” said Steve Richter, a health care consultant who oversaw the study. “The real issue is the overall cost of health care.”
L.A. Care Health Plan, which originally had expected to be up and running in February, has set itself a revised April 1 “go live” date.
The latest delay stems from difficulties the health plan is having in obtaining its Knox-Keene license from the state Department of Corporations. All HMOs must have a Knox-Keene license to do business in California.
L.A. Care is a public-sector HMO created by Los Angeles County as part of state and federal government efforts to move Medi-Cal recipients into managed care. The plan is expected to eventually serve 650,000 of the county’s 1.2 million residents who are eligible to be Medi-Cal recipients.
The health plan experienced unexpected delays related to getting L.A. County to sign its contract. The Department of Corporations would not recognize a letter of intent the county had signed as enough guarantee that an agreement was in place.
Pasadena’s Kaiser Permanente last week expanded its reach to the Coachella Valley and western Ventura County. It’s the first time Kaiser has turned full responsibility for Southern California member care over to affiliated providers.
In the Coachella Valley, Kaiser penned deals with Desert Medical Group and Oasis IPA for physician care, and with Desert Hospital and John F. Kennedy Memorial Hospital for in-patient care.
In Ventura County, Sea View Medical Group in Oxnard will provide the physicians, while St. John Regional Medical Center and Community Memorial Hospital of San Buenaventura will offer in-patient services.
“The network model of providing care is a new approach for Kaiser,” said Jeffrey Selevan, Kaiser’s network manager for Southern California. But “we feel it’s the most efficient and affordable way to provide medical services for our members in these areas.”