Shock treatment for a sick system - TennCare, Tennessee's health care reform plan - includes related articles

Business & Health, March, 1995 by Stuart Schear

Delivery System. Twelve private HMOs and PPOs provide coverage to all TennCare beneficiaries, who now comprise 25 percent of the state population. By 1997, all TennCare provider groups must use primary-care gatekeepers.

Benefits. TennCare health plans must provide a Standard benefits package, including preventive care and coverage of prescription drugs.

Insurance reforms. Market reforms for employers with three to 25 full-time employees, including guaranteed issue, renewability, portability, and community rates within price bands. A reinsurance pool has also been established.

Cost Controls. Federal TennCare contributions capped at $12 billion over five years. State liable for overruns. Health plans and providers receive capitated payments for all TennCare beneficiaries, plus "risk adjustment" funds.

Will This New Player Shake Up The Market?

Health-care reform in Tennessee took on a new dimension earlier this year, when mega-hospital chain Columbia/HCA Healthcare Corp. announced it would move its headquarters to Nashville from Louisville, Ky.

State officials were thrilled. In a move that they claim was not a condition of the company's relocation, the Tennessee attorney general's office immediately dropped its antitrust probe of Columbia/HCA's $5.6 billion purchase of Nashville-based Healthtrust, another hospital chain. State officials also handed the company $11.6 million in tax breaks.

After the purchase of Healthtrust--if it isn't blocked by the federal government Columbia/HCA will own 311 hospitals in 31 states, with 60,000 beds and 172,000 employees. It will be the 51st largest capitalized company in the nation, with annual revenues of $15 billion.

President and CEQ Rick Scott has been aggressive in positioning the company as a cost-cutter. He has also pledged to reduce unneeded hospital beds and streamline the delivery of care.

Columbia/HCA's move has a direct impact on the Tennessee health-care market as well. The company will own 26 hospitals in the state, one in six of all acute-care hospitals. And while Columbia officials have announced no plans to increase that market share, other Tennessee providers clearly expect it. In defense, about 100 of the state's notfor-profit hospitals have formed an alliance known as Tennessee Healthcare. While not a merger in any way, the alliance brings together four existing state-wide hospital networks. The group intends to negotiate with employers and managed-care companies as a single entity, officials of the group said last month.

The participating hospitals include many of Tennessee's biggest players, such as Nashville's Baptist Hospital, which operates its own managed-care plan, and Health Net, with 287,000 enrollees. The Fort Sanders Health System in Knoxville is also involved. Its managed-care plan, PHP, has 242,000 enrollees.

In addition, Columbia/HCA is expected to enter the TennCare market, possibly by building its own HMO or PPO. In a move that raised many eyebrows last month, former state Finance Commissioner David Manning, a chief proponent and architect of TennCare, was named a vice president at Columbia/HCA.