Managed-care 'revolution' looms in central New York

CNY Business Journal (1994-95), Nov 13, 1995 by Grossman, Naomi

CENTRAL NEW YORK--In referring to managed care's presence in Central New York, Timothy Bobo, executive director of the Central New York Health Systems Agency, likes to steal a quotation from Abraham Lincoln: "Revolutions don't go backwards." Says Bobo, "The managed-care revolution is here to stay."

Lincoln's quote gains relevance when the reality of managed care's penetration in Central New York is clarified. While the managed-care "revolution" has certainly made its presence felt in this area, it has not made as much of an impact here as it has on other areas in the country. More urban areas of Central New York, like the counties of Onondaga and Oneida, have enrollments in health-maintenance organizations (HMOs)--the most common form of a managed-care organization--that are as high as 20 and 18 percent of the respective populations.

Other areas, like Jefferson and Lewis counties, have seen virtually no penetration at all. In fact, according to the New York State HMO Council, for the 16-county area of Central New York, HMO penetration as of January, 1995 was only 2 percent. This is well below the statewide average of 25 percent and the national average of 30 percent.

"Central New York is an early market for managed care," says Thomas Dennison, director of the Upstate Health Care Audit and Consulting group at Coopers and Lybrand L.L.P. "We have not had the same level of penetration as the rest of the country and we have not felt its effect. But we will feel that, eventually."

The low rate of penetration can be attributed to this area's fairly efficient health-care delivery system. "Healthcare costs in Central New York have been lower than average," explains Bobo. "In other areas, those costs really skyrocketed, but there was less pressure here to go into HMOs at the outset."

Dennison points out that Onondaga County has one of the two lowest use rates (which measure rates of discharges from hospitals) in the state, and the area has also seen a shift to ambulatory-care services. Moreover, until recently many of the indemnity plans that were offered locally were actually cheaper than the HMOs. And Central New York's rural areas make it more difficult to set up the networks that HMOs require to manage health care.

HMOs Coming Fast

Nevertheless, the HMOs are not only coming but are also excited about their prospects here. "We see real potential in Central New York," affirms Amy Ertel Bellcourt, director of corporate communications for MVP Health Plan, a not-for-profit regional health plan, which recently expanded into the Central New York area. "It is an untapped market. And with Central New York sitting right in the middle of eastern and western New York, both of which have very heavy HMO penetration, we believe it is an area of tremendous growth for us."

Similarly, Maureen West, vice president for marketing at Community Health Plan (CHP), a multistate not-for-profit health plan, reports that her company, which recently expanded into Broome and Tioga counties, plans on further expansions in Central New York. "Central New York is more open to managed care now. Employers, who pay a large chunk of the healthcare bill, see what's going on on the West Coast where managed care has such a high penetration, and they are taking the bull by the horns." Bellcourt insists that a good understanding of HMOs has not yet been communicated effectively in this area but with more players in the market she believes that the benefits of HMOs will be made known.

But more players in the market also mean more competition for the HMOs. "We are just on the cusp of competition," says Dennison. "We've had a noncompetitive environment until now, but that's changing."

According to Leslie Moran, director of communications for the New York State HMO Council, the HMOs now want to move into those counties at have been slower in enrollment: "That's the next frontier, where HMOs are looking to develop networks."

Also, employers in the less rural areas of Central New York are demanding coverage for their employees who live in the more rural areas. "Now HMOs have a reason to go out and build that network, because employers are saying, 'I will use you if you have access for my employees,'" Moran declares. "They build capacity when they are directed to build it."

West agrees. "Often our expansion is on invitation--either by employers or by a delivery system," she says. "We have a different approach from that of many other HMOs in that we don't seek out metropolitan markets. Our first expansion here was to a rural community."

For-Profit HMOs, Too

There are now eight HMOs serving the Central New York area. Some, like MVP Health Plan and CHP, have recently moved into the region. Other local HMOs have expanded their service areas. And there are still other HMOs, like WellCare of New York, Inc., a for-profit HMO subsidiary of The WellCare Management Group, Inc. With more than 96,000 members in New York state and 1994 revenues of $122 million, it has applied to expand into Central New York. And many anticipate that this is only the beginning.