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INDEPENDENT HEALTH'S LOSS OF 22,700 MEMBERS IS COMPETITORS' GAIN

Independent Health lost at least 22,700 local members during fall enrollment after the region's largest HMO was criticized last year for prohibiting senior members from seeking care in Catholic hospitals and was boycotted by a large physicians' group.

Meanwhile, defecting subscribers pumped new blood into other plans.

Blue Cross and Blue Shield of Western New York officials said preliminary numbers showed it adding about 30,000 subscribers to its various plans during fall enrollment.

"The turnstile is still turning. We're still getting applications from people retroactive to Jan. 1 and they're coming in at a rate of 400 to 500 a day," said John Anderson, chief executive officer of Blue Cross and Blue Shield of Western New York, a division of HealthNow New York.

The region's other major HMO, Health Care Plan, said its ChoiceCare HMO jumped from 69,121 members to 81,832 members in January and the company's SeniorChoice grew by 40 percent, from 20,605 to 28,853.

An Independent Health official confirmed Thursday that preliminary January figures show an 18,500-member drop in Encompass, IHA's traditional health-maintenance organization, and more than 4,200 net defections from the Medicare HMO plan Encompass 65.

The total statewide membership loss since Independent Health announced an exclusive contract with Kaleida Health, the former CGF Health System, for treatment of Encompass 65 patients appears to be more than 35,000 members.

Linda Rehrauer, assistant sales director of Independent Health, said the company's total membership may slip under 400,000 when January figures are final. Independent Health had 435,796 subscribers on Sept. 30, 1998, according to reports filed with the New York State Insurance Department.

"We knew that this was going to happen. We made some difficult business decisions and we knew we were going to have some membership loss," Ms. Rehrauer said Thursday.

The membership numbers the local plans announced could be adjusted in February because each plan is still calculating January "disenrollment." The insurers still have some 1998 subscribers billed for January who may not renew because they enrolled in another health plan in the fall.

Health Care Plan is also beaming from its recent merger with PrePaid Health of Syracuse and acquisition of NorthAmericare. The deals and internal growth give HCP a statewide membership of 354,000.

The company headquartered in Buffalo's Guaranty Building leased 19,700-square-feet of additional space in December in the nearby Lafayette Court Building. HCP is adding 51 new jobs, primarily customer service and administration, in downtown Buffalo.

"We have some competitors out there who have alienated some of their customers, in particular Independent Health with their gaffe with the Catholic Health System," said Lesley Lannan, senior vice president of marketing and sales for Health Care Plan.

Independent Health signed an exclusive contract for senior members to streamline its Medicare HMO. The Encompass 65 plan was spending about $392 per member per month on revenue of $343 per member each month.

The Catholic Health System was not willing to accept the same rate structure Kaleida signed with Independent Health. CGF, the merged Childrens', Millard Fillmore and Buffalo General hospitals, officially changed its name to Kaleida Health Wednesday.

Despite losses on the senior plan, Independent Health appears to have had a decent financial year in 1998. The company had net income of $7.5 million, about $3 million over budget, at the end of the third quarter, according to state records.

The financial improvement could make Independent Health a stronger market competitor. The company said it plans to return between 75 and 100 percent of its physician withhold for 1998. That is the amount of money the HMO holds back in payments to doctors until it determines if its expense estimates were accurate.

Independent Health has also reduced the amount of money it withholds from physician payments this year, from the previous 15 percent, to 10 percent for specialists and 5 percent for primary-care physicians.

"We're trying to hold our rate increases down and we've improved the relationship with our physicians," Ms. Rehrauer said.

The company lost Promedicus Health Group, a 105-physician practice, altogether in 1998. Promedicus cited quality of care concerns in bolting Independent Health, but also has an active lawsuit against the insurance company over a financial dispute.

"We've got some basic indications that most of our patients are staying with us. Patients are very satisfied with their care and they feel the doctor-patient relationship is more important than the patient relationship with their insurance company," said Dr. Robert Erickson, CEO of Promedicus.

A Catholic Hospital System spokesman said senior patients of Mercy, Sisters and other Catholic hospitals are showing the same loyalty.

"We're not surprised. Because in this community, people follow their doctors and they want to stay with their doctors and their hospitals," CHS spokesman Dennis McCarthy said.

Independent Health's move to restrict patient access outraged local senior groups, the Catholic Diocese of Buffalo and about every politician running for office last year.

However, the move to make the senior HMO, which supplements Medicare with a broader package of benefits, more cost efficient was not unique in the industry.

Thirty-three health insurers, including large companies such as Aetna U.S. Healthcare and Prudential, pulled out of the Medicare HMO market Jan. 1, according to federal records.

Independent Health's senior membership is now about 22,000, giving Health Care Plan the market leadership with 28,853 senior members. Blue Cross and Blue Shield of Western New York is just hitting the senior market with about 4,000 members in the Senior Blue product launched last April.

Blue Cross and Blue Shield of Western New York's parent company, HealthNow New York, is enjoying significant statewide growth. The company, which also owns Blue Shield of Northeastern New York and just launched a new health plan in Central New York, has added 80,000 subscribers over the last year and now insures 750,000 state residents.

The company has launched several tailored products, such as a health plan in cooperation with local labor unions, drawing members in niche markets.

"All across the state we've been getting the benefits of the work we've been doing over the last two years," Anderson said.

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