Lawrence Memorial Hospital's community health plan will close Oct. 31, and its members will be offered spots in Premier Blue, a larger HMO offered by Blue Cross and Blue Shield of Kansas.
Lawrence Memorial Hospital is getting out of the sole-owner HMO business.
The hospital agreed Monday to close its fledgling health-maintenance organization this fall and become an owner of a larger managed-care operation owned by Blue Cross and Blue Shield of Kansas.
The hospital will swap $3.5 million in stock from Premier Blue Inc., the HMO owned by Blue Cross and Blue Shield, for the hospital's equity in the plan.
In exchange, the hospital agreed to close its HMO -- called Community Health Plans of Kansas Inc. -- Oct. 31.
The deal means the 7,200 members of the hospital's plan will be shopping for a new managed-care provider, and both parties are confident they will sign on with Premier Blue.
"This relationship will mean our customers will have the convenience of a statewide network, excellent customer service, strong claims processing and, certainly, the financial stability of a strong health plan," said Gene Meyer, president and chief executive officer of the hospital and its plan.
With 60,000 members in 55 Kansas counties, Premier Blue contracts with more than 450 primary-care providers and another 1,200 specialists available for referrals.
Plan members can sign on with any number of companies, but Premier Blue will not require the hospital's customers to submit forms for proof of insurability or other health statements to get coverage.
Rates will be determined later.
"We have a very solid, well-established network here in Lawrence," said Graham Bailey, a spokesman for Blue Cross and Blue Shield. "We'll easily be able to care for any people who want to transfer over."
Blue Cross spent more than six months negotiating with hospital officials to land a deal, which effectively gives Blue Cross a stronghold in one of the fastest-growing areas in Kansas and a financial lifeline midway between Topeka and Kansas City.
"It's just a vital cog, I think, in the machinery of creating a solid and productive managed-care program," Bailey said.
Like Premier Blue, the hospital has been working since 1995 to build a managed-care network that serves community needs by working directly with local physicians through partnerships.
But the hospital's plan couldn't keep up with increasing competition, Meyer said. In 1994, consultants figured the plan would need between 12,000 and 13,500 members within five years to break even.
With only 7,200 signed up so far -- including 1,023 Lawrence Memorial Hospital employees and their dependents -- the plan lost $1.6 million last year, all of it because of administrative costs. About 250 other area businesses and organizations belong to the hospital's plan.
By teaming with Blue Cross, Meyer said, things should get better fast.
"It really lessens our financial risk " and allows the resources of LMH to be directed to our core business, which is the delivery of health care," Meyer said.
Last month, the hospital reported a $1.13 million overall loss for 1998, most of it because of bad debts and higher expenses.
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PREMIER BLUE AND YOU
Community Health Plans of Kansas Inc., the HMO owned and operated by Lawrence Memorial Hospital, will close Oct. 31.
The plan will settle and administer claims for services incurred by Nov. 1, even if it takes months to wrap up the paperwork.
The hospital agreed to close the plan in exchange for partial ownership in Premier Blue, a larger HMO owned by Blue Cross and Blue Shield of Kansas. Rates have not yet been set for people looking to sign up for Premier Blue coverage.
Questions? Call the plan at (888) 969-7526, or Blue Cross and Blue Shield at (800) 874-1823.