Third California HMO Under State Control

California regulators changed the locks and froze the bank accounts of doctor-owned Tower Health last month, marking the third time this year that state officials have taken over a financially struggling HMO.

      As of July 31, Tower reported $653,000 in cash and more than $13.6 million in liabilities. It had a negative net worth of $985,000, far short of the $1.5 million surplus that the state required it to maintain. In addition, Tower is holding $5 million in reimbursement checks to providers that would bounce if mailed out and deposited. Founded in 1995 by President Robert Cohen, M.D., the for-profit health plan serves 111,000 members in Southern California and Nevada.

      In August, state regulators took control of Los Angeles-based Watts Health Foundation, a 34-year-old not-for-profit that covers 96,000 mostly low-income and elderly enrollees. Watts, which also operates 70 medical clinics and a number of community-based health programs, reported assets of 15.9 million and liabilities of $59.1 million as of July 31.

      In May, Maxicare Health Plans, a Los Angeles-based HMO with 272,000 members, was placed under state receivership. The HMO, which is now operating under bankruptcy court protection, had assets of $74.9 million and liabilities of $91 million.

      The three seizures-coupled with the recent financial shortfalls of HMO giants Aetna, Kaiser Permanente and PacifiCare Health Systems-seem to signal that the managed-care industry, especially in California, is heading for trouble. Back to TOC.

University of Wisconsin Broadens Stem Cell Lawsuit Against Geron Corp

The University of Wisconsin's patent agency has broadened its lawsuit against a company that wants to use the university's human embryonic stem cell lines.

      The agency, the Wisconsin Alumni Research Foundation, filed its original suit in August, seeking to prevent the Geron Corporation of Menlo Park, Calif., from interfering with the foundation's ability to contract with other companies to develop stem cell technology further.

      Human embryonic stem cells were first isolated and grown at the University of Wisconsin in 1998.

      Geron, which financed much of the early research, wants exclusive rights to any research products developed using the stem cells, said Carl Gulbrandsen, the foundation's managing director. That goes against its licensing agreement with Geron, the foundation says.

      Embryonic stem cell lines, each descended from a single embryo, can divide into an infinite number of biological blank slates. With genetic manipulation, their cells could be induced to differentiate into specialized cells that could be used to repair hearts, livers and other tissue. Back to TOC.

HCA to Takes Ownership of St. Joseph's Hospital In Parkersburg, WV

HCA announced that it will acquire the 50 percent interest of its joint venture partner in St. Joseph's Hospital, in Parkersburg, West Virginia from its current partner in the hospital, the Sisters of Saint Joseph Health System.

      In 1996, HCA and the Sisters of Saint Joseph Health System entered into a 50-50 joint venture agreement in which HCA acquired 50 percent of the hospital. The Sisters of Saint Joseph recently decided to exercise an option in the original joint venture agreement that would allow them to sell its 50 percent interest in the hospital to HCA by July 2002. The transaction is expected to be completed by the end of 2001, subject to regulatory approvals. Back to TOC.

Health Management to Buy Back up to 5 Million Shares

NAPLES, Fla., Sept 24 (Reuters) - Health Management Associates Inc. (NYSE:HMA - news), an operator of 38 hospitals, said on Monday its board has approved the repurchase of up to 5 million shares of class A common stock.

      As of the third quarter ended June 30, Health Management had about 264 million fully diluted shares outstanding.

      Purchases will be made from time to time in the open market and will continue until all of such shares are repurchased or until the company decides to terminate the repurchase program, the company said.

      Health Management shares rose 3.4 percent, or 64 cents, to $19.44 in afternoon trading on the New York Stock Exchange. The S&P 500 and the Nasdaq Composite were up 4 percent and 5 percent, respectivly. Back to TOC.

LifePoint Hospitals to Acquire Ville Platte Medical Center

LifePoint Hospitals, Inc. announced a definitive agreement to acquire 116-bed Ville Platte Medical Center, Ville Platte, Louisiana. Closing of the acquisition, which is subject to the satisfaction of certain conditions, including governmental and regulatory approvals, is expected on November 30, 2001, following a public referendum scheduled for November 17, 2001.

      Ville Platte Medical Center is a 116-bed, acute care facility that serves Evangeline Parish and South Central Louisiana. The facility is accredited by the Joint Commission on Accreditation of Healthcare Organizations.

      LifePoint Hospitals, Inc. operates 21 hospitals in non-urban areas where the LifePoint facility is the only hospital in its community. Back to TOC.

Magellan Health Services Names Messina CEO

Magellan Health Services, Inc., a manager of behavioral health care, announced that Daniel S. Messina, president of the company, has been named to the additional role of chief executive officer, effective Oct. 1, 2001.

      Messina succeeds Henry T. Harbin, who will remain chairman of the board of directors.

      Messina, 45, has served on the board of Magellan since 1998. He became president of Magellan earlier this year, after having joined the company in 2000 as executive vice president and chief operating officer. Prior to joining Magellan, Messina was chief financial officer and head of business strategy for Aetna U.S. Healthcare, the nation's largest health insurer. He also served as vice president of financial relations and chief of staff to the vice-chairman of Aetna. Overall, Messina has 20 years of managed health care experience in various roles at Aetna and previously at Cigna.

      Henry Harbin, 54, has spent the last eight years leading two of the nation's most prominent managed behavioral health care organizations, first as CEO of Green Spring Health Services and most recently as chairman and CEO of Magellan.

      Headquartered in Columbia, Md., Magellan is in managed behavioral health and employee assistance programs, serving approximately 70 million individuals across the United States. The company serves over 3,000 client organizations representing health plans, government agencies, unions, and corporations. Back to TOC.

THC Earnings Lift Hospital Stocks

Tenet HealthCare's positive earnings outlook sent hospital stocks higher, despite a weak broad market, as hospital admissions and higher medical care prices have shown no signs of slowing, analysts said.

      "We're seeing the hospital sector as a fairly safe place to be and the Tenet announcement places a nice backdrop for us," Salomon Smith Barney analyst Deborah Lawson said.

      Tenet said late on Wednesday it was expecting earnings for the quarter ended Aug. 31 to rise 35 percent to 40 percent, to 65 cents to 67 cents per share, compared with current analysts' estimate of 61 cents, as compiled by First Call/Thomson Financial.

      The company said above-average growth in admissions, a strong pricing environment, effective cost controls, and superb cash flow trends supported its earnings performance.

      "The factors driving Tenet to preannounce aren't happening in isolation," Andreas Dirnagl, analyst at Gerard Klauer Mattison, said, noting that other hospitals could benefit from the same factors.

      Dirnagl said most hospital chains are expected to report 15 percent to 30 percent earnings growth for the third quarter.

      Tenet's fiscal year makes its earnings calendar different than the majority of hospitals, which will report results in late October or early November.

      Goldman Sachs analyst Andrew Bhak reiterated the firm's stance that investors should "overweight" their portfolios with hospital stocks, since they are expected to outperform the market.

      "We expect strong rates of earnings growth and potential for EPS outperformance," Bhak said. This would be the seventh consecutive quarter of hospitals beating expectations, he added.

      Investors had been moving into "defensive," or less risky, stocks even prior to the hijacking attacks on Sept. 11. Hospitals, which had been expected to show strong earnings growth, have benefited from this trend.

      "There is obviously a flight of capital into industries that appear to be safe havens and apparently there aren't that many of them," Credit Suisse First Boston analyst John Hindelong said. Back to TOC.

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In This Issue--Also See Archive

California Regulators Seize HMO

California regulators changed the locks and froze the bank accounts of doctor-owned Tower Health...

Univ. of Wis. Stem Cell Lawsuit

The University of Wisconsin's patent agency has broadened its lawsuit against a company that wants to use...

HCA Buys Parkersburg, WV Hospital

HCA announced that it will acquire the 50 percent interest of its joint venture partner in St. Joseph's Hospital...

HMA Announces Stock Buy Back

NAPLES, Fla., Sept 24 (Reuters) - Health Management Associates Inc., an operator...

LifePoint Targets Ville Platte Med. Ctr.

LifePoint Hospitals, Inc. announced a definitive agreement to acquire 116-bed Ville Platte Medical Center...

New CEO Takes Helm for Magellan

Magellan Health Services, Inc., a manager of behavioral health care, announced that Daniel S. Messina, president...

Stock High on THC Earnings

Tenet HealthCare's positive earnings outlook sent hospital stocks higher, despite a weak broad market...

Income Sags for Primary Care MDs

According (Mark Crane, Senior Editor) to the Medical Economics Continuing Survey, which samples MDs...

GAO Report Spells Changes for Oncology

The upcoming release of a General Accounting Office report on Medicare drug reimbursement will either...

New Specialty--Wealthy Health

The practice of charging upfront access or membership fees for more personalized physician service...

Does ASRM Support Gender Selection?

A fertility specialist with offices in Chicago and New York has told The New York Times that, after requesting

MD Income--Primary Care Docs Earn Less Than They Did In 1998

According (Mark Crane, Senior Editor) to the Medical Economics Continuing Survey, which samples MDs and DOs in office-based private practice, median gross income in 2000 fell by 11 percent for general internists and GPs. It rose by 19 percent for ob/gyns and 12 percent for pediatricians, and was unchanged for FPs.

      But the net income side of the ledger spells real trouble. GPs saw their median earnings decline by 16 percent. Pediatricians earned 2 percent less than in 1999. Median net income rose by a paltry 1 percent for FPs and ob/gyns, and was unchanged for general internists.

      For the fourth year since 1995, FPs wound up with a median net higher than that of their general internal medicine colleagues. Ob/gyns are still the income leaders in primary care, with pediatricians in second place.

      Some internal medicine subspecialists posted notable income gains last year. Invasive cardiologists had a 17 percent increase in median gross and an 8 percent boost in net. Noninvasive cardiologists saw their gross income decrease by 9 percent, while net earnings went up 3 percent. Gastroenterologists increased their median gross income by 9 percent; net earnings, however, struggled to rise just 1 percent.

      Surveyed physicians in groups of five to nine had the highest median gross and net incomes ($385,030 and $218,790, respectively). Doctors in single-specialty groups typically netted 23 percent more (or $39,190) than colleagues in multispecialty groups.

      Physicians between the ages of 45 and 49 had the highest net earnings, as did doctors who have been in practice for 11 to 20 years. Not surprisingly, the youngest and most senior physicians earn considerably less than their middle-aged counterparts.

      Midwestern physicians had the highest net incomes, typically earning $11,790 more than colleagues in the West, where earnings were lowest last year. Urban physicians netted $8,240 more than rural doctors, and $29,300 more than their inner-city colleagues.

      The gender gap is still pretty wide. The typical female physician netted $42,100 less than her male counterpart. The gap in primary care earnings is narrowest among FPs, where male physicians earned about $20,000 more than female doctors.

      For complete information about this survey and the company that produced the results, go to http://me.pdr.net/me/index.htm and look for the appropriate story line. Back to TOC.

Report From General Accounting Office Means Big Changes for Oncologists

The upcoming release of a General Accounting Office report on Medicare drug reimbursement will either doom outpatient chemotherapy delivery or provide the framework for reshaping a system widely said to be flawed.

      The study, due Oct. 11, was mandated by Congress last fall in response to a long series of failed attempts to change reimbursement methods for physician-administered drugs. For some of these drugs, Medicare pays doctors 95% of the average wholesale price (AWP), self-reported by drug companies and published in price indices. In competing for market share, drug companies have allegedly over-reported AWP to allow doctors to profit from the "spread," or the difference between Medicare reimbursement and the actual cost charged to physicians for the drugs, according to the government.

      In October 2000, HCFA, now the Centers for Medicare and Medicaid Services (CMS), had planned to lower reimbursements for 50 drugs, including 16 used in chemotherapy, according to a Department of Justice pricing scheme developed as part of a fraud investigation. Cuts would have taken place without increases in payments for drug administration and cognitive services. Medical groups cried foul, and CMS backed down.

      In the months since GAO was charged with the report, the oncology community has been working feverishly to make its position known. In May, the American Society of Clinical Oncology issued a white paper supporting drug price reductions only if accompanied by offsetting increases for cognitive services and drug administration, which the society says are underpaid by at least 75%.

      US Oncology gave GAO an analysis showing that in 2000 its combined Medicare reimbursement on drugs and drug administration was "near breakeven." In a report released in January, however, the HHS' office of inspector general found that Medicare could save $1.6 billion a year if it reimbursed just 24 drugs using the lower prices on the Federal Supply Schedule rather than the higher AWP prices. The GAO study is part of a larger imbroglio surrounding the AWP that includes drug companies having their records subpoenaed and four urologists pleading guilty to receiving kickbacks. Back to TOC.

"Wealthy Health" or Retainer Medicine Physicians Catching On

The practice of charging upfront access or membership fees for more personalized physician service is catching on in a few areas. And some expansion-minded medical groups want to take the concept to other major cities.

      To date, retainer medicine still is largely confined to the Pacific Northwest, Northern California and south Florida. Some physicians see their involvement in this sort of care as a lifestyle or professional choice.

      A Boca Raton, Fla., company makes its mission clear with its name: MDVIP, which was incorporated in November 2000. It signs up independent physicians to adopt its business model of charging patients $125 per month on top of any treatment fees and limiting each practitioner to 600 patients.

      Physicians do not have to pay an affiliation fee to MDVIP, but they must agree to leave their former practices, work with the company to start up a new practice and provide an annual physical to all MDVIP patients. The physicians get to keep the majority of each patient's membership payment.

      Andrew Ripps, COO of MDVIP, says those feelings will help the company grow. By early fall, the company had affiliations with five South Florida practices. Ripps says the company is looking to expand in Florida, the Northeast and Southern California.

      Jim Wiehl, who heads the Health Care Practice Group at the St. Louis law firm of Sonnenschein Nath & Rosenthal cautions against over-aggressive expansion, however. "I would not be surprised if it doesn't grow in some of the large cities around the country, but I don't think there's going to be a huge wave of this," Wiehl says. "A marketwhere HMOs are your main choice and there is pressure on HMOs for access, that's going to create a ripe atmosphere" for these kinds of practices. Back to TOC.

ASRM Disputes News Report That Its Ethics Chairman Endorses Gender Selection

A fertility specialist with offices in Chicago and New York has told The New York Times that, after requesting and receiving an ethics opinion from the American Society for Reproductive Medicine (ASRM), he plans to offer gender selection of embryos obtained via in vitro fertilization. However, the ASRM disagrees that its representative endorsed the practice.

      The Times reported Friday that attorney John Robertson of the University of Texas in Austin, acting chairman of the ASRM ethics committee, told Dr. Norbert Gleicher that "it is sometimes acceptable for couples to choose the sex of their children by selecting either male or female embryos and discarding the rest."

      In an interview with Reuters Health, Dr. Robert Rebar, associate executive director of the ASRM, said of the Times article, "When they take [one statement] out of context, it makes it seem more positive than his letter actually is." He contended that the tone of Robertson's letter is more vague than the newspaper report implied.

      Dr. Rebar stressed that the letter does not represent the consensus of the ethics committee, members of which "deliberate at some length over each of the positions they take," he said. "They have never come out and said in vitro fertilization should be an avenue for sex selection." He explained that the ASRM has position papers on sex selection. "What they say more than anything else is, if someone is having in vitro fertilization for another reason, and if the sex of the embryos is determined for another reason, perhaps there is nothing wrong with the couple aiming for gender variety if they already have children of one sex." He added, "Please remember, the Society purposely left ambiguities in their documents. One thing about ethics is that it is difficult to say that what is right for me is right for someone else."Back to TOC.