Arkansas' HMOs Growing and PPOs Booming.

AMID ANALYSTS' PREDICTIONS that the fourth quarter signaled a reversal of the financial woes stalking the managed care industry, Arkansas' major health maintenance organizations reported significant network growth in 1999.

Fourth quarter reports of net income among Arkansas' managed care firms -- long a victim of rising drug costs - aren't yet available. And reports of activity during the first three quarters of 1999 show the red ink deepening at QCA Health Plan Inc., the state's third largest HMO.

But a check of managed care by the number of members and the size of provider networks show growth among the state's major HMOs and preferred provider organizations (PPOs), which allow customers to move outside their provider networks to pick doctors and hospitals of their choice.

Fortunes appear better at HMOs that have moved closer to the open-market PPO concept by abandoning strict use of "gatekeepers" or primary care physicians.

United Healthcare Inc. of Minneapolis stunned the medical community last fall by announcing it would open its system, or example, to allow patients to go directly to specialists while bypassing the raditional gatekeeper.

Kila A. Hau, executive director of United Healthcare of Arkansas Inc., says United rolled out its new Care Coordination plan in Arkansas on Nov. 1 with an emphasis on patients going directly to specialists.

"We realized we weren't necessarily adding value by requiting them to make that first trip to the primary care physician," she says. "The data pretty well supports that the older utilization review model might have been effective 10 year ago."

United Healthcare logged a 24-percent increase in HMO members in Arkansas during 1999 to a total of 82,300. The number of Arkansas physicians in its net work grew from 1,700 to 2,500 and its affiliated hospitals doubled from 30 to 60.

It ranked second in total membership behind HMO Partners Inc., marketed as Health Advantage, which reported a slight increase of membership for the year -- from 176,468 to 177,141 - and a growth in its physician base from 3,400 to 4,738.

PPOs Gaining Ground

New Orleans-based PPO American Lifecare Inc. reported a staggering 31 percent increase in Arkansas membership to 128,000 and placed third behind Arkansas' FirstSource, owned by Arkansas Blue Cross Blue Shield subsidiary USAble Corp., and Arkansas Managed Care Organization of Little Rock.

Ed Michael Reggie, chairman of American Lifecare, says the numbers show the open network concept of PPOs are gaining major ground and HMOs are adapting similar structures.

"We're up over 30 percent. We've have a growth spurt in Mississippi, Louisiana and Arkansas," Reggie says. "The overall growth in the region and here in New Orleans has been greater than it has been in Arkansas."

PPOs offer their customers networks of physicians and hospitals but allow the use of any provider when the customer assumes a greater percentage of the cost.

Nevertheless, says Reggie, the numbers underscore the company's move to more choices and alternative treatments, which include acupuncture, chiropractic, therapeutic message and aromatherapy.

"People prefer choice," he says.

Traditional HMO plans are changing under pressure - in some cases drastically.

QCA, marketed as QualChoice, reported its 1999 losses by the third quarter at $10.6 million -- nearly twice the $5.7 million in losses it reported for all of 1998.

The company referred all questions to Little Rock public relations executive Robert K. Sells, who says the fourth quarter saw a turnaround at the Little Rock-based insurer.

"They have been making all kinds of management decisions and taking all kinds of management actions, both internally and externally," he says. "They feel very confident of a turnaround. This has paralleled a lot of what has been happening in the health insurance industry across America."