Beating the odds: Sierra Health has turned a physician practice into the largest health insurer in Nevada with its unusual approach of owning its own medical facilities and by making its home in one of the nation's largest booming markets.In the early 1970s, a young Las Vegas Las Vegas (läs vā`gəs), city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States. doctor had a dream to begin his own cardiology cardiology Medical specialty dealing with heart diseases and disorders. It began with the 1749 publication by Jean Baptiste de Sénac of contemporary knowledge of the heart. Diagnostic methods improved in the 19th century, and in 1905 the electrocardiograph was invented. practice. Unbeknownst to him at that time, the practice would pave PAVE Cardiology A clinical trial–Post AV Node Ablation Evaluation the way to what is now the largest health insurer in Nevada. Today, Sierra Health Services health services Managed care The benefits covered under a health contract Inc. serves nearly 800,000 members. While its size may pale in comparison to many of the national health plans, the company's innovation is keeping pace with the "big guys." Its unusual operating model--a publicly traded health plan that owns its own physician practice--along with its strong emphasis on the delivery of health care and technology, places Sierra in its own league. The company also is well positioned for growth. Based in Las Vegas, Sierra is at the epicenter ep·i·cen·ter n. 1. The point of the earth's surface directly above the focus of an earthquake. 2. A focal point: stood at the epicenter of the international crisis. of a population explosion that's seeing up to 7,000 new residents moving into the area each month. Road Map to Success Sierra Health's history begins nearly 35 years ago when its chairman, president and chief executive officer, Dr. Anthony Marlon, was recruited by Southern Nevada Memorial Hospital to develop a cardiology division. Five years later, the practice evolved into Southwest Medical Associates, which is now the largest multispecialty group practice in Nevada. Marlon didn't stop there. In the early '80s, he wanted to get employers to accept the concepts of health maintenance organizations and preferred provider organizations pre·ferred provider organization n. Abbr. PPO A medical insurance plan in which members receive more coverage if they choose health care providers approved by or affiliated with the plan. , so he founded an HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, , Health Plan of Nevada. Today, the organization provides and administers managed care benefit plans for employers, government programs and individuals. In 2005, the plan boasted more than $1.3 billion in total premium revenue. In 1984, Marlon took that a step farther. He recognized not only the importance of health-care delivery but also the need for payment for those services and established Sierra Health Services Inc., which now insures about 78% of Las Vegans Las Vegan could refer to:
Today, Sierra offers members a full range of products, from HMOs to consumer-directed health plans. An early pioneer in the Medicare program in the mid-'80s, Sierra became a Medicare Part D administrator in 10 states in the western United States Noun 1. western United States - the region of the United States lying to the west of the Mississippi River West Santa Fe Trail - a trail that extends from Missouri to New Mexico; an important route for settlers moving west in the 19th century in 2005. It expects to enroll between 175,000 and 200,000 beneficiaries in its SierraRx program this year, the majority of whom will be automatically assigned as dual eligible for Medicare and Medicaid Medicare and Medicaid U.S. government programs in effect since 1966. Medicare covers most people 65 or older and those with long-term disabilities. Part A, a hospital insurance plan, also pays for home health visits and hospice care. . Over the years, Sierra has become an industry leader in commercial growth. While national managed care plans are growing, on average, about 3% to 4% annually, Sierra over the past three years has been growing consistently more than 10% each year, said Peter O'Neill Peter O'Neill was an Irish soccer player who played in the League of Ireland during the 1940s. O'Neill played for the Bohemian Minors (i.e. schoolboys/youth team) of the early 1940s. , vice president of public and investor relations Investor relations The process by which the corporation communicates with its investors. . The company also is working to reduce Nevada's uninsured problem. Nearly 20% of the state's population is without health insurance, a problem stemming from a mix of immigrants, healthy individuals electing not to purchase coverage, employers that don't offer health insurance and unhealthy individuals, said Marlon. An Unusual Approach Sierra's unusual approach to the delivery of health care is the backbone to its success. The company owns and operates its own physician groups through its multispecialty medical group practice, Southwest Medical Associates. "Sierra's focus stems from evidence-based medicine evidence-based medicine Decision-making 'The use of scientific data to confirm that proposed diagnostic or therapeutic procedures are appropriate in light of their high probability of producing the best and most favorable outcome'. See Meta-analysis. , with the company concentrating on how products get translated from an insurance policy to actual delivery of health care," Marlon said. Southwest Medical Associates operates 14 medical clinics and several stand-alone facilities, including a 24-hour urgent-care center, a wound-care center, a surgery center and a radiology radiology, branch of medicine specializing in the use of X rays, gamma rays, radioactive isotopes, and other forms of radiation in the diagnosis and treatment of disease. department, all dispersed dis·perse v. dis·persed, dis·pers·ing, dis·pers·es v.tr. 1. a. To drive off or scatter in different directions: The police dispersed the crowd. b. throughout the city. It employs nearly 250 providers in 13 specialties, and those numbers continue to climb. Southwest Medical Associates builds a new clinic near or within the city limits about every 18 months. "We don't just finance health care, we also deliver it," said O'Neill. While members have a choice between Sierra's network of providers or outside providers, more than 75% of members elect to receive primary care from a Southwest Medical provider. "We're able to manage the delivery of that health care much more efficiently than we would by contracting with an outside entity," said O'Neill. He said the company has a 12% to 15% cost advantage over its competitors. The system also allows for a higher quality of care. Marion said Sierra functions as a "petri dish pe·tri dish n. A shallow circular dish with a loose-fitting cover, used to culture bacteria or other microorganisms. Petri dish a shallow, circular, glass or disposable plastic dish used to grow bacteria on solid media such as agar. for innovations" in the delivery of outpatient care. Southwest Medical Associates accommodates members' needs and lifestyles, including offering facilities close to most of Las Vegas' major residential areas and convenient office hours office hours, n.pl See business hours. that reflect the city's 24/7 nature. "This is really a city that never sleeps, so we extend our hours for doctors' appointments," said O'Neill. "It's probably one of only a few places in the country where you can see a doctor at 7 p.m. or 7 a.m." "The company is unique in having a model in place that works well for them," said Bridget Maehr, an analyst with A.M. Best Co. "They're using a lot of information services See Information Systems. and data-driven integrations to make that happen, and the cost advantage of their members utilizing Southwest Medical Associates." Sierra isn't immune, however, to challenges faced by other plans, including the uninsured and affordable health care. "But Sierra is up to the challenge," she said. e-Pioneers Over the years, Sierra has made significant investments and huge strides in technology. Its clinics now all operate in a virtually paperless environment. That environment grew out of searching for a way to manage more than 650,000 patient medical records, with an additional 50,000 added each year. More than 50 full-time employees were required to manage the records at a price tag of nearly $2.5 million annually. In addition, transcription errors A transcription error is a specific type of data entry error that is commonly made by human operators or by optical character recognition programs (OCR). Human transcription errors are commonly the result of typographical mistakes, putting fingers in the wrong place during touch , miscommunication mis·com·mu·ni·ca·tion n. 1. Lack of clear or adequate communication. 2. An unclear or inadequate communication. between health-care providers, redundant diagnostic testing Diagnostic testing Testing performed to determine if someone is affected with a particular disease. Mentioned in: Von Willebrand Disease , illegible il·leg·i·ble adj. Not legible or decipherable. il·leg  i·bil handwriting and the
unavailability of medical information at the point and time of care were
taking a toll.
"The real issue for us was the electronic side hasn't kept up with the delivery side of health care," said Marlon. "We were running more than a dozen different clinical locations and had trucks going back and forth with medical records." Also, a variety of issues in the delivery and duplication of services, storage of X-rays and other challenges had to be addressed, he said. The answer: technology. In the early 2000s, Sierra launched an electronic prescribing and digital dictation Digital dictation is a method of recording and editing the spoken word in real-time within a digital audio format. Digital dictation offers several advantages over traditional cassette tape based dictation: Clinics are mandated to transmit prescriptions from physicians' computers in the exam room to a pharmacy's computer through a secure electronic transmission, said Dr. Craig Morrow, an internist internist /in·tern·ist/ (in-ter´nist) a specialist in internal medicine. in·ter·nist n. A physician specializing in internal medicine. with Southwest Medical Associates. "Patients then have their prescription ready for them by the time they reach the pharmacy." SMA's physicians write more than 1 million electronic prescriptions for patients each year. The company is realizing not only various financial gains from the process, but also improved quality of health care, patient safety and convenience, Morrow said. Sierra recently expanded its technological reach. In 2005, the company collaborated with the Clark County Clark County is the name of twelve counties in the United States of America:
Although providers expressed some initial reluctance, Morrow said now there's no turning back. "Physicians are excited about the solution, and I don't think there's any way doctors would ever return to using paper charts or handwritten hand·write tr.v. hand·wrote , hand·writ·ten , hand·writ·ing, hand·writes To write by hand. [Back-formation from handwritten.] Adj. 1. scripts." Patients also are pleased. Lucy Peres, a retired state worker and a member of Sierra's Medicare Advantage HMO, Senior Dimensions, said it's a safeguard that allows her physician to ensure there are no drug interactions between her prescriptions. "Regardless of where patients get their primary care within the network, doctors can call up fries instantly. If they need a prescription, they queue in the information, send it immediately to the pharmacy, and there's no need to walk out of the doctor's office with a paper prescription or having pharmacists This is a list of notable pharmacists.
Morrow said one of the biggest gains is that e-prescribing incorporates patients' insurance information as part of the electronic health record. "The software alerts physicians on available generics and the preferred products for a patient's insurance plan." While the company enjoyed a 65% generic utilization rate prior to implementation of the e-system, he said three years after its introduction, Sierra is seeing a rate of nearly 75% for the group--resulting in $5 million in annual savings for the company. In 2005, Sierra again partnered with Allscripts to create an electronic medical record. More than 250 of Southwest Medical Associates' medical providers now use the technology. "All internal records are automatically entered in an electronic database, and external records, such as consultants' reports and hospital records from outside medical groups, are scanned in with high-speed scanners," said Morrow. Sierra plans to spend nearly $25 million through this year to upgrade its facilities, including electronic health records. Weathering the Storms "You don't appreciate success until you've failed a couple of times," said Marion. He said the company's performance history is reflected in its stock's peaks-and-valleys trend over the past 20 years. One of the company's trials came from Sierra's expiration in the Dallas/Fort Worth market. In 1998, the company extended its reach into Texas by purchasing a failing operation from Kaiser Permanente Kaiser Permanente is an integrated managed care organization, based in Oakland, California, founded in 1945 by industrialist Henry J. Kaiser and physician Sidney R. Garfield. . It was a difficult undertaking, and Marlon said Sierra couldn't turn the 120,000-member health plan around. "Maybe it was because of geography or local climate.... We didn't have the capital base or size that we have in our current market." In 2002, Sierra decided to exit the market, citing inadequate federal reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. and significantly increased physician and hospital costs. A few years later, the company suffered another loss. In late 2003, Sierra lost its rebid re·bid v. re·bid, re·bid·den or re·bid, re·bid·ding, re·bids v.tr. 1. Games To bid (a previously bid suit) again in bridge. 2. for its once lucrative government TRICARE program. In 2004, it reached a settlement with HealthNet Federal Services to end its formal protest of the award and completed a six-month phase-out the following year. The company bounced back from what Marlon said is a generally "not smooth ride up the slope for any company during a two-decade-plus history." The answer, he said, came from placing appropriate people into jobs and developing a clearer understanding of the company's strengths. "Now we try not to do anything outside those strengths," he said. Moving Forward Marlon said Sierra is well positioned for continued growth. The company continues to look for new opportunities to expand its reach, despite the unknown future of health care. "Health care, whether on the financing or delivery side, is best described as moving at glacial gla·cial adj. 1. a. Of, relating to, or derived from a glacier. b. Suggesting the extreme slowness of a glacier: Work proceeded at a glacial pace. 2. a. speeds, and I don't foresee any dramatic changes to health care going forward" said Marlon. "We had a dramatic attempt to change health care in the early '90s with the Clinton-Administration, but no one was ready for radical change." One change he does foresee is various states' combinations of private-public partnerships. "Employers and states need to step up to provide insurance, to expand their Medicaid programs and try to reduce the number of uninsured to a minimum, and then we can focus on helping those individuals," he said. A.M. Best Co.'s Maehr believes 2006 will be status quo [Latin, The existing state of things at any given date.] Status quo ante bellum means the state of things before the war. The status quo to be preserved by a preliminary injunction is the last actual, peaceable, uncontested status which preceded the pending controversy. for the company. While she doesn't foresee any big changes, she does anticipate another profitable year with some growth in membership and expansion into new products, including Medicare Part D. Some of that modest financial growth may stem from the company's SierraRx product, Marion said. He anticipates margin percentages in the low- to mid-single digits this year. Others agree. David Shove and Leo Leo, in astronomy Leo [Lat.,=the lion], northern constellation lying S of Ursa Major and on the ecliptic (apparent path of the sun through the heavens) between Cancer and Virgo; it is one of the constellations of the zodiac. Carpio, analysts with Prudential Equity Group LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control ., said Sierra views the Medicare Part D program as having an untapped earnings potential. "The company potentially stands to realize incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. earnings upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside from Medicare Advantage pricing this year, in addition to Medicare Part D enrollment conversion and tighter cost trend management," they said. "The moderating Medicare reimbursement rates will create a more challenging environment in 2007 that will impact Sierra and other managed care organizations that offer Medicare Advantage plans," said Justin Lake, an analyst with UBS UBS Union Bank of Switzerland UBS United Bible Societies UBS United Blood Services UBS United Buying Service UBS Used Bookstore UBS University Business Services UBS Universal Building Society (UK) UBS Ulaanbaatar Broadcasting System . He said Sierra has a rather modest Medicare book in terms of members (approximately 56,000) relative to others in the group. "However, we estimate that due to the company's size, a meaningful 13% of SIE's 2007 operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. will be leveraged to its Medicare business." Sierra will likely continue to dominate the Nevada market. However, competition is slowly beginning to creep into the Las Vegas hotbed hotbed, low, glass-covered frame structure for starting tender plants. It differs from a cold frame only in that the soil is heated—either artificially as by underground electric wiring or steampipes, or naturally with partially fermented stable manure, which . But Marion doesn't see that as a threat. Instead, Sierra's biggest competitors come from the area's self insureds, including some of the city's large casinos. Competition won't stop the company. "We're tough as nails," said Marlon. Despite several periods of adversity over the years, he said Sierra managed to overcome those events and he's proud that many of the people who went through those turbulent times remain with the company. "We're an insurance company that really understands health care and the complexity of it, and we roll up our sleeves and try to get that message out and deliver that product to our customers" he said. Key Points * Sierra Health Services Inc., located in an area of high growth potential, is unusual in that it owns its own physician practice. * About 75% of its members elect to see a provider from Southwest Medical Associates--the company's multispecialty group practice. * The company is a leader in creating a virtually paperless environment. * Since 2002, the company's premiums revenue has grown at a compounded annual rate of 14%. Location, Location, Location Location, Location, Location is a popular Channel 4 property programme, presented by Kirstie Allsopp and Phil Spencer. The reality show follows two real estate experts as they try to find the perfect home for a different set of buyers each week. It first aired in May 2001. Sierra Health Services Inc. is located at the center of it all. Housed just a few miles off the Las Vegas strip The Las Vegas Strip (also known as The Strip) is a 4 mi (6.7 km) section of Las Vegas Boulevard South, most of which has been designated an All-American Road. , the company is well positioned to meet the demands of a booming economy. The U.S. Census Bureau Noun 1. Census Bureau - the bureau of the Commerce Department responsible for taking the census; provides demographic information and analyses about the population of the United States Bureau of the Census predicts that Las Vegas' population will increase 4% to 5% this year and 114% over the next 25 years. The city's unchecked growth includes a 7.3% job growth rate and a 3.5% unemployment rate compared with the 4.9% national average. Real estate and new industry continue to come into the area, with about 65 new and expanded companies entering the Nevada market last year. In addition, the more than 38 million visitors expected to visit the city this year are another economy booster. What this means for Sierra is both continued market share gain and expansion of its medical delivery system, said Peter O'Neill, vice president of public and investor relations. Sierra recently extended its reach beyond the Nevada border. All of the company's subsidiaries combined now operate in 12 states. Sierra Health Services Inc. Through the Years [1982] Dr. Anthony M. Marlon establishes the health maintenance organization Health Plan of Nevada and begins enrolling members in southern Nevada. [1984] Sierra Health Services Inc. is created. [1985] The company completes an initial public offering of shares of Sierra's stock. [1986] Sierra purchases the health and life insurance company West States Insurance Co. and establishes Sierra Health and Life Insurance Co. Inc. [1993] Health Plan of Nevada enrolls its 100,000th HMO member. [1994] Sierra opens its new corporate headquarters in Las Vegas. The company's stock is moved from the American Stock Exchange American Stock Exchange (AMEX) Stock exchange in the U.S. Originally known as “the Curb,” it began as an outdoor marketplace in New York City c. 1850. It moved indoors to its present location in the Wall Street area in 1921. to the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. . [1995] Sierra Military Health Services Inc., a subsidiary created to bid for and manage government health-care contracts, is established. [2003] Sierra Military Health Services learns it hasn't been selected as the contractor to manage the expanded TRICARE contract. [2004] Sierra reaches a settlement with HealthNet Federal Services, ending its formal protest of the TRICARE award. Military service delivery ends Aug. 31, 2004. Learn More Sierra Health Services Inc. A.M. Best Company # 07370 Distribution: Agents, internal sales staff, direct For ratings and other financial strength information about this company, visit www.ambest.com.
At A Glance: Sierra Health Services Inc.
Headquarters: Las Vegas
Founded: 1984 by Chairman, President and CEO Dr. Anthony M. Marlon
Membership: Approximately 800,000
Employees: Approximately 3,000
Products and Services: Commercial, Medicare, Medicaid HMO; point of
service; Medicare prescription drug plan; managed indemnity/PPO/life
insurance/Medicare supplement; medical group; mental health and
substance abuse counseling; home health; administrative services
Sierra Health Services Inc.
Financial Information
2005 2003
Total Premium Revenue $1.29 billion $962 million
Total Assets $668 million $1.13 billion
Total Debt $52 million $117 million
Shares Outstanding 58,130 53,904
Total HMO Members 365,000 292,000
Closing Share Price $39.98 $13.73
Nevada Commercial Market
Market Share (HMO) *
Statewide
StatewideHeath Plan of Nevada ** 254,272 66.3%
PacifiCare (United) 43,462 11.3%
Health First 28,185 7.3%
Hometown Health Plan 23,730 6.2%
NevadaCare 12,604 3.3%
Aetna 10,363 2.7%
HMO Nevada 11,035 2.9%
Total 383,651 100.0%
For years ended December 31.
Health Plan of Nevada Membership Characteristics ***
Commercial Employer Group Size
(As of March 31, 2006)
501+ (large) 62%
51-500 (mid-size) 33%
1-50 (small) 6%
Commercial Employer Type Mix
All Others 38%
Gaming 20%
School Districts 10%
Government 11%
National Accounts 11%
Unions 10%
Note: Table made from pie chart
* Nevada State Health Division, HMO Industry Profile 12/31/05
** Health Plan of Nevada is Sierra Health Services' principal operating
subsidiary offering HMO products and services
*** Based on number of subscribers in each category
Source: Sierra Health Services, Inc.
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