FHS CUTS SOME HMO COVERAGE IN SIX STATES.

Byline: Chris Sieroty Staff Writer

WOODLAND HILLS - Foundation Health Systems Inc. said Thursday it will end its Medicare-plus-Choice HMO coverage of 19,000 members in six states, blaming the federal government's policies on reimbursements.

Lisa Haines, a spokeswoman with FHS, said a 2 percent reimbursement cap in these markets didn't cover the ever-increasing costs of the programs.

Beginning Dec. 31, Foundation Health members in 36 counties in Arizona, California, Connecticut, Florida, New York and Pennsylvania will no longer get coverage under the Medicare-plus-Choice HMO product.

In California, FHS subsidiary Health Net will cease offering its Medicare HMO product in Fresno and Sonoma counties, affecting 3,200 Medicare enrollees.

``In both areas, we didn't have a lot of market share, which makes it tougher from a negotiating standpoint with our providers,'' Haines said.

In Sonoma County, for example, for every $120 Health Net spends treating a patient, the government reimburses the company $100, she said.

However, Health Net will continue to provide Medicare coverage in 20 California counties, including Los Angeles, Ventura, San Bernardino and Riverside counties.

FHS also announced that it would significantly reduce pharmacy and other benefits in the majority of the 36 counties nationwide where it will continue to offer a Medicare-plus-Choice product next year.

In addition, the company was expected to increase supplemental premiums in many of these counties, which could lead to further attrition in its Medicare-plus-Choice program.

Haines said the subsidiaries are contacting all affected enrollees, physicians and employer groups, notifying them of these decisions and informing them of other Medicare options for 2001.

All of the health plans will work closely with their members to ensure a smooth transition to another Medicare HMO or back to traditional Medicare, she said.

Since Congress passed the Balanced Budget Act of 1997, which revised the way Medicare was funded, FHS health plans offering Medicare HMO products have left 64 counties, affecting 38,000 enrollees nationwide.

Effective Jan. 1, FHS will have ceased offering its HMO product in 82 counties, affecting 57,000 Medicare enrollees.

Shares of Woodland Hills-based Foundation Health Systems closed up 0.31 cents to $14.31 on volume of 701,100 shares traded on the New York Stock Exchange.