Long Beach hospital looks to Medicare for profits; patients' rights advocate warns of possible drawbacks.

In the world of sinking profit margins, hospitals are coming up with all kinds of clever ways to keep afloat. And Long Beach Memorial Medical Center is no exception.

That 998-bed facility has introduced what it calls its Memorial Senior Companion Plan, an innovation plan aimed at securing more business from Medicare patients. The new plan, however, drew criticism from one Medicare-patients' advocate, who charged the hospital may not be disclosing enough information to patients about the plan's possible drawbacks.

Like many hospitals, Long Beach Memorial gets 45 percent to 50 percent of its patient load through Medicare, the federal health care insurance program for people aged 65 and over and for the disabled.

To secure its elderly population, Long Beach Memorial came up with a plan to reimburse patients' for expenses not covered by Medicare. And that plan is being offered at a price 25 to 30 percent less than standard "Medi-gap" insurance plans.

Items covered under the hospital's Memorial Senior Companion Plan include the 20 percent copayment, outpatient prescriptions, hospitalization over 60 days and blood products. There are no pre-existing conditions limitations.

Medicare, which is funded through Social Security, general revenues and premiums, pays 80 percent of a patient's expenses and hospitalization for 60 days with a $652 copayment. Additional expenses are either paid by the patient or through a supplemental insurance plan.

"We just increased the coverage and decreased the premiums of common plans," said Thomas Collins, senior vice president of Memorial Health Services, of the hospital's innovative Medicare plan. He said the hospital backed into the program by first analyzing coverage provided by five competing insurance plans and then designing a plan that offered more coverage at a lower price.

The only catch is that patients may only go to Long Beach Memorial Medical Center. They can, however, choose from any of the hospital's 500 physicians at any time. They may also choose to use a physician not from Long Beach Memorial, but the coverage is not as extensive.

The hospital calls the plan a preferred provider policy, but others in the industry say the plan is more like an exclusive provider plan.

The hospital is able to offer discounts because it eliminates the typical 20 percent profit built in by most Medicare supplemental insurance plans, said Collins.

The hospital has its own claims payment company so there are no claims forms.

A senior aged 65 to 69 would pay $96 a month for the hospital's policy, versus $130 a month for a competing plan, Collins said.

In the first six months, the hospital sold 300 policies, said Collins. He said the hospital sells about two to three policies a day and is clearly going to make its goal of 500 policies the first year. He said the hospital will top its program at 2,000 enrollees, which it expects to reach in three years.

Word of the plan has traveled fast, said Collins. He has already heard expressions of interest from three hospitals in California -- Cedars-Sinai in Los Angeles, Cottage Hospital in Santa Barbara and Saddleback Memorial Hospital in Orange County -- as well as a hospital each in Washington, Arizona and Massachusetts.

Could this be a new trend in Medicare?

Geraldine Dallek, executive director of the Medicare Advocacy Project in L.A., said yes. "Hospitals need Medicare to survive," she said.

Hospitals complain, however, that they lose money with Medicare because the government doesn't reimburse them for the true cost of service.

Dallek said the biggest drawback to Long Beach's Medicare plan is that patients might enroll in the program without knowing the advantages and disadvantages.

Not only does the Long Beach Memorial plan limit patients from choosing another hospital but, if patients with pre-existing conditions disenroll from the policy, they might have a problem getting Medi-gap insurance, she said.